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CFTC STAFF CONCEPTS AND QUESTIONS 

REGARDING PHASED IMPLEMENTATION OF 

EFFECTIVE DATES FOR FINAL DODD-FRANK RULES 

The Commodity Futures Trading Commission (CFTC or Commission) and the Securities and 

Exchange Commission (SEC) staffs will hold a two-day public roundtable to discuss the 

schedule for implementing final rules for swaps and security-based swaps under the Dodd-Frank 

Wall Street Reform and Consumer Protection Act. The following sets forth a number of 

concepts that CFTC staff is considering in framing recommendations to implement the effective 

dates of final rules for swaps. The following also presents a series of relevant questions aimed at 

eliciting public comment and input regarding how to phase the implementation of new rules. 

Background

The Dodd-Frank Act gives the CFTC and SEC certain flexibility to set effective dates and a 

schedule for compliance with rules implementing Title VII of the Act, which involves oversight 

of swaps and security-based swaps. This authority may be used so that market participants have 

time to develop policies, procedures, systems, and infrastructure needed to comply with the new 

regulatory requirements. 

Public comments on Title VII have helped inform the Commission as to which requirements can 

be met sooner and which ones will take more time. The order in which the Commission finalizes 

the rules does not determine the order in which the rules become effective or the applicable 

compliance dates. 

The Commission has the ability to phase implementation of the new requirements based on 

factors such as: the type of swap, including by asset class; the type of market participants that 

engage in such trades; the speed with which market infrastructures can meet the new 

requirements; and whether registered market infrastructures or participants might be required to 

have policies and procedures in place ahead of compliance with such policies and procedures by 

non-registrants. 

Concepts 

The following concepts are being considered by staff in framing their recommendations 

regarding how to phase the implementation of effective dates for final rules. 

1. Implementation will be facilitated if effective dates for the new Dodd-Frank regulatory 

requirements are phased in over time rather than implemented all at once. Accordingly, it 

may be appropriate for the effective dates for new rules, or specific provisions of a 

proposed rulemaking, to be phased over time. Furthermore, for those rules that could be 

implemented sooner, doing so would be beneficial so as to lower risk. 

2. For market infrastructures, such as clearing entities, trading platforms, and data 

repositories, registration with the Commission and development of new policies, 
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procedures, and rulebooks must be completed before compliance with those policies, 

procedures, and rulebooks by market participants could be required. This may suggest 

that market infrastructures are required to be registered and have in place their policies, 

procedures, and rulebooks sooner than the required use of the market infrastructure. 

Under one approach, while transaction compliance would be required later, new policies, 

procedures, and/or rulebooks could be required to be in place by the later of (i) 60 days 

after relevant final rules are issued; (ii) December 31, 2011; or (iii) when a new 

infrastructure registers with the Commission. 

3. The Dodd-Frank Act requires open access to both clearinghouses and swap execution 

facilities. Thus, any effective dates that are set for clearinghouses and trading platforms 

to establish new rulebooks that are fully compliant with Dodd-Frank (i.e., being open for 

business) must provide for client clearing and access at the same time for all participants 

who wish to use the platform. 

4. For swap dealers and major swap participants, registration and development of new 

policies and procedures must be accomplished before compliance with those policies and 

procedures by their counterparties or customers can be required. This may suggest a 

sequence for effective dates whereby swap dealers register and develop policies and 

procedures by a particular date and then the application of those policies and procedures 

to the transactions of non-registrants would come later (transaction compliance). 

5. Swap dealers and major swap participants that have been previously regulated, such as 

those that are part of bank holding companies and have been subject to oversight by a 

prudential regulator, may be more likely to have policies and procedures already in place 

that make it easier to comply with new Dodd-Frank requirements. On the other hand, it 

may be appropriate to afford those swap dealers and major swap participants that have 

not been previously regulated additional time to comply with new requirements. 

6. Financial entities that are not swap dealers or major swap participants may require more 

time than swap dealers or major swap participants for the new regulatory requirements of 

Dodd-Frank to apply to their transactions (transaction compliance). In addition, amongst 

financial entities there may be different characteristics that would suggest phasing 

transaction compliance by the type of financial entity. For instance, if a counterparty is a 

hedge fund, transaction compliance may be appropriate in less time than if the 

counterparty was another type of financial entity. Similarly, financial entities that are not 

managing subaccounts may require less time for the new regulatory requirements to 

apply to their transactions. Thus, it may be possible to phase the effective dates for 

transaction compliance by type of financial entity. For example, swap dealers and hedge 

funds could be required to meet transaction compliance the soonest, i.e. within the 60 

days after a particular final rule or mandate is issued. Financial entities not managing 

subaccounts for third parties might be required to meet transaction compliance next. 

Lastly, those who manage third-party subaccounts, such as asset managers, may be given 

more time. 
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7. Non-financial end users have different characteristics than those of financial entities. 

Consequently, it may be appropriate to provide more time for any new regulatory 

requirements that may apply to transactions with non-financial end users. 

8. The Dodd-Frank Act specifies a number of different requirements for transaction 

compliance. Among these requirements are (i) the clearing requirement; (ii) the trading 

requirement; (iii) real-time public reporting; (iv) reporting data to a data repository; (v) 

swap dealer and major swap participant requirements, such as documentation, 

confirmation, valuation, and margining; and (vi) compliance with any applicable position 

limits. Each of these transaction compliance requirements could have different 

approaches to phased implementation of effective dates depending on the specific 

requirements of the rules. 

9. With regard to transaction compliance, there also may be interdependence of one rule 

with another. One rule’s effective date may be conditioned upon another rule being 

finalized or becoming effective. For instance, it may be appropriate for the definitions of 

swap dealer and major swap participant to be final before the business conduct 

requirements for those entities become effective. However, as noted above, it would be 

beneficial to implement those rules that can be implemented sooner so as to lower overall 

risk. 

10. Some provisions of the proposed rules under Dodd-Frank rely upon the CFTC having 

access to data. For example, the Commission’s proposed rules on block sizes for swaps 

and position limits depend on data reported to data repositories. Thus, effective dates for 

some rules may be dependent upon the effective dates for data reporting. 

11. The statute provides for some natural sequencing. A clearing requirement cannot go into 

effect until the CFTC conducts a 90-day review process of the swap or group, category, 

type, or class of swaps. Additionally, there can be no trading requirement prior to the 

Commission’s determination that a swap is required to be cleared, a trading platform(s) 

has listed the swap for trading, and the Commission has determined that the swap is made 

available for trading. 

12. Market infrastructures and participants rely on technology connectivity to communicate 

and transact. Much of this connectivity may already be in place, but given the new 

requirements of Dodd-Frank, additional investments will likely need to be made. A 

rule’s effective date may take into account the time and resources needed to achieve the 

needed technology connectivity. 

13. For some asset classes, a certain amount of market infrastructure may already be in place 

and market participants may have already developed procedures that could be adapted to 

comply with the new Dodd-Frank regulatory requirements. Other asset classes may not 

be as far along. This suggests that implementation of effective dates for some rules could 

differ by asset class. 
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Specific Questions

• How applicable are each of these concepts in guiding staff recommendations regarding 

how to phase the effective dates of Dodd-Frank rules? 

• What specific timing is suggested by these concepts or any alternative concepts that 

might be appropriate? 

• What particular issues arise from applying each of the concepts outlined above to 

compliance with the new Dodd-Frank requirements for clearing? 

• What particular issues arise from applying each of the concepts outlined above to 

compliance with the new Dodd-Frank requirements for the clearing mandate? 

• What particular issues arise from applying each of the concepts outlined above to 

compliance with the new Dodd-Frank requirements for trading platforms, such as swap 

execution facilities? 

• What particular issues arise from applying each of the concepts outlined above to 

compliance with the new Dodd-Frank requirements for the trading mandate? 

• What particular issues arise from applying each of the concepts outlined above to 

compliance with the new Dodd-Frank requirements for reporting swaps data to data 

repositories and for real-time public reporting purposes? 

• What particular issues arise from applying each of the concepts outlined above to 

compliance with the new Dodd-Frank requirements for swap dealers and major swap 

participants, such as rules related to documentation, confirmation, valuation, margining, 

and sales practices? 

• What particular issues arise from applying each of the concepts outlined above to 

compliance with the new Dodd-Frank requirements related to adoption of aggregate 

positions limits covering futures and swap positions?