Commodity Futures Trading Commission 

 Office of Public Affairs 

 Three Lafayette Centre 

 1155 21st Street, NW 

 Washington, DC 20581 

 www.cftc.gov

Q & A – Confirmation, Portfolio Reconciliation, and Portfolio Compression 

Requirements for Swap Dealers and Major Swap Participants 

What is the goal of the proposed rulemaking? 

The Dodd-Frank Act authorizes the CFTC to adopt regulations setting forth standards for the timely and accurate 

confirmation, processing, netting, documentation, and valuation of swaps. The goal of the proposed rulemaking is 

to establish standards for swap confirmation as well as standards for portfolio reconciliation and portfolio 

compression, two post-trade processing procedures that effectuate the timely and accurate netting and valuation of 

swaps. 

What registrants are covered by the proposed regulations? 

The proposed regulations would apply to swap dealers and major swap participants. 

By when must comments on the rules be submitted? 

Comments on the rules must be submitted within sixty (60) days of the publication of the proposal in the Federal 

Register. 

What are the confirmation requirements? 

The proposed regulations would require swap dealers and major swap participants to execute confirmations of all 

swap transactions in which their counterparty is another swap dealer or major swap participant on the execution 

date. For swap transactions with other types of counterparties, swap dealers and major swap participants would be 

required to send an acknowledgement of the transaction on the execution date, and would be required to have 

policies and procedures in place to confirm the swap transaction on the same calendar day as execution for financial 

entities, as defined in section 2h(7)(c) of the CEA, and on the next business day for all other counterparties. 

While the Commission encourages the use of master confirmation agreements and other standardized 

documentation that has been developed by the industry, the proposed rules would not prescribe the particular 

acknowledgement or confirmation documentation that market participants would be required to use, nor would it 

prescribe a particular venue or platform for confirmation. 

What are the portfolio reconciliation requirements? 

Swap dealers and major swap participants would be required to reconcile swap portfolios with other swap dealers or 

major swap participants with the varying frequency, depending upon the size of the particular portfolio. 

Discrepancies in material terms identified as part of a portfolio reconciliation process would be required to be 

resolved immediately. Discrepancies in valuation would be required to be resolved within one business day. 

For swap portfolios involving a counterparty that is not a swap dealer or major swap participant, the proposed 

regulations would require that swap dealers and major swap participants establish written policies and procedures to 

Commodity Futures Trading Commission ♦ Office of Public Affairs ♦ 202-418-5080 
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Commodity Futures Trading Commission ♦ Office of Public Affairs ♦ 202-418-5080 

perform portfolio reconciliation with varying frequency, depending upon the size of the portfolio. Swap dealers 

and major swap participants also would be required to establish written procedures reasonably designed to resolve 

any identified discrepancies in the material terms or valuation of swaps in a timely fashion. 

What are the portfolio compression requirements? 

The proposed regulations would establish certain offset and portfolio compression requirements for swap dealers 

and major swap participants with respect to swaps in which their counterparty is also a swap dealer or major swap 

participant. Specifically, swap dealers and major swap participants would be required to participate in multilateral 

portfolio compression exercises required by Commission regulation or order or offered by a derivatives clearing 

organization, a self-regulatory organization, or a self-regulatory association of which the swap dealer or major swap 

participant is a member. 

Swap dealers and major swap participants also would be required to terminate bilaterally all fully offsetting swaps 

between them within one day and to engage annually in bilateral portfolio compression exercises with 

counterparties that are also swap dealers or major swap participants. 

The proposed regulation would not mandate portfolio compression exercises for swaps between a swap dealer or a 

major swap participant and counterparties that are not swap dealers or major swap participants. Instead, swap 

dealers and major swap participants would be required to maintain written policies and procedures for periodically 

terminating any fully offsetting swaps and for periodically engaging in compression exercises.