Clearinghouse regulatory basics for swap market participants

A central tenet of the Dodd-Frank Act is that standardized swap transactions must be centrally cleared through a Commodity Futures Trading Commission-registered derivatives clearing organization or a clearinghouse that is exempt from DCO registration. Dozens of articles and law firm client alerts have discussed this new clearing requirement and related issues, including the CFTC regulatory provisions governing the protection of cleared swaps customer collateral, commonly known as the LSOC model. Yet relatively little attention has been focused on the rules and regulations governing the basic day-to-day operation of DCOs, even though these provisions have important implications for swap market participants.