The CFTC unanimously approved a final plan to expand the clearing requirement for interest rate swaps to include those denominated in nine new currencies on Wednesday.
The Commodity Futures Trading Commission’s regulation 50.4(a) denotes four classes of interest rate swaps — fixed-to-floating swaps, basis swaps, forward rate agreements and overnight index swaps.
{mosads}The fixed-to-floating class now includes swaps denominated in Australian dollars, Canadian dollars, Hong Kong dollars, Mexican pesos, Norwegian drones, Polish zloty, Singapore dollars, Swedish krona and Swiss francs.
The basis swap classes added those denominated in Australian dollars. The forward rate agreements now include swaps denominated in Norwegian, Polish, and Singapore currencies. The overnight index swaps will feature swaps denominated in Australian and Canadian dollars, as well as those denominated in U.S. dollars, euros and sterlings with termination dates up to three years.
Under the new clearing requirement determination, market participants will have to submit a swap for clearing by a derivates clearing organization if it is identified in the expanded CFTC regulation 50.4(a).
“Requiring clearing for these swaps will further reduce risk within our financial system,” CFTC Chairman Timothy Massad said in a statement. “Today’s determination also represents another important step toward cross-border harmonization of swaps regulations, which is critically important to creating an effective regulatory framework.”
Compliance will be phased in over the course of two years, with implementation based on when similar clearing requirements have taken effect in non-U.S. jurisdictions.
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