June 28th, 2013
With the recent regulatory reforms, deadlines encroach upon many buy-side firms – deadlines that could turn into extravagant costs. As we saw with the June 10th deadline, buy-side firms and “Category 2 Entities” were scrambling. May 15th was the absolute deadline for picking a Futures Commission Merchant (FCM), which then only gave buy-side firms one month to complete legal documents, open accounts and do testing before the June 10th deadline.
The next upcoming deadline is September 9th, 2013 and this deadline applies to “Category 3 Entities” meaning that the CFTC plans to phase in compliance for all swapping entities, essentially requiring compliance from all firms that engage in swapping that were not included in the first two categories. This means all other firms have to go through the tedious process that buy-side firms had to go through this month and will likely face similar challenges since they will tend to be even smaller firms. They will likely face similar challenges with FCMs, middleware providers and Derivative Clearing Organizations (DCOs). The question remains: will these remaining firms heed the cautionary lesson conveyed by buy-side firms or will they procrastinate until the deadline and create a bottleneck as all these firms rush to comply at once?
