The International Swaps and Derivatives Association, Inc. (ISDA) appreciates the opportunity to comment on the proposed regulations (the Proposed Regulations), promulgated by the Commodity Futures Trading Commission (CFTC or the Commission) in accordance with section 4s of the Commodity Exchange Act (the CEA), which was added to the CEA by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act), with respect to the registration of swap dealers (SDs) and major swap participants (MSPs and, together with SDs, Swaps Entities). 
ISDA commends the Commission for its careful consideration of the issues raised by the new registration requirements of the Dodd-Frank Act and respectfully submits the following comments in response to the Proposed Regulations. 

Phased Implementation 

The Commission has proposed a system of phased implementation for the “transitional period” between July 21, 2011, the date by which regulations establishing a process for Swaps Entities’ registration are to be in place and the potentially later effective dates of key definitional aspects of doing business as a SD or an MSP. These potentially later rulemakings will complete the determination of who must register and what the responsibilities of registrants will be. The Commission proposes that “voluntary”, provisional registration begin on April 15, 2011.

ISDA appreciates that the Commission has invited comment on alternatives to this system of phased implementation, including the extension of the effective date of the Proposed Regulations until such time as rules further defining the terms “swap dealer” and “major swap participant,” and rulemakings implementing the other key requirements become effective. ISDA supports such an extension of the effective date of the Proposed Regulations because an early, provisional registration procedure is not cost-effective or otherwise efficient for potential Swaps Entities. At the time of pre-registration, many potential Swaps Entities will not know if they must register or if they will be able to function under the still-developing regulatory regime. Compliance with new regulations may require extensive changes to the way that Swaps Entities presently organize themselves and conduct their business. It is therefore only reasonable that those entities should be aware of all their compliance obligations with certainty before they are asked to register – otherwise unnecessary costs and unnecessary disclosure may result, burdening both regulator and regulated.

Although nominally voluntary, provisional registration from July 21, 2011 onwards will be necessary to avoid business interruption. Given that (i) if a Swaps Entity does not provisionally register in advance, then on the day that it must register, its business must stop, because it will not yet be through the registration process; and (ii) in the Release the stated reason provided for provisional registration is that without such a system, Swaps Entities may not be registered on time, we question how “voluntary” provisional registration will in fact be. Furthermore, the subsequent finalization of each relevant regulation will again threaten business interruption as compliance becomes necessary. ISDA urges the Commission to (i) postpone the effective date of the registration requirements until all important aspects of compliance are settled and (ii) provide for a compliance period after the effective date of the registration requirements. ISDA additionally requests that the CFTC introduce reasonably extended compliance periods into any rulemakings that may be left to later development as a less disruptive, less costly, and generally more appropriate alternative to the threat of business interruption.

There is a growing awareness that the swaps markets and the Commission face a growing “chicken and egg” problem in attempting to develop in a single stroke an entirely new market regulatory structure. We share the Commission's goal of implementing appropriate and meaningful regulation and believe that a first step is to provide adequate time for compliance. 

Allocation of Responsibilities 

The Commission has proposed that Swaps Entities will be required to become and remain members of at least one registered futures association. Presently, there is only one such association, the National Futures Association (NFA) and so the Commission has proposed registration of Swaps Entities through the NFA. The Commission has further proposed three alternatives for monitoring compliance by Swaps Entities with all requirements applicable to them under the CEA and CFTC regulations: (1) the Commission directly and solely responsible; (2) the NFA responsible but with CFTC oversight; or (3) division of responsibilities between the CFTC and the NFA. ISDA favors self-regulation but believes that the swaps market needs self-regulation that is solely focused on swaps and the intricacies of the swaps markets.

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