Davis Polk has issued a client memo titled “An Asset Manager’s Guide to Swap Trading in the New Regulatory World.” As a result of the Dodd-Frank Act, the over-the-counter derivatives markets have become subject to significant new regulatory oversight. As the markets respond to these new regulations, the menu of derivatives instruments available to asset managers, and the costs associated with those instruments, will change significantly. As the first new swap rules
have come into effect in the past several months, market participants have started to identify risks and costs, as well as new opportunities, arising from this new regulatory landscape. The memorandum is designed to provide asset managers with background information on key aspects of the swap regulatory regime that may impact their derivatives trading activities. The memorandum focuses largely on the regulations of the CFTC that apply to swaps, rather than on the rules of the SEC that will govern security-based swaps, as virtually none of the SEC’s security-based swap rules have been adopted.