[ by Howard Haykin ] The SEC and CFTC ensured that the OTC derivatives market will not resemble a "Tower of Babel," only to crumble and die from the weight brought on by confused traders and rejected transactions that are destined for settlement in the courts rather than in designated clearinghouses. The SEC accomplished this task in, perhaps, unusual fashion - they unanimously approved the rules and interpretations that will define key terms, which were jointly written by staffs of the SEC and the CFTC. The SEC rules and interpretations further define the terms "swap" and "security-based swap", and stipulate the conditions by which a particular instrument is a "swap" regulated by the CFTC or a "security-based swap" regulated by the SEC.  The SEC action also addresses "mixed swaps", which are regulated by both agencies, and "security-based swap agreements", which are regulated by the CFTC but over which the SEC has antifraud and other authority. The rules and interpretations written jointly with the CFTC implement provisions of the 2010 Dodd-Frank Act that establish a comprehensive framework for regulating over-the-counter derivatives.

"Approving the product rules and interpretations is another foundational step in the establishment of a new regulatory regime for derivatives.  I look forward to action on the rules and interpretations by my colleagues at the CFTC." -- SEC Chairman Mary Schapiro.

Adoption, Waiting Period, Then Enactment. Once both agencies adopt the final rules, they will become effective 60 days after the date of publication in the Federal Register.  The compliance date of such rules for purposes of certain interim exemptions under the federal securities laws will be 180 days after the date of publication in the Federal Register.  The final rule text and a fact sheet will be available after both agencies adopt the final rules. For further details, go to:  [SEC PR 12-130, 7/9/12].