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News July 9, 2012 Issue

Comments Requested on the "Roadmap" for Phase-In of Derivatives Regulation

Derivatives can be complicated, and so can their regulation.

Now that the SEC and CFTC must jointly issue rules for swaps regulation pursuant to the Dodd-Frank Act (DFA), is has become very complicated.

So complicated, that the SEC is asking for help in sorting out the order that the rules they will adopt should take effect.

It all began back in 2010, when the DFA carved up swaps jurisdiction, giving "security-based swaps" to the SEC, and leaving everything else with the CFTC. Nearly all of the SECís rulemaking proposals required by the DFA are now out there, but the largely unregulated (as in off-exchange, private party transactions) space is requiring some extra thought to achieve an orderly transition to the final regulations.

The SEC has asked the industry what they think about it.

On June 11, the SEC issued a policy statement describing the order in which it expects new rules regulating the derivatives market would take effect. It does not address the actual timing for issuing final rules.

"The phased-in approach is intended to avoid the disruption that could occur if all the new rules took effect simultaneously," said the SEC.

In addition, the policy statement discusses the timing of the expiration of temporary relief granted to securities-based swaps market participants, much of which is due to expire when certain final rules become effective.

"We look forward to public comment on our anticipated sequencing as we continue to adopt and implement the rules under the law," said SEC Chairman Mary Schapiro.

The policy statement was published in the Federal Register on June 14, and comments are due 60 days later, on August 13.