From Readiness to Revolution

The Implementation and Impact of Derivatives Clearing Regulatory Reform

July 2013

Central clearing regulations under Title VII of the Dodd-Frank Act are dramatically transforming the swaps market. The Category III mandate will mark the official end of the bilateral days of International Swaps and Derivatives Association (ISDA) negotiations, client-to-dealer execution and negotiated collateral for transactions moving to the cleared model.

Central clearing has implications across the lifecycle of a derivatives transaction. From the use of Swap Execution Facilities (SEF) and Futures Commission Merchants (FCM) to mandated collateral, regulation is fundamentally altering the status quo.

The third in our series on the evolving derivatives market, this paper presents research on the implementation of clearing and its complexity against a backdrop of uncertainty around other regulatory topics such as bilateral collateral requirements and reporting.

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Central clearing has implications across the lifecycle of a derivatives transaction.