Subject: Interim Final Rule: Record Retention (today) and Reporting (someday) of Emissions Swaps (Attorney Advertising)
From: "Thomas, William L. \(WAS\)" <[email-masked]>
To: "Biden, R. Hunter" <[email-masked]>
Date: Thu, 28 Oct 2010 16:19:57 -0400

Already, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act) has affected to some degree the conduct of swaps and derivatives activities for all participants in the emissions swaps market.  See "Energy Derivatives Under the Dodd-Frank Act" (July 22, 2010), at http://www.skadden.com/Index.cfm?contentID=51&itemID=2171, as well as the more detailed discussion to be found in The Dodd-Frank Act: Commentary and Insights (http://www.skadden.com/Cimages/siteFile/Skadden_Insights_Special_Edition_Dodd-Frank_Act1.pdf), see especially "Regulation of Over-the-Counter Derivatives Under the Dodd-Frank Wall Street Reform and Consumer Protection Act"
http://marketing.skadden.com/rs/ct.aspx?ct=24F7681ED0E30AEDC1D180A9D32C9118D8BE5588F8A52DA2349D55444994FA27FB591B85D184178A3D01362FAB4758F288FF96535B563B32DDA37D61B5A52D9AC55787CD1F07EFBB19621D773DDD61B00183657BA77F80744F179C6FB15B2BB476AD839CC69D3E4CB3EB8
.

In light of the CFTC's recently published Interim Final Rule (attached), parties to any emissions swap (or any other swap) should save all existing records related to that swap.  This includes any transaction entered into prior to July 21, 2010 that could be a swap unless the transaction expired by July 21, 2010.  Because the term "swap" has not yet been defined by the Commodity Futures Trading Commission (CFTC), records should be kept for any transaction that could be a swap, including carbon swaps.  Physical emissions trades (or emissions trades where physically delivery is intended) are not swaps.  

Information and documentation to be retained includes: 

any information necessary to identify and value the transaction; 
the date and time of execution; 
 information relevant to the price of the transaction; 
 whether the transaction was accepted for clearing and, if so, the identity of the clearing organization; 
 any modification(s) to the transaction terms; and  
the final confirmation (in electronic form if available). 
Parties are not required to create new records for past transactions.  Parties should expect to have to retain these records for future transactions.

At a future date (to be determined through future CFTC actions), one of the parties to each emissions swap will be required to report certain information and provide certain documentation to a registered swap data repository (SDR) or directly to the CFTC.  The responsibility for reporting the emissions swap will be based on whether each party to the swap is a "swap dealer" or an emissions "major swap participant" (MSP).  Until the CFTC determines who will become a swap dealer or an MSP, all parties to an emissions swap should retain all information and documents, to the extent and in such form as presently exists, relating to the swap.

Comments on this release are due to the CFTC on November 15, 2010.  If you have a particular interest in any of the issues raised by the Interim Final Rule, or about the broader implications of the Dodd-Frank Act for the emissions market, please call William L. Thomas at (202) 371-7640 or your usual Skadden, Arps contact.=2