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Alternative Market Briefing

New derivatives and CPO rule changes to impact fund managers

Wednesday, August 22, 2012

Bailey McCann, Opalesque New York:

The Commodities Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) in the US have finalized new derivatives rules and issued new guidance on the types of exemptions available to commodity pool operators (CPOs). As Opalesque reported in July, both regulators issued definitions for the terms "swap" and "security-based swap." These rules have now been officially entered into the federal register and will trigger additional provisions outlined in the Dodd-Frank Act.

The definitions themselves are designed to establish the products that make up "mixed swaps," mixed swaps will be monitored and regulated by the commissions going forward. The new rules effective date will be October 12, 2012. The gap accounts for a window in which those effected by the new rules will be given time to comply.

According to a client alert from US-based law firm, Shulte, Roth & Zabel, the product definitions "implicate a range of commodity law requirements governed by statutes and regulations enforced by the CFTC because derivatives that are swaps are now included in the definition of "commodity interests" for purposes of the CEA."

Significantly, these definitions will also have implica......................

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