I. INTRODUCTION

On January 11, the Commodity Futures Trading Commission approved final rules (the Final Rules) under Section 4s(h) of the Commodity Exchange Act (CEA) (added by Section 731 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act)) that set forth general antifraud prohibitions and establish detailed business conduct standards that must be observed by CFTC-registered swap dealers (Swap Dealers or SDs) and major swap participants (MSPs) (together, Swap Entities) when they are entering into swaps with counterparties other than other Swap Entities (End Users).

The Final Rules have softened some of the most onerous and widely criticized provisions of the original conduct standards proposed by the CFTC (the Proposed Rules) by providing conduct safe harbors and allowing reliance on counterparty representations. Nevertheless, the Final Rules still contain many provisions that drastically alter the way an uncleared swap must be negotiated and executed between a Swap Entity and an End User, particularly if the Swap Entity’s counterparty falls within a special subset of End Users known as “Special Entities,” which includes pension plans, governmental entities and certain other entities that receive enhanced protections under the Final Rules. Swap Entities will accordingly need to make significant modifications to their current ordinary course of business for swaps in order to be able to comply with the new rules when they become effective.

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