2010-29024
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FR Doc 2010-29024[Federal Register: November 23, 2010 (Volume 75, Number 225)]
[Proposed Rules]
[Page 71379-71390]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr23no10-17]
[[Page 71379]]
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COMMODITY FUTURES TRADING COMMISSION
17 CFR Parts 3, 23 and 170
RIN 3038--AC95
Registration of Swap Dealers and Major Swap Participants
AGENCY: Commodity Futures Trading Commission.
ACTION: Proposed rules.
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SUMMARY: The Commodity Futures Trading Commission (``Commission'' or
``CFTC'') is proposing to adopt regulations that would establish the
process for registering swap dealers (``SDs'') and major swap
participants (``MSPs,'' and collectively with SDs, ``swaps entities'').
The proposed regulations also would require swaps entities to become
members of the National Futures Association (``NFA'') and to confirm
that persons associated with them are not subject to a statutory
disqualification under the Commodity Exchange Act (``CEA'')
(``Proposal''). The Commission is making the Proposal in accordance
with Section 4s of the CEA, which was recently added to the CEA by the
Dodd-Frank Wall Street Reform and Consumer Protection Act (``Dodd-Frank
Act'').
DATES: Comments must be received on or before January 24, 2011.
ADDRESSES: You may submit comments, identified by RIN 3038-AC95, by any
of the following methods:
Agency Web Site, via its Comments Online process: http://
comments.cftc.gov. Follow the instructions on the Web site for
submitting comments.
Mail: Send to David A. Stawick, Secretary, Commodity
Futures Trading Commission, 1155 21st Street, NW., Washington, DC
20581.
Hand delivery/Courier: Same as Mail above.
Federal eRulemaking Portal: http://www.regulations.gov/
search/index.jsp. Follow the instructions for submitting comments.
All comments must be submitted in English, or if not, accompanied
by an English translation. Comments will be posted as received to
http://www.cftc.gov. You should submit only information that you wish
to make available publicly. If you wish the Commission to consider
information that is exempt from disclosure under the Freedom of
Information Act,\1\ a petition for confidential treatment of the exempt
information may be submitted according to the procedures set forth in
Commission Regulation 145.9.\2\ The Commission reserves the right, but
shall have no obligation, to review, pre-screen, filter, redact, refuse
or remove any or all of your submission from http://www.cftc.gov that
it may deem to be inappropriate for publication, such as obscene
language. All submissions that have been redacted or removed that
contain comments on the merits of the rulemaking will be retained in
the public comment file and will be considered as required under the
Administrative Procedure Act and other applicable laws, and may be
accessible under the Freedom of Information Act.
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\1\ 5 U.S.C. 552.
\2\ Commission regulations referred to herein are found at 17
CFR Ch. 1 (2010), as amended by 75 FR 55409 (Sep. 10, 2010). They
are accessible on the Commission's Web site.
FOR FURTHER INFORMATION CONTACT: Barbara S. Gold, Associate Director,
Christopher W. Cummings, Special Counsel, or Elizabeth Miller,
Attorney-Advisor, Division of Clearing and Intermediary Oversight, 1155
21st Street, NW., Washington, DC 20581. Telephone number: 202-418-5450
and electronic mail: bgold@cftc.gov, ccummings@cftc.gov or
_____________________________________-
emiller@cftc.gov.
SUPPLEMENTARY INFORMATION:
I. Background
On July 21, 2010, President Obama signed the Dodd-Frank Act.\3\
Title VII of the Dodd-Frank Act \4\ amended the CEA\5\ to establish a
comprehensive new regulatory framework for swaps and security-based
swaps. The goal of this legislation was to reduce risk, increase
transparency, and promote market integrity within the financial system
by, among other things: (1) Providing for the registration and
comprehensive regulation of SDs and MSPs; (2) imposing clearing and
trade execution requirements on standardized derivative products; (3)
creating robust recordkeeping and real-time reporting regimes; and (4)
enhancing the Commission's rulemaking and enforcement authorities with
respect to, among others, all registered entities and intermediaries
subject to the Commission's oversight. The regulations in the Proposal
concern the process for registering SDs and MSPs.
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\3\ See Dodd-Frank Wall Street Reform and Consumer Protection
Act, Public Law 111-203, 124 Stat. 1376 (2010). The text of the
Dodd-Frank Act may be accessed at http://www.cftc.gov./
LawRegulation/OTCDERIVATIVES/index.htm.
\4\ Pursuant to Section 701 of the Dodd-Frank Act, Title VII may
be cited as the ``Wall Street Transparency and Accountability Act of
2010.''
\5\ 7 U.S.C. 1 et seq. (2006).
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A. Relevant Definitions
In furtherance of the foregoing legislative goals, Section 721(a)
of the Dodd-Frank Act amended the definitions of various existing terms
in the CEA and added definitions of numerous new terms to the CEA.
Relevant to the Proposal are the definitions of the new terms ``swap
dealer,'' ``major swap participant,'' and ``associated person of a swap
dealer or major swap participant.'' The Commission currently is
developing regulations to implement the new ``swap dealer'' and ``major
swap participant'' definitions (``Definitional Rulemakings'').\6\ In
light of the statutory mandate in new Section 4s(b)(5) of the CEA that
``Rules under this section shall provide for the registration of swap
dealers and major swap participants not later than 1 year after the
date of enactment of the [Dodd-Frank] Act,'' the Commission is
proposing rules that will establish a process for the registration of
swaps entities by this one-year deadline--i.e., by July 21, 2011.\7\
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\6\ See Sections 721(b) and (c) of the Dodd-Frank Act, which
provide the Commission with authority to define these new terms.
\7\ See also Paragraph C of this Section I, below.
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1. Swap Dealer
New Section 1a(49) of the CEA defines the term ``swap dealer'' as
follows:
(A) IN GENERAL.--The term `swap dealer' means any person who--
(i) holds itself out as a dealer in swaps;
(ii) makes a market in swaps;
(iii) regularly enters into swaps with counterparties as an
ordinary course of business for its own account; or
(iv) engages in any activity causing the person to be commonly
known in the trade as a dealer or market maker in swaps,
provided however, in no event shall an insured depository institution
be considered to be a swap dealer to the extent it offers to enter into
a swap with a customer in connection with originating a loan with that
customer.\8\
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\8\ New Section 1a(49) further provides:
(B) INCLUSION.--A person may be designated as a swap dealer for
a single type or single class or category of swap or activities and
considered not to be a swap dealer for other types, classes, or
categories of swaps or activities.
(C) EXCEPTION.--The term `swap dealer' does not include a person
that enters into swaps for such person's own account, either
individually or in a fiduciary capacity, but not as a part of a
regular business.
(D) DE MINIMIS EXCEPTION.--The Commission shall exempt from
designation as a swap dealer an entity that engages in a de minimis
quantity of swap dealing in connection with transactions with or on
behalf of its customers. The Commission shall promulgate regulations
to establish factors with respect to the making of this
determination to exempt.
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[[Page 71380]]
2. Major Swap Participant
New Section 1a(33) of the CEA defines the term ``major swap
participant'' as follows:
(A) IN GENERAL.--The term `major swap participant' means any person
who is not a swap dealer, and--
(i) maintains a substantial position in swaps for any of the major
swap categories as determined by the Commission, excluding--
(I) positions held for hedging or mitigating commercial risk; and
(II) positions maintained by any employee benefit plan (or any
contract held by such a plan) as defined in paragraphs (3) and (32) of
section 3 of the Employee Retirement Income Security Act of 1974 (29
U.S.C. 1002) for the primary purpose of hedging or mitigating any risk
directly associated with the operation of the plan;
(ii) whose outstanding swaps create substantial counterparty
exposure that could have serious adverse effects on the financial
stability of the United States banking system or financial markets; or
(iii)(I) is a financial entity that is highly leveraged relative to
the amount of capital it holds and that is not subject to capital
requirements established by an appropriate Federal banking agency; and
(II) maintains a substantial position in outstanding swaps in any
major swap category as determined by the Commission.\9\
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\9\ This section further provides:
(B) DEFINITION OF SUBSTANTIAL POSITION.--For purposes of
subparagraph (A), the Commission shall define by rule or regulation
the term `substantial position' at the threshold that the Commission
determines to be prudent for the effective monitoring, management,
and oversight of entities that are systemically important or can
significantly impact the financial system of the United States. In
setting the definition under this subparagraph, the Commission shall
consider the person's relative position in uncleared as opposed to
cleared swaps and may take into consideration the value and quality
of collateral held against counterparty exposures.
(C) SCOPE OF DESIGNATION.--For purposes of subparagraph (A), a
person may be designated as a major swap participant for 1 or more
categories of swaps without being classified as a major swap
participant for all classes of swaps.
(D) EXCLUSIONS.--The definition under this paragraph shall not
include an entity whose primary business is providing financing, and
uses derivatives for the purpose of hedging underlying commercial
risks related to interest rate and foreign currency exposures, 90
percent or more of which arise from financing that facilitates the
purchase or lease of products, 90 percent or more of which are
manufactured by the parent company or another subsidiary of the
parent company.
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3. Associated Person of a Swap Dealer or Major Swap Participant
New Section 1a(4) of the CEA defines the term ``associated person
of a swap dealer or major swap participant'' as follows:
(A) IN GENERAL.-- The term `associated person of a swap dealer or
major swap participant' means a person who is associated with a swap
dealer or major swap participant as a partner, officer, employee, agent
(or any person occupying a similar status or performing similar
functions), in any capacity that involves--
(i) the solicitation or acceptance of swaps; or
(ii) the supervision of any person or persons so engaged.\10\
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\10\ New section 1a(4) further provides:
(B) EXCLUSION.-- Other than for purposes of section 4s(b)(6),
the term `associated person of a swap dealer or major swap
participant' does not include any person associated with a swap
dealer or major swap participant the functions of which are solely
clerical or ministerial.
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B. Registration Requirements for SDs and MSPs
New Section 4s(a) of the CEA \11\ sets forth the registration
requirements for SDs and MSPs as follows:
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\11\ Section 4s(a) was added to the CEA by Section 731 of the
Dodd-Frank Act.
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(a) REGISTRATION.--
(1) SWAP DEALERS.-- It shall be unlawful for any person to act as a
swap dealer unless the person is registered as a swap dealer with the
Commission.
(2) MAJOR SWAP PARTICIPANTS.-- It shall be unlawful for any person
to act as a major swap participant unless the person is registered as a
major swap participant with the Commission.
New Section 4s(b) \12\ directs the Commission to adopt rules that
provide for the registration of SDs and MSPs. New Section 4s does not
direct the Commission to adopt rules that provide for the registration
of associated persons of SDs or MSPs. However, new Section 4s(b)(6)
makes it unlawful for a swaps entity to permit a person to associate
with it if the person is subject to a statutory disqualification as
follows:
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\12\ Section 4s(b) similarly was added to the CEA by Section 731
of the Dodd-Frank Act.
Except to the extent otherwise specifically provided by rule,
regulation, or order, it shall be unlawful for a swap dealer or
major swap participant to permit any person associated with a swap
dealer or major swap participant who is subject to a statutory
disqualification to effect or be involved in effecting swaps on
behalf of the swap dealer or major swap participant, if the swap
dealer or major swap participant knew, or in the exercise of
reasonable care should have known, of the statutory
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disqualification.
For the purpose of the Proposal, the Commission intends that a
statutory disqualification is a disqualification under Section 8a(2) or
8a(3) of the CEA.\13\
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\13\ 7 U.S.C. 12a(2) and 12a(3). These sections of the CEA
contain an extensive list of matters that constitute grounds to
refuse to register a person, including, without limitation, felony
convictions, commodities or securities law violations, and bars or
other adverse actions taken by financial regulators.
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Section 4s further directs the Commission to adopt rules that
provide for the regulation of SDs and MSPs with respect to, among
others, the following areas: Capital and margin, reporting and
recordkeeping, daily trading records, business conduct standards,
documentation standards, trading duties, chief compliance officer,\14\
and, with respect to uncleared swaps, segregation \15\ (collectively,
``Section 4s Requirements''). The Section 4s Requirements are being
addressed by other rulemakings. Their impact on the registration
process is discussed below at Paragraph C of this Section I.
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\14\ New Sections 4s(e) through (k), respectively, added to the
CEA by Dodd-Frank Section 731.
\15\ New Section 4s(l), added to the CEA by Dodd-Frank Section
724(c).
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Additionally, Section 716 of the Dodd-Frank Act prohibits an
insured depository institution (``IDI'') from receiving Federal
assistance if it is also an SD that engages in swaps activities that
are not covered by the exclusion in Section 716(d).\16\ Under Section
716(c), an IDI can retain its access to Federal assistance if it
transfers covered activities to a non-IDI affiliate (a ``Push-Out
Affiliate'') that is an SD or MSP, if the affiliate complies with the
requirements of Section 716(c), including such requirements as the
Commission may establish.\17\ The Push-
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Out Affiliate, however, would not have access to Federal assistance.
The Commission is not proposing any specific requirements at this time
for any Push-Out Affiliate. The Commission does intend, however, that
any Push-Out Affiliate that comes within the statutory definition of an
SD or an MSP be subject to registration and regulation as an SD or as
an MSP, as the case may be.
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\16\ Specifically, the prohibition against Federal assistance to
swaps entities is set forth in paragraph (a) of Section 716 as
follows:
(a) PROHIBITION ON FEDERAL ASSISTANCE.-- Notwithstanding any
other provision of law (including regulations), no Federal
assistance may be provided to any swaps entity with respect to any
swap, security-based swap, or other activity of the swaps entity.
Dodd-Frank Section 716(d) carves out certain swap activities of
an IDI that is an SD, and therefore a ``swaps entity,'' from the
prohibition against ``Federal assistance.'' In particular, the
prohibition against Federal assistance does not apply to the extent
the IDI SD engages in: (1) Hedging and other risk-mitigating
activities of the IDI; or (2) acting as an SD for swaps and
security-based swaps involving rates (e.g., interest rate swaps) or
reference assets that are permissible investments. Engaging in non-
cleared credit default swaps, however, would subject an IDI SD to
the prohibition against Federal assistance.
\17\ Section 716(c) provides for the Push-Out Affiliate
exception as follows:
(c) AFFILIATES OF INSURED DEPOSITORY INSTITUTIONS.--The
prohibition on Federal assistance contained in subsection (a) does
not apply to and shall not prevent an insured depository institution
from having or establishing an affiliate which is a swaps entity, as
long as such insured depository institution is part of a bank
holding company, or savings and loan holding company, that is
supervised by the Federal Reserve and such swaps entity affiliate
complies with sections 23A and 23B of the Federal Reserve Act and
such other requirements as the Commodity Futures Trading Commission
* * * may determine to be necessary and appropriate.
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Part 3 of the Commission's regulations governs registration under
the CEA. Currently, Part 3 is not applicable to swaps entities. To
fulfill the statutory mandates of the Dodd-Frank Act, and as is
discussed more fully below, the Commission is proposing amendments to
Regulations 3.2, 3.4, 3.10, 3.21, 3.30, 3.31 and 3.33, and adoption of
new Regulation 23.21. To further accomplish these aims, the Commission
also is proposing adoption of new Regulations 23.22 and 170.16.\18\
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\18\ New Regulation 23.22 would pertain to requirements
applicable to SDs and MSPs with regard to associated persons and new
Regulation 170.16 would require SDs and MSPs to become members of
NFA. As is discussed in Item II.C.2.b. below, the Commission
specifically is requesting comment on certain matters related to
these proposed requirements.
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C. Phased Implementation
As is noted above, the Dodd-Frank Act requires the Commission to
promulgate rules providing for the registration of SDs and MSPs not
later than July 21, 2011.\19\ Section 754 of the Dodd-Frank Act,
however, permits the other separate rulemakings establishing specific
criteria in the SD and MSP definitions that determine who must
register, as well as the Section 4s Requirements, to become effective
after July 21, 2011.\20\ In order to meet the prescribed deadline to
adopt rules providing for registration of swaps entities, even though
the Definitional Rulemakings will not be effective until a later date
and the criteria of many of the Section 4s Requirements will not be
known with certainty until a later date, the Commission is proposing a
provisional registration procedure for the transitional period between
the July 21, 2011 date by which regulations establishing a process for
swaps entities' registration must be in place and the effective dates
of the Definitional Rulemakings and the rulemakings implementing the
Section 4s Requirements. This approach is intended to ensure continuity
of the business operations of existing swaps entities, and to avoid
undue market disruption.
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\19\ New Section 4s(b)(5) of the CEA.
\20\ Section 754 provides that:
Unless otherwise provided in this title, the provisions of this
subtitle [Subtitle A--Regulation of Over-the-Counter Swaps Markets]
shall take effect on the later of 360 days after the date of
enactment of this subtitle [i.e., July 15, 2011], or, to the extent
a provision of this subtitle requires a rulemaking, not less than 60
days after publication of the final rule or regulation implementing
such provision of this subtitle.
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Moreover, to provide sufficient processing time for the initial set
of applicants so that persons may be registered at the earliest
possible date, persons would be able to begin applying for registration
ahead of the July 21 date, beginning on April 15, 2011.\21\ This
process, which would be entirely voluntary, would permit a person that
anticipates that it may be considered to be a ``swap dealer'' or
``major swap participant'' to apply for and obtain registration--albeit
on a provisional basis--as soon as possible. SDs and MSPs who had not
applied for registration by July 21 would be required to apply for
registration not later than the effective date of the applicable
Definitional Rulemaking.\22\ In light of the possibility that the
rulemakings regarding the operations and activities of swaps entities
will have later compliance deadlines than the effective date of the
Definitional Rulemakings, provisionally registered swaps entities would
be permitted to come into compliance with the Section 4s Requirements
within the compliance deadlines set forth in the respective final
implementing rulemakings.\23\ The Commission intends that upon the
filing of an application these swaps entities would be provisionally
registered, and would remain registered so long as they timely
established compliance with the various Section 4s Requirements and met
the standard fitness requirements. Swaps entities applying for
registration after July 21, 2011 would be subject to the same
provisional registration process but would have to demonstrate
compliance with any applicable regulation for which a compliance
deadline had passed by the time of the initial filing.
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\21\ This advance application procedure is authorized by Section
712(f) of the Dodd-Frank Act, which states in relevant part:
[N]otwithstanding the effective date of any provision of this
Act, the Commodity Futures Trading Commission * * * may, in order to
prepare for the effective dates of the provisions of this Act * * *
register persons under the provision of this Act * * * provided,
however, that no [such] action * * * shall become effective prior to
the effective date applicable to such action under the provisions of
this Act.
\22\ See Dodd-Frank Act Sections 721(b) and (c).
\23\ For the purpose of this Federal Register release, the term
``compliance'' includes ``ability to comply,'' to the extent that a
regulation subsequently adopted requires demonstration of the
ability to comply. See proposed Regulation 3.10(a)(1)(v)(A).
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Once all of the Section 4s Requirements are adopted and effective,
provisional registrants would become fully registered SDs and MSPs,
provided that they demonstrate compliance with all applicable
regulations. SDs and MSPs who failed to demonstrate compliance would
cease to be registered, would be required to withdraw their
registration application and would be prohibited from engaging in any
subsequent new activity within the SD or MSP definition, as the case
may be.\24\ After all of the rulemakings implementing the Section 4s
Requirements became effective, no provisional registrations would be
granted.
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\24\ See Section II.B.2., Regulation 3.10, for a fuller
discussion of this matter.
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By proposing a system of phased implementation, the Commission has
endeavored to accomplish the registration of SDs and MSPs in a manner
that is both efficient and minimally disruptive to on-going business.
The Commission seeks comment on this or alternative approaches to
registration, including extension of the effective date of the
registration rules until such time as rules further defining the terms
``swap dealer'' and ``major swap participant,'' and rulemakings
implementing the Section 4s Requirements, become effective.
D. Request for Comment on Allocation of Responsibilities
Currently, when a person registers with the Commission, they apply
electronically via NFA's online registration system.\25\ NFA conducts a
fitness review of the applicant, including background checks of
principals and associated persons, and proficiency testing of
associated persons. Presently, all registered futures commission
merchants (``FCMs''), introducing brokers (``IBs''), retail foreign
exchange dealers (``RFEDs''), commodity pool operators (``CPOs'') and
those registered commodity trading advisors (``CTAs'') who manage or
exercise discretion over client accounts must be members of NFA in
order to conduct futures business with the
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public.\26\ Associated persons of NFA Members must become NFA
Associates.\27\ On an ongoing basis, NFA audits registrants for
compliance with regulatory requirements applicable to the particular
registration category.
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\25\ NFA is registered as a futures association in accordance
with Section 17 of the CEA, 7 U.S.C. 21.
\26\ See NFA Bylaw 1101.
\27\ See NFA Bylaw 301(b).
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In the case of SDs and MSPs, the Commission proposes that an
application for registration would commence with the filing of Form 7-R
by means of NFA's online registration system.\28\ SDs and MSPs would
also file accompanying Forms 8-R for the entity's principals by means
of NFA's online registration system to verify that the principal is not
subject to a statutory disqualification.\29\ NFA would conduct a
background check, and would provide to the SD or MSP and to the
Commission any information that would indicate the principal is unfit
or subject to a statutory disqualification. Currently, the structure
for oversight of existing registrants' activities is that the
Commission has delegated to NFA responsibility for conducting all
aspects of the registration process and for monitoring for compliance
with all subsequent requirements.\30\ Along these lines, then, the
Commission is proposing to adopt Regulation 170.16 to include SDs and
MSPs among the registrants that are required to become and remain
members of at least one registered futures association.\31\
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\28\ Form 7-R is the form filed with NFA by entities--e.g.,
FCMs, IBs, RFEDs, CPOs and CTAs. The information called for includes
the firm's full legal name and form of organization, business
address, business records location, branch office location,
principals, contact information and any disciplinary history. Form
7-R is filed electronically and not as a paper form.
\29\ Form 8-R is the form that is filed with NFA by the entity
applicant on behalf of certain natural persons. It calls for the
person's name, address and other identifying information, any
criminal history, any regulatory disciplinary history, employment,
and educational history. The entity submits the Form 8-R and the
person confirms the accuracy of the information. Form 8-R also is
filed electronically and not as a paper form.
\30\ See, e.g., 75 FR 55310 (Sep. 10, 2010), delegating
registration functions for RFEDs, which includes the determination
of compliance with net capital requirements, to NFA.
\31\ Although Section 17 of the CEA provides that ``[a]ny
association of persons may be registered with the Commission as a
registered futures association,'' to date, NFA is the sole
association that has applied for and has been issued registration as
a futures association with the Commission.
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The Commission believes that there are three options with respect
to who should be responsible for determining initial and ongoing
compliance by swaps entities with respect to the Section 4s
Requirements and all other applicable requirements. Option number one
would involve the Commission being directly responsible for ensuring
compliance by swaps entities with all requirements applicable to them
under the CEA and Commission regulations. Option number two would
involve NFA (or any other association that may subsequently be
registered as a futures association) being responsible for ensuring
compliance, subject to Commission oversight. Option number three would
involve certain compliance oversight activities being performed by the
Commission and others being delegated to NFA (or a subsequently
registered futures association). The Commission requests comment on
these options. In the case of option number three, commenters should
specify which oversight activities should be performed by the
Commission and which should be delegated to, or performed by NFA (or
another registered futures association).
E. Extraterritorial Application of Swap Dealer and Major Swap
Participant Registration Requirements
New Section 2(i) of the CEA, which was added by Section 722(d) of
the Dodd-Frank Act, states that provisions of the CEA that were enacted
by Title VII of the Dodd-Frank Act (which includes the definition of
swap dealer, and the registration requirement) shall not apply to
activities outside the United States unless those activities ``have a
direct and significant connection with activities in, or effect on,
commerce of the United States,'' or contravene rules or regulations the
Commission may promulgate to prevent evasion.
In view of Sections 2(i) and 4s(a)(1), the Commission must
determine under which circumstances a person who engages in the
activities set forth in new Section 1a(49) of the CEA (``swap dealing
activities'') outside the U.S. shall be required to register as an SD.
By its terms, Section 2(i) sets a floor that must be met for the swap
provisions of the CEA to apply abroad. Thus, a person whose swap
dealing activity has no connection or effect of any kind, direct or
indirect, whether through affiliates or otherwise, to U.S. commerce
would not be required to register as a swap dealer. The Commission also
recognizes the role that considerations of international comity play in
determining the proper scope of extraterritorial application of federal
statutes.\32\
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\32\ See generally, Hartford Fire Insurance Co. v. California,
509 U.S. 764, 113 S.Ct. 2891, 125 L.Ed.2d 612 (1993); 1 Restatement
(Third) of Foreign Relations Law of the United States Sec. Sec.
402-403 (1987).
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The Commission generally would not require a person to register as
a swap dealer if their only connection to the U.S. was that the person
uses a U.S.-registered swap execution facility, designated clearing
organization or designated contract market in connection with their
swap dealing activities,\33\ or reports swaps to a U.S.-registered swap
data repository.\34\ On the other hand, a person outside the U.S. who
engages in swap dealing activities and regularly enters into swaps with
U.S. persons would likely be required to register as a swap dealer.
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\33\ Cf. 17 CFR 3.10 (foreign broker not required to register as
FCM if it: (1) Limits its customers to customers located outside the
U.S.; (2) confines its commodity interest activities to areas
outside the U.S.; and (3) submits its trades for clearing on an
omnibus basis through a registered FCM; also, registration exemption
for any foreign person acting in the capacity of an IB, CTA or CPO
solely with respect to customers located outside the U.S., provided
that all commodity interest transactions are submitted for clearing
to a registered FCM).
\34\ Such persons, however, may be subject to other requirements
imposed on swap dealers, such as reporting obligations. Further, the
provisions of the CEA and the Commission's regulations applicable to
``any person'' will apply as well, such as those prohibiting fraud
and manipulation.
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The Commission requests comment as to what level of swap dealing
activity outside the U.S. would qualify as having a direct and
significant connection with activities in or effect on commerce of the
U.S., thereby requiring a person outside the U.S. to register as an SD.
In particular, in view of the global nature of the swap markets and the
ability to transfer swap-related risks within affiliated groups, the
Commission requests comment on when swap dealing activity with or by
non-U.S. affiliates of U.S. persons has a ``direct and significant
connection with activities in, or effect on'' U.S. commerce for
purposes of Section 2(i) of the CEA. For example, to what extent do
persons outside the U.S. who engage in swap dealing activity with non-
U.S. affiliates of U.S. persons (such as the non-U.S. subsidiary of a
corporate parent headquartered in the U.S.) engage in swap dealing
activity that has a direct and significant connection with activities
in, or effect on, U.S. commerce?
Registration of MSPs raises different jurisdictional issues,
because the definition of MSP specifically focuses on the degree of
risk that an entity's swaps pose to U.S. counterparties and the U.S.
market. Thus, the analysis of whether a non-U.S. entity should register
as an MSP would turn upon, among other things, swap positions with U.S.
counterparties (including the use of a U.S. clearing agency or swap
execution facility) or that involve U.S. mails or any means or
instrumentality of interstate commerce. The Commission
[[Page 71383]]
requests comment on these interpretive issues.
II. Section-by-Section Analysis
A. Structure and Approach
As noted above, the Dodd-Frank Act requires SDs and MSPs to be
registered as such with the Commission, and it requires the Commission
to adopt rules providing for registration of SDs and MSPs, as well as
rules regulating their activities. To the extent practicable, the
Commission intends to place requirements that are unique to SDs and
MSPs in a new Part 23 of its regulations. However, as is noted above,
the Commission's existing registration process for futures, commodity
options and retail forex intermediaries, as well as for floor traders
and floor brokers, is extensively set forth in Part 3 of the
regulations. Replication in new Part 23 of all of the registration
process requirements appropriate for SDs and MSPs would be unwieldy and
potentially confusing. Accordingly, while two proposed new regulations
would be in new Part 23, and one proposed new regulation would be in
Part 170, most of the proposed changes in this rulemaking concern
amendments to existing provisions of Part 3.\35\
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\35\ In this regard, however, it has not been necessary for the
Commission to propose any amendments to the following Part 3
regulations in order to subject SDs and MSPs to registration with
the CFTC: 3.1, 3.11, 3.12, 3.13, 3.22, 3.40-3.47, 3.50-3.64, 3.70,
and 3.75. This is because these regulations either apply to
``applicants'' or ``registrants'' generally, such that they would
also apply to swaps entities, or they apply to other specific
registration categories (such as floor broker or floor trader), such
that they would not pertain to swaps entities.
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B. Proposed Amendments to Existing Regulations
Some of the proposed amendments to Part 3 consist entirely of
adding appropriate references to SDs and MSPs in existing
regulations.\36\ These proposed amendments will not be separately
discussed. Other proposed amendments, however, involve substantive
changes to existing regulations because of the particular attributes or
characteristics of SDs, MSPs and swaps. They are separately discussed
below.
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\36\ See the proposed amendments to Regulations: 3.4(a); 3.10
title and paragraphs (a)(1)(i), (b)(1) and (d); 3.21(c); 3.30(a);
3.31(a)(1) and (c); and 3.33(a), (b) introductory text and (e).
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1. Regulation 3.2--Registration Processing by the National Futures
Association; Notification and Duration of Registration
Regulation 3.2 generally provides for performance by NFA of
registration, temporary licensing and denial, revocation or suspension
of registration. Paragraph (c) of this regulation currently requires
NFA to notify various registration applicants when a temporary license
has been granted under provisions of Regulation 3.40. The Commission
proposes to amend Regulation 3.2(c) to add paragraph (c)(3), which
would provide that NFA will notify an applicant for registration as an
SD or MSP (pursuant to the provisional application procedure described
below, in the discussion of proposed amendments to Regulation 3.10)
that the applicant has been granted provisional registration.
2. Regulation 3.10--Registration of Futures Commission Merchants,
Retail Foreign Exchange Dealers, Introducing Brokers, Commodity Trading
Advisors, Commodity Pool Operators and Leverage Transaction Merchants
Regulation 3.10 sets forth the basic registration scheme for
various firms. The Proposal would amend the regulation to accommodate
SD and MSP registration. It would require an applicant for registration
as an SD or MSP to commence the registration process by filing Form 7-R
with NFA.\37\ This is the same form currently used by an entity
applying for registration as an FCM, IB, RFED, CPO, or CTA. Like those
other registrants, an SD's or MSP's Form 7-R would be accompanied by a
Form 8-R and a fingerprint card for each principal.\38\ NFA would then
conduct the same background check it performs with respect to other
applicants for registration.\39\
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\37\ See the proposed amendment to Regulation 3.10(a)(1)(i). SDs
and MSPs would thus be subject to the requirement in Regulation
3.10(a)(2) to file a Form 8-R for each natural person who is a
principal of the firm, along with a fingerprint card for that
person.
\38\ See Section 8a(1) of the CEA. The term ``principal'' is
defined in Regulation 3.1(a) to include generally: An officer,
director, partner or similar person exercising control over an
entity's activities; a person who owns or has power to vote ten
percent or more of the entity's securities; or a person who has
contributed ten percent or more of the entity's capital.
\39\ In the event that final registration rules are adopted and
published pursuant to the Proposal, the Commission would issue an
order officially delegating these application and background check
functions to NFA. The delegation order would require NFA to notify
the Commission if it found information regarding an applicant
indicating that the applicant was unfit or that it was subject to a
statutory disqualification.
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Concurrently with or subsequent to the filing of the Form 7-R, the
applicant for SD or MSP registration would be required to demonstrate
their compliance with such regulations as the Commission adopts
implementing the Section 4s Requirements.\40\ Moreover, filing of Form
7-R by an SD or MSP would authorize the Commission to conduct on-site
inspection to ascertain compliance with those obligations.\41\ However,
this filing would not require the Commission to conduct such
inspection. As is stated above, the Commission specifically is
requesting comment on whether it or NFA (by delegation and subject to
Commission oversight) should be directly responsible for ensuring
compliance with the Section 4s Requirements.
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\40\ See proposed Regulation 3.10(a)(1)(v)(A).
\41\ See proposed Regulation 3.10(a)(1)(v)(B).
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As is noted above, the Commission is proposing a provisional
registration process for the transitional period between adoption of
regulations providing for registration of swaps entities, and the
latest date by which applicants must comply with the final rulemakings
for the Section 4s Requirements. This provisional registration process
and the transition to full compliance would be incorporated into
Regulation 3.10(a)(1)(v)(C). As proposed, a swaps entity would be able
to file a Form 7-R at any time beginning April 15, 2011, which filing
would cause the person to be provisionally registered. From and after
the effective date(s) of the Definitional Rulemakings, a person within
the SD or MSP definition must file a Form 7-R, and until such time as
the last of the rulemakings implementing the Section 4s Requirements
becomes effective, such person will also be provisionally registered.
As each of the Section 4s Requirements rulemakings becomes effective, a
provisionally registered SD or MSP would be required to demonstrate
compliance within the timeframe required by such rulemaking. Once all
of the Section 4s Requirement rulemakings are effective and an
applicant has timely demonstrated compliance, the applicant would be
notified that its provisional registration has become a full
registration. If the applicant failed to demonstrate compliance within
the prescribed period of time, it would be so notified and required to
withdraw its registration application and its provisional registration
would cease. In the event the applicant failed to withdraw its
registration application within 30 days following receipt of notice
that its application was deficient, the application would be deemed
withdrawn and its provisional registration would cease. The regulation
would provide that the Commission could extend the time to cure the
deficiency upon written request from
[[Page 71384]]
the applicant. Upon withdrawal--whether on the part of the applicant or
upon receipt of notice of deficiency--the applicant would be prohibited
from subsequently engaging in any new activity described in Section
1a(33) or 1a(49) of the CEA. Finally, the regulation would make clear
that it would not affect the terms of any swap transaction to which the
applicant is a party entered into prior to the notice of
deficiency.\42\
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\42\ See Proposed Regulation 3.10(a)(1)(v)(D)(3). Section 739 of
the Dodd-Frank Act, in language to be codified as new Section
22(a)(5)(A) of the CEA, states:
EFFECT ON SWAPS--Unless specifically reserved in the applicable
swap, neither the enactment of the Wall Street Transparency and
Accountability Act of 2010, nor any requirement under that Act or an
amendment made by that Act, shall constitute a termination event,
force majeure, illegality, increased costs, regulatory change, or
similar event under a swap (including any related credit support
arrangement) that would permit a party to terminate, renegotiate,
modify, amend, or supplement 1 or more transactions under the swap.
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The same process would apply for persons applying for registration
as an SD or MSP on or after July 21, 2011. Filing of Form 7-R would
commence provisional registration, and would subject the applicant to
immediate compliance with any rulemaking affecting it as an SD or MSP,
insofar as the rulemaking was effective and compliance required at the
time the applicant filed its Form 7-R. As additional rulemakings phase
in, the provisionally registered SD or MSP would be required to meet
the applicable compliance deadlines. Failure to do so would result in
cessation of registration under the terms and conditions discussed in
the preceding paragraph of this Federal Register release.
Swaps entities, like other registrants, would be required to review
and update at least annually the information they had provided to NFA
in their application. Additionally, swaps entities would be required to
review and update at least annually the information they had provided
to the Commission.\43\
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\43\ See the proposed amendment to Regulation 3.10(d).
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3. Regulation 3.21--Exemption From Fingerprinting Requirement in
Certain Cases
Regulation 3.21 generally provides for submission of a copy of a
fingerprint card previously submitted to the Federal Bureau of
Investigation (``FBI''), instead of a new fingerprint card, and it
provides for exemption from the fingerprint requirement for outside
directors of a firm who are not directly involved in the firm's
activities subject to Commission regulation. As is currently true with
other firms registering with the Commission, in lieu of submitting a
fingerprint card in connection with the firm's registration, under the
Proposal an outside director of an SD or MSP would be able to submit a
notice stating that the outside director is not engaged in soliciting
business for the firm, handling its transactions, keeping its records
or supervising those who are so engaged.\44\
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\44\ See the proposed amendment to Regulation 3.21(c).
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4. Regulation 3.31--Deficiencies, Inaccuracies and Changes To Be
Reported
Regulation 3.31 generally sets forth the requirements and
responsibility for correcting and updating the information submitted by
applicants for registration on Form 7-R and Form 8-R. Each applicant
for registration or registrant as a swaps entity would be required to
promptly correct any inaccuracy or deficiency of the information in a
Form 7-R or Form 8-R it has filed. Each principal of a swaps entity
would likewise be responsible for correcting anything that renders the
information in a Form 8-R filed on behalf of such person inaccurate or
incomplete.
5. Regulation 3.33--Withdrawal From Registration
Regulation 3.33 generally sets forth the forms, procedures and
requirements for withdrawal from registration, and when such withdrawal
becomes effective. In order to withdraw from registration, under the
Proposal the Form 7-W that a swaps entity would file would specify the
nature and extent of any swap counterparty actual, anticipated or
threatened claims against the registrant.\45\ Additionally, an SD's
Form 7-W would specify that the person will not engage in any new
activity described in the definition of the term ``swap dealer'' \46\
and an MSP's Form 7-W would specify that the person will not engage in
any new activity described in the definition of the term ``major swap
participant.'' \47\
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\45\ See the proposed amendment to Regulation 3.33(b)(6)(vi).
\46\ See proposed Regulation 3.33(b)(6)(viii).
\47\ See proposed Regulation 3.33(b)(6)(ix).
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As the Commission noted in adopting Regulation 3.33 (then
designated as Regulation 1.10f):
Rule 1.10f provides that a request for withdrawal must contain
information which is intended to inform the Commission of the status
of the registrant making the withdrawal request, to substantiate the
registrant's eligibility to withdraw from registration, and to
enumerate any outstanding claims of its customers.\48\
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\48\ [Footnote in original] As used in Sec. 1.10f, the term
``customer'' includes the customers of FCMs and the clients of CTAs,
as well as the customers of any category of registrant that may be
established in the future. Section 1.10f also refers to ``commodity
pool participants''--i.e., those persons who have a direct financial
interest in a commodity pool. See Sec. 4.10(c), 46 FR 26004, 26014
(May 8, 1981).
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Withdrawal of a registration under Sec. 1.10f will become
effective 30 days after receipt by the Registration Unit of the
Commission's Division of Trading and Markets of a properly completed
request.\49\ The purpose of the 30 day period is to give the
Commission time to review the information provided by the registrant
to determine if there is any reason why withdrawal should not be
allowed. \50\
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\49\ [Footnote in original] A request will be considered to be
``received'' when it is delivered to the address specified in the
rule.
\50\ 46 FR 48915 (Oct. 5, 1981).
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C. New Part 23
As is stated above, the Commission expects that, to the extent
practicable, various Section 4s Requirements will be included in new
Part 23. At this juncture, by this Federal Register release, the
Commission is proposing that Subpart B of Part 23 include the general
requirements for the registration of SDs and MSPs and their obligations
with respect to persons associated with them.\51\
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\51\ The Commission intends that regulations applicable to the
SD and MSP definitions will be placed in Subpart A of Part 23, and
accordingly is proposing to reserve Regulations 23.1 through 23.20
for that purpose.
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1. Proposed Regulation 23.21--Registration of Swap Dealers and Major
Swap Participants
Proposed Regulation 23.21 has three paragraphs. Paragraph (a)
states that anyone coming within the statutory definition of the term
``swap dealer'' in Section 1a(49) of the CEA and the Commission's
regulations issued thereunder is subject to the registration provisions
under the CEA, and to Part 3 of the Commission's regulations, and
paragraph (b) states that anyone coming within the statutory definition
of the term ``major swap participant'' in Section 1a(33) of the CEA and
the Commission's regulations issued thereunder is subject to the
registration provisions under the CEA, and to Part 3 of the
Commission's regulations. Paragraph (c) deals with Push-Out Affiliates,
and requires that any Push-Out Affiliate that comes within the
statutory definition of an SD or an MSP be registered as an SD or as an
MSP, as the case may be. As is stated above, this requirement would
apply to Push-Out Affiliates in existence on July 21, 2011,
[[Page 71385]]
as well as to those that are organized and are active subsequent
thereto.
2. Proposed Regulation 23.22--Requirements Applicable in the Case of an
Associated Person of a Swap Dealer or Major Swap Participant
a. The Proposed Regulation
Proposed Regulation 23.22 incorporates the statutory prohibition in
new Section 4s(b)(6) against swaps entities permitting persons subject
to a statutory disqualification to be associated with them. For the
purposes of this regulation, paragraph (a) defines the term ``person''
as a shorthand substitute for the statutory term ``associated person of
a swap dealer or major swap participant.'' Paragraph (b) restates the
statutory prohibition.
b. Request for Comment
Associated persons of existing Commission registrants (e.g., FCMs,
IBs, RFEDs, CPOs or CTAs) are required to be registered. The term
``associated person'' in the context of existing Commission registrants
is not defined in the CEA. That term is defined in the Commission's
regulations. Specifically, Regulation 1.3(aa) provides that ``[T]his
term [i.e., associated person] means any natural person who is
associated with'', e.g., an FCM, IB, CPO or CTA in any capacity that
involves solicitation or the supervision of any person or persons so
engaged (emphasis added). ``Associated person'' has typically referred
to a salesperson of a registrant. Thus, a corporation, partnership or
other legal entity has never been considered an associated person. The
use of the term ``natural person'' in the current associated person
definition is intended to distinguish between the rights and
responsibilities of persons acting as associated persons of a
registrant and persons acting as IBs.\52\ However, in the absence of
any language in the Dodd-Frank Act restricting associated persons of
swaps entities to natural persons, the Commission is not proposing such
a definition. The Commission nonetheless requests comment on whether it
should by regulation in fact restrict associated persons of swaps
entities to natural persons.
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\52\ See Regulation 166.4, which provides in pertinent part that
``[e]ach branch office of each Commission registrant must use the
name of the firm of which it is a branch for all purposes, and must
hold itself out to the public under such name.'' and 48 FR 35248,
35252 (Aug. 3, 1983), in which the Commission explained the history
of the regulation. See also CFTC Staff Letters 84-10, Comm. Fut. L.
Rep. (CCH) ]22,252 (May 29, 1984) and 84-26, Comm. Fut. L. Rep.
(CCH) ]22,472 (Dec. 6, 1984), in which Commission staff further
explained and interpreted this requirement. An entity that solicits
for a registrant, but that is not a branch office of the registrant,
must register as an IB.
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The Commission also requests comment on implementing the statutory
prohibition against SDs and MSPs permitting persons subject to a
statutory disqualification to be associated with them. Currently, in
connection with registration applications for associated persons of
existing registrants, NFA conducts a thorough background check in order
to determine whether an individual is subject to statutory
disqualification. This process includes submission of fingerprint
cards, which are sent to the FBI to determine if the applicant has a
criminal record. As for associated persons of swaps entities, the
Commission is proposing that the responsibility of ensuring that such
persons are not subject to statutory disqualification would fall upon
the SD or MSP employing them. The Commission seeks comment on how SDs
and MSPs could conduct background checks or otherwise fulfill this
requirement. Possible alternatives include voluntary or required
submission of identification information and fingerprint cards to NFA
for the type of fitness review NFA conducts for existing registrants.
D. New Regulation 170.16
Part 170 of the Commission's regulations pertains to registered
futures associations.\53\ It concerns standards governing Commission
review of applications for registration as a futures association, the
registration statement that a futures association must submit to the
Commission, and membership in a registered futures association.\54\
With respect to the last subject area, Regulation 170.15 requires that,
with the exception of certain ``notice-registered'' FCMs,\55\ each
person registered as an FCM ``must become and remain a member of'' at
least one registered futures association that provides for FCM
membership (unless no such registered futures association exists). The
Commission is proposing that, like FCMs, SDs and MSPs be required to
become and remain members of a registered futures association. Proposed
Regulation 170.16 would thus closely follow the existing requirement
for FCMs in Regulation 170.15.
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\53\ As is noted above, NFA is the sole association that has
applied for and has been issued registration as a futures
association with the Commission.
\54\ Application forms for NFA membership are incorporated in
Form 7-R.
\55\ Regulation 3.10(a)(3) provides for notice registration of
an FCM (or IB) in the case of certain persons registered as
securities brokers or dealers in connection with trading security
futures products.
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III. Related Matters
A. Regulatory Flexibility Act
The Regulatory Flexibility Act (``RFA'') \56\ requires that
agencies consider whether the rules they propose will have a
significant economic impact on a substantial number of small entities
and if so, provide a regulatory flexibility analysis respecting the
impact. The Commission has already established certain definitions of
``small entities'' to be used in evaluating the impact of its rules on
such small entities in accordance with the RFA.\57\ SDs and MSPs are
new categories of registrant. Accordingly, the Commission has not
previously addressed the question of whether such persons are, in fact,
small entities for purposes of the RFA.
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\56\ 5 U.S.C. 601 et seq.
\57\ 47 FR 18618 (Apr. 30, 1982).
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The Commission previously has determined that FCMs should not be
considered to be small entities for purposes of the RFA. The
Commission's determination was based in part upon their obligation to
meet the minimum financial requirements established by the Commission
to enhance the protection of customers' segregated funds and protect
the financial condition of FCMs generally.\58\ Like FCMs, SDs will be
subject to minimum capital and margin requirements, and are expected to
comprise the largest global financial firms. The Commission is required
to exempt from designation entities that engage in a de minimis level
of swaps dealing in connection with transactions with or on behalf of
customers. Accordingly, for purposes of the RFA for this and future
rulemakings, the Commission is hereby proposing that SDs not be
considered ``small entities'' for essentially the same reasons that
FCMs have previously been determined not to be small entities.
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\58\ Id. at 18619.
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The Commission has also previously determined that large traders
are not ``small entities'' for RFA purposes.\59\ The Commission
considered the size of a trader's position to be the only appropriate
test for purposes of large trader reporting.\60\ MSPs maintain
substantial positions in swaps, creating substantial counterparty
exposure that could have serious adverse effects on the financial
stability of the United States banking system or financial markets.
Accordingly, for purposes of the RFA for this and future rulemakings,
the Commission is hereby proposing
[[Page 71386]]
that MSPs not be considered ``small entities'' for essentially the same
reasons that large traders have previously been determined not to be
small entities.
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\59\ 47 FR at 18620.
\60\ Id.
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The Commission is carrying out Congressional mandates by proposing
these rules. The Commission is incorporating registration of SDs and
MSPs into the existing registration structure applicable to other
registrants. In so doing, the Commission has attempted to accomplish
registration of SDs and MSPs in the manner that is least disruptive to
ongoing business and most efficient and expeditious, consistent with
the public interest, and accordingly believes that these registration
rules will not present a significant economic burden on any entity
subject thereto. Accordingly, the Chairman, on behalf of the
Commission, hereby certifies pursuant to 5 U.S.C. 605(b) that the
proposed rules will not have a significant economic impact on a
substantial number of small entities.
B. Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (PRA) \61\ imposes certain
requirements on Federal agencies (including the Commission) in
connection with their conducting or sponsoring any collection of
information as defined by the PRA. This proposed rulemaking would
result in new collection of information requirements within the meaning
of the PRA. The Commission therefore is submitting this proposal to the
Office of Management and Budget (OMB) for review. If adopted, responses
to this collection of information would be mandatory. The Commission
will protect proprietary information according to the Freedom of
Information Act and 17 CFR Part 145, ``Commission Records and
Information.'' In addition, Section 8(a)(1) of the CEA strictly
prohibits the Commission, unless specifically authorized by the CEA,
from making public ``data and information that would separately
disclose the business transactions or market positions of any person
and trade secrets or names of customers.'' The Commission is also
required to protect certain information contained in a government
system of records according to the Privacy Act of 1974.\62\
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\61\ 44 U.S.C. 3501 et seq.
\62\ 5 U.S.C. 552a.
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An agency may not conduct or sponsor, and a person is not required
to respond to, a collection of information unless it displays a
currently valid control number. OMB has not yet assigned a control
number to the new collection.
1. Information Provided/by Reporting Entities/Persons
The burden associated with the proposed new rules implementing
registration of SDs and MSPs is estimated to be 752 hours, which will
result from (1) application for registration by SDs and MSPs and
submission of required information on behalf of their respective
principals; (2) initially, no withdrawals from registration by SDs or
MSPs and a relatively small decrease in the number of their respective
principals; and (3) initially, no reported corrections. Burden means
the total time, effort, or financial resources expended by persons to
generate, maintain, retain, disclose or provide information to or for a
federal agency.
The respondent burden for this collection is estimated to average
0.5 hours per response for the Form 7-R; 0.4 hours per response for the
Form 8-R; 3 minutes per response for the Form 7-W; 6 minutes per
response for the Form 8-T; and 3 minutes per response for the Form 3-R.
These estimates include the time needed to review instructions;
develop, acquire, install, and utilize technology and systems for the
purposes of collecting, validating, and verifying information,
processing and maintaining information and disclosing and providing
information; adjust the existing ways to comply with any previously
applicable instructions and requirements; train personnel to be able to
respond to a collection of information; and transmit or otherwise
disclose the information. While staff believes that there may likely be
approximately 200 swap dealers, we have taken a conservative approach
in estimating that there will be 250 SDs for PRA purposes. The
estimated burden was thus calculated as follows:
Form 7-R
Respondents/Affected Entities: 300.
Estimated number of responses: 300.
Estimated total annual burden on respondents: 0.5 hours.
Frequency of collection: On occasion and annually.
Burden statement: 300 respondents x 0.5 hours = 150 Burden Hours.
Form 8-R
Respondents/Affected Entities: 5 principals per each of 300 SDs and
MSPs.
Estimated number of responses: 1,500.
Estimated total annual burden on respondents: 0.4 hours.
Frequency of collection: On occasion.
Burden statement: 1,500 respondents x 0.4 hours = 600 Burden Hours.
Form 8-T
Respondents/Affected Entities: 1 principal per each of 20 SDs and
MSPs.
Estimated number of responses: 20.
Estimated total annual burden on respondents: 6 minutes.
Frequency of collection: On occasion.
Burden statement: 20 respondents x 0.1 hours = 2 Burden Hours.
2. Information Collection Comments
The Commission invites the public and other Federal agencies to
comment on any aspect of the reporting and recordkeeping burdens
discussed above. Pursuant to 44 U.S.C. 3506(c)(2)(B), the Commission
solicits comments in order to: (1) Evaluate whether the proposed
collection of information is necessary for the proper performance of
the functions of the Commission, including whether the information will
have practical utility; (2) evaluate the accuracy of the Commission's
estimate of the burden of the proposed collection of information; (3)
determine whether there are ways to enhance the quality, utility, and
clarity of the information to be collected; and (4) minimize the burden
of the collection of information on those who are to respond, including
through the use of automated collection techniques or other forms of
information technology.
Comments may be submitted directly to the Office of Information and
Regulatory Affairs, by fax at (202) 395-6566 or by e-mail at
OIRAsubmissions@omb.eop.gov. Please provide the Commission with a copy
of submitted comments so that all comments can be summarized and
addressed in the final rule preamble. Refer to the Addresses section of
this notice of proposed rulemaking for comment submission instructions
to the Commission. A copy of the supporting statements for the
collections of information discussed above may be obtained by visiting
RegInfo.gov. OMB is required to make a decision concerning the
collection of information between 30 and 60 days after publication of
this document in the Federal Register. Therefore, a comment is best
assured of having its full effect if OMB receives it within 30 days of
publication.
C. Cost-Benefit Analysis
Section 15(a) of the CEA \63\ requires the Commission to consider
the costs and benefits of its action before issuing a rulemaking under
the CEA. By its terms, Section 15(a) does not require the Commission to
quantify the costs and benefits of a rule or to determine
[[Page 71387]]
whether the benefits of the rulemaking outweigh its costs; rather, it
simply requires that the Commission ``consider'' the costs and benefits
of its actions. Section 15(a) further specifies that the costs and
benefits shall be evaluated in light of five broad areas of market and
public concern: (1) Protection of market participants and the public;
(2) efficiency, competitiveness and financial integrity of futures
markets; (3) price discovery; (4) sound risk management practices; and
(5) other public interest considerations. The Commission may in its
discretion give greater weight to any one of the five enumerated areas
and could in its discretion determine that, notwithstanding its costs,
a particular rule is necessary or appropriate to protect the public
interest or to effectuate any of the provisions or accomplish any of
the purposes of the CEA.
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\63\ 7 U.S.C. 19(a).
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Summary of Proposed Requirements. The proposed rules would create a
process to implement the registration requirements for swaps entities
under the CEA pursuant to the Dodd-Frank Act generally through
amendments to the existing regulatory framework.
Costs. With respect to costs, the Commission has determined that
the costs of the new registration requirements imposed on SDs and MSPs
will consist primarily of the fees that NFA will charge: (1) For
application for registration of SDs and MSPs, which are expected to be
$500 per application; (2) to process fingerprints and background
information for principals, which are expected to be $85 per person;
and (3) for NFA membership, which are expected to be $7,500 for an SD
and $5,600 for an MSP annually. Time and expense to registrants
relating to the registration process alone are expected to be
relatively minimal as the forms are not complicated. Time and expense
relating to the new registration requirements are therefore not
expected to be a barrier to entry of registrants or to adversely affect
the liquidity of any markets.
For purposes of this rulemaking, the costs of the new registration
requirements do not include costs to registrants resulting from any
need to create or augment an internal compliance and reporting
infrastructure as a result of the Section 4s Requirements that are
being addressed by other Commission rulemakings. The Commission
therefore views the costs of the new registration requirements to be
insubstantial when viewed in the context of the broader purpose of
Congress to promote systemic safety for the financial markets as
embodied in the Dodd-Frank Act.
Benefits. With respect to benefits, the Commission has determined
that the benefits of registering swaps entities are significant.
Registration will enable the Commission to identify the universe of SDs
and MSPs, which will enable these entities to be monitored for
compliance with the Dodd-Frank Act and the rules being implemented by
the Commission thereunder. This will enable the protection of market
participants and the public, promote efficiency and transparency of
markets, promote sound risk management practices and promote the public
interest, as described in the rules being proposed by the Commission
implementing the substantive provisions of the Dodd-Frank Act.
Similarly, the Commission has determined that the benefits of requiring
swaps entities to become and remain members of a registered futures
association are significant. Membership will provide the Commission
with flexibility with regard to its oversight of compliance with the
Dodd-Frank Act and Commission regulations.
Public Comment. The Commission invites public comment on its cost-
benefit considerations. Commenters are also invited to submit any data
or other information that they may have quantifying or qualifying the
costs and benefits of the Proposal with their comment letters.
List of Subjects
17 CFR Part 3
Definitions, Customer protection, Licensing, Registration, Swaps.
17 CFR Part 23
Swaps, Swap dealers, Major swap participants, Registration.
17 CFR Part 170
Authority delegations (Government agencies), Commodity futures,
Swaps, Reporting and recordkeeping requirements.
For the reasons presented above, the Commission proposes to amend
Chapter I of Title 17 of the Code of Federal Regulations as follows:
PART 3--REGISTRATION
1. The authority citation for part 3 is amended to read as follows:
Authority: 7 U.S.C. 1a, 2, 6, 6a, 6b, 6c, 6d, 6e, 6f, 6g, 6h,
6i, 6k, 6m, 6n, 6o, 6p, 6s, 8, 9, 9a, 12, 12a, 13b, 13c, 16a, 18,
19, 21, and 23, as amended by Title VII of the Dodd-Frank Wall
Street Reform and Consumer Protection Act, Pub. L. No. 111-203, 124
Stat. 1376 (Jul. 21, 2010).
2. Section 3.2 is amended by adding paragraph (c)(3) to read as
follows:
Sec. 3.2 Registration processing by the National Futures Association;
notification and duration of registration.
* * * * *
(c) * * *
(3) Upon filing of an application for registration pursuant to
Sec. 3.10(a)(1)(v) of this part by a swap dealer or major swap
participant the National Futures Association shall notify the swap
dealer or major swap participant that it is provisionally registered
pending completion of a fitness review by the National Futures
Association.
* * * * *
3. Section 3.4 is amended by revising paragraph (a) to read as
follows:
Sec. 3.4 Registration in one capacity not included in registration in
any other capacity.
(a) Except as may be otherwise provided in the Act or in any rule,
regulation, or order of the Commission, each futures commission
merchant, retail foreign exchange dealer, swap dealer, major swap
participant, floor broker, floor trader, associated person (other than
an associated person of a swap dealer or major swap participant),
commodity trading advisor, commodity pool operator, introducing broker,
and leverage transaction merchant must register as such under the Act.
Registration in one capacity under the Act shall not include
registration in any other capacity; Provided, however, That a
registered floor broker need not also register as a floor trader in
order to engage in activity as a floor trader.
* * * * *
4. Section 3.10 is amended by:
a. Revising the heading;
b. Revising paragraph (a)(1);
c. Adding paragraph (a)(1)(v); and
d. Revising paragraphs (b) and (d) to read as follows:
Sec. 3.10 Registration of futures commission merchants, retail
foreign exchange dealers, introducing brokers, commodity trading
advisors, commodity pool operators, swap dealers, major swap
participants and leverage transaction merchants.
(a) * * *
(1)(i) Except as provided in paragraph (a)(3) of this section,
application for registration as a futures commission merchant, retail
foreign exchange dealers, introducing broker, commodity trading
advisor, commodity pool operator, swap dealer, major swap participant
or leverage transaction merchant must be on Form 7-R, completed and
filed with the National Futures Association in accordance with the
instructions thereto.
(ii) Applicants for registration as a futures commission merchant
or
[[Page 71388]]
introducing broker must accompany their Form 7-R with a Form 1-FR-FCM
or Form 1-FR-IB, respectively, in accordance with the provisions of
Sec. 1.10 of this chapter: Provided, however, That an applicant for
registration as a futures commission merchant or introducing broker
which is registered with the Securities and Exchange Commission as a
securities broker or dealer may accompany its Form 7-R with a copy of
its Financial and Operational Combined Uniform Single Report under the
Securities Exchange Act of 1934, Part II or Part II A, in accordance
with the provisions of Sec. 1.10(h) of this chapter.
(iii) Applicants for registration as a commodity pool operator must
accompany their Form 7-R with the financial statements described in
Sec. 4.13(c) of this chapter.
(iv) Applicants for registration as a leverage transaction merchant
must accompany their Form 7-R with a Form 2-FR in accordance with the
provisions of Sec. 2-FR of this chapter.
(v)(A) Applicants for registration as a swap dealer or major swap
participant must demonstrate, concurrently with or subsequent to the
filing of their Form 7-R with the National Futures Association,
compliance with regulations adopted by the Commission pursuant to
sections 4s(e), 4s(f), 4s(g), 4s(h), 4s(i), 4s(j) and 4s(k) of the Act,
and, as applicable, section 4s(l) of the Act; Provided, however, that
for the purposes of this paragraph (a)(1)(v) the term ``compliance''
includes the term ``the ability to comply,'' to the extent that a
particular regulation may require demonstration of the ability to
comply with a requirement.
(B) The filing of the Form 7-R by the applicant swap dealer or
major swap participant authorizes the Commission to conduct on-site
inspection of the applicant to determine compliance with the
regulations referred to in paragraph (a)(1)(v)(A) of this section.
(C)(1) Any person may apply to be registered as a swap dealer or
major swap participant by filing a form 7-R at any time from April 15,
2011 until such time as regulations adopted by the Commission further
defining the terms ``swap dealer'' and ``major swap participant''
become effective.
(2) From and after such time as regulations adopted by the
Commission further defining the terms ``swap dealer'' and ``major swap
participant'' become effective, each swap dealer or major swap
participant must apply to be registered as a swap dealer or major swap
participant by filing a form 7-R.
(3) Any person who applies to be registered as a swap dealer or
major swap participant before such time as all of the regulations
specified in paragraph (a)(1)(v)(A) of this section have become
effective will be granted provisional registration as a swap dealer or
major swap participant, as the case may be, upon filing a Form 7-R and
such documentation as may be required to demonstrate compliance with
such of the regulations specified in paragraph (a)(1)(v)(A) of this
section as are effective as of the date of such filing; Provided,
however, that: Where the applicant has been granted provisional
registration as a swap dealer or major swap participant, it must
provide such documentation as may be required to demonstrate compliance
with the remaining regulations specified in paragraph (a)(1)(v)(A) of
this section by no later than the respective effective date of each
such regulation.
(D)(1) Where an applicant for registration as a swap dealer or
major swap participant that has been granted provisional registration
has timely demonstrated compliance with the regulations specified in
paragraph (a)(1)(v)(A) of this section in accordance with paragraph
(a)(1)(v)(C) of this section, the applicant will be notified that its
provisional registration has ceased to be provisional and it has become
fully registered as a swap dealer or major swap participant.
(2) Where an applicant for registration as a swap dealer or major
swap participant that has been granted provisional registration has
failed to timely demonstrate compliance with any of the regulations
specified in paragraph (a)(1)(v)(A) of this section in accordance with
paragraph (a)(1)(v)(C) of this section the applicant will be notified
that its application is deficient, whereupon it must withdraw its
registration application, it must not engage in any new activity
described in the definition of ``swap dealer'' in section 1a(49) of the
Act or the definition of ``major swap participant'' in section 1a(33)
of the Act as such terms may be further defined by Commission
regulations, and its provisional registration shall cease; Provided,
however, that in the event the applicant fails to withdraw its
registration application or cure the deficiency within 30 days
following receipt of notice that its application is deficient, its
application will be deemed withdrawn and thereupon its registration
shall cease; Provided further, however, that upon written request by
the applicant submitted to the Director of the Division of Clearing and
Intermediary Oversight, the Commission may in its discretion extend the
time within which the deficiency may be cured.
(3) Unless specifically reserved in the applicable swap, no
withdrawal, deemed withdrawal, cessation or revocation of registration
as a swap dealer or major swap participant pursuant to paragraph
(a)(1)(v)(D)(2) of this section or paragraph (b) of this section shall
constitute a termination event, force majeure, an illegality, increased
costs, a regulatory change, or a similar event under a swap (including
any related credit support arrangement) that would permit a party to
terminate, renegotiate, modify, amend or supplement one or more
transactions under the swap.
* * * * *
(b) Duration of registration. (1) A person registered as a futures
commission merchant, retail foreign exchange dealer, introducing
broker, commodity trading advisor, commodity pool operator, swap
dealer, major swap participant or leverage transaction merchant in
accordance with paragraph (a) of this section will continue to be so
registered until the effective date of any revocation or withdrawal of
such registration. Such person will immediately be prohibited from
engaging in new activities requiring registration under the Act or from
representing himself to be a registrant under the Act or the
representative or agent of any registrant during the pendency of any
suspension of such registration.
* * * * *
(d) On a date to be established by the National Futures
Association, and in accordance with procedures established by the
National Futures Association, each registrant as a futures commission
merchant, retail foreign exchange dealer, introducing broker, commodity
trading advisor, commodity pool operator, swap dealer, major swap
participant or leverage transaction merchant shall, on an annual basis,
review and update registration information maintained with the National
Futures Association and additionally, in the case of a swap dealer or
major swap participant, with the Commission. The failure to complete
the review and update within thirty days following the date established
by the National Futures Association shall be deemed to be a request for
withdrawal from registration, which shall be processed in accordance
with the provisions of Sec. 3.33(f).
5. Section 3.21 is amended by:
a. Revising paragraph (c) introductory text; and paragraph
(c)(1)(iv);
b. Adding paragraph (c)(1)(v);
c. Revising paragraph (c)(2)(i); and
[[Page 71389]]
d. Revising paragraph (c)(4)(i) to read as follows:
Sec. 3.21 Exemption from fingerprinting requirement in certain cases.
* * * * *
(c) Outside directors. Any futures commission merchant, retail
foreign exchange dealer, introducing broker, commodity trading advisor,
commodity pool operator, swap dealer, major swap participant or
leverage transaction merchant that has a principal who is a director
but is not also an officer or employee of the firm may, in lieu of
submitting a fingerprint card in accordance with the provisions of
Sec. Sec. 3.10(a)(2) and 3.31(a)(2), file a ``Notice Pursuant to Sec.
3.12(c) of the Commission's Regulations'' with the National Futures
Association. Such notice shall state, if true, that such outside
director:
(1) * * *
(iv) The solicitation of leverage customers' orders for leverage
transactions,
(v) The solicitation of a swap agreement;
(2) * * *
(i) Commodity interest or swap transactions;
* * * * *
(4) * * *
(i) The name of the futures commission merchant, retail foreign
exchange dealer, swap dealer, major swap participant, introducing
broker, commodity trading advisor, commodity pool operator, leverage
transaction merchant, or applicant for registration in any of these
capacities of which the person is an outside director;
* * * * *
6. Section 3.30 is amended by revising paragraph (a) to read as
follows:
Sec. 3.30 Current address for purpose of delivery of communications
from the Commission or the National Futures Association.
(a) The address of each registrant, applicant for registration, and
principal, as submitted on the application for registration (Form 7-R
or Form 8-R) or as submitted on the biographical supplement (Form 8-R)
shall be deemed to be the address for delivery to the registrant,
applicant or principal for any communications from the Commission or
the National Futures Association, including any summons, complaint,
reparation claim, order, subpoena, special call, request for
information, notice, and other written documents or correspondence,
unless the registrant, applicant or principal specifies another address
for this purpose: Provided, that the Commission or the National Futures
Association may address any correspondence relating to a biographical
supplement submitted for or on behalf of a principal to the futures
commission merchant, retail foreign exchange dealer, commodity trading
advisor, commodity pool operator, swap dealer, major swap participant,
introducing broker, or leverage transaction merchant with which the
principal is affiliated and may address any correspondence relating to
an associated person to the futures commission merchant, retail foreign
exchange dealer, commodity trading advisor, commodity pool operator,
swap dealer, major swap participant, introducing broker, or leverage
transaction merchant with which the associated person or the applicant
for registration is or will be associated as an associated person.
* * * * *
7. Section 3.31 is amended by revising paragraphs (a)(1), (b) and
(c)(2) to read as follows:
Sec. 3.31 Deficiencies, inaccuracies, and changes, to be reported.
(a)(1) Each applicant or registrant as a futures commission
merchant, retail foreign exchange dealer, swap dealer, major swap
participant, commodity trading advisor, commodity pool operator,
introducing broker, or leverage transaction merchant shall, in
accordance with the instructions thereto, promptly correct any
deficiency or inaccuracy in Form 7-R or Form 8-R which no longer
renders accurate and current the information contained therein. Each
such correction shall be made on Form 3-R and shall be prepared and
filed in accordance with the instructions thereto. Provided, however,
that where a registrant is reporting a change in the form of
organization from or to a sole proprietorship, the registrant must file
a Form 7-W regarding the pre-existing organization and a Form 7-R
regarding the newly formed organization.
* * * * *
(b)(1) Each applicant for registration or registrant as a floor
broker, floor trader or associated person, and each principal of a
futures commission merchant, retail foreign exchange dealer, commodity
trading advisor, commodity pool operator, introducing broker, or
leverage transaction merchant must, in accordance with the instructions
thereto, promptly correct any deficiency or inaccuracy in the Form 8-R
or supplemental statement thereto which renders no longer accurate and
current the information contained in the Form 8-R or supplemental
statement. Each such correction must be made on Form 3-R and must be
prepared and filed in accordance with the instructions thereto.
(2) Each applicant for registration or registrant as a swap dealer
or major swap participant and each principal of a swap dealer or major
swap participant, must, in accordance with the instructions thereto,
promptly correct any deficiency or inaccuracy in the Form 8-R or
supplemental statement thereto which renders no longer accurate and
current the information contained in the Form 8-R or supplemental
statement. Each such correction must be made on Form 3-R and must be
prepared and filed in accordance with the instructions thereto.
(c) * * *
(2) Each person registered as, or applying for registration as, a
futures commission merchant, retail foreign exchange dealer, commodity
trading advisor, commodity pool operator, swap dealer, major swap
participant, introducing broker or leverage transaction merchant must,
within thirty days after the termination of the affiliation of a
principal with the registrant or applicant, file a notice thereof with
the National Futures Association.
* * * * *
8. Section 3.33 is amended by:
a. Revising paragraph (a) introductory text;
b. Revising paragraph (b) introductory text and paragraphs
(b)(6)(vi) through (b)(6)(vii);
c. Adding paragraphs (b)(6)(viii) and (b)(6)(ix); and
d. Revising paragraph (e) to read as follows:
Sec. 3.33 Withdrawal from registration.
(a) A futures commission merchant, retail foreign exchange dealer,
introducing broker, commodity trading advisor, commodity pool operator,
swap dealer, major swap participant, leverage transaction merchant,
floor broker or floor trader may request that its registration be
withdrawn in accordance with the requirements of this section if:
* * * * *
(b) A request for withdrawal from registration as a futures
commission merchant, retail foreign exchange dealer, introducing
broker, commodity trading advisor, commodity pool operator, swap
dealer, major swap participant, or leverage transaction merchant must
be made on Form 7-W, and a request for withdrawal from registration as
a floor broker or floor trader must be made on Form 8-W,
[[Page 71390]]
completed and filed with National Futures Association in accordance
with the instructions thereto. The request for withdrawal must be made
by a person duly authorized by the registrant and must specify:
(6) * * *
(vi) The nature and extent of any pending customer, retail forex
customer, option customer, leverage customer, swap counterparty or
commodity pool participant claims against the registrant, and, to the
best of the registrant's knowledge and belief, the nature and extent of
any anticipated or threatened customer, option customer, leverage
customer, swap counterparty or commodity pool participant claims
against the registrant;
(vii) In the case of a futures commission merchant or a retail
foreign exchange dealer which is a party to a guarantee agreement, that
all such agreements have been or will be terminated in accordance with
the provisions of Sec. 1.10(j) of this chapter not more than thirty
days after the filing of the request for withdrawal from registration;
(viii) In the case of a swap dealer, that the person will not
engage in any new activity described in the definition of the term
``swap dealer'' in section 1a(49) of the Act, as such term may be
further defined by Commission regulations; and
(ix) In the case of a major swap participant, that the person will
not engage in any new activity described in the definition of the term
``major swap participant'' in section 1a(33) of the Act, as such term
may be further defined by Commission regulations.
* * * * *
(e) A request for withdrawal from registration as a futures
commission merchant, retail foreign exchange dealer, introducing
broker, commodity trading advisor, commodity pool operator, swap
dealer, major swap participant or leverage transaction merchant on Form
7-W, and a request for withdrawal from registration as a floor broker
or floor trader on Form 8-W, must be filed with the National Futures
Association and a copy of such request must be sent by the National
Futures Association within three business days of the receipt of such
withdrawal request to the Commodity Futures Trading Commission,
Division of Clearing and Intermediary Oversight, Three Lafayette
Centre, 1155 21st Street, NW., Washington, DC 20581. In addition, any
floor broker or floor trader requesting withdrawal from registration
must file a copy of his Form 8-W with each contract market that has
granted him trading privileges. Within three business days of any
determination by the National Futures Association under Sec. 3.10(d)
to treat the failure by a registrant to file an annual Form 7-R as a
request for withdrawal, the National Futures Association shall send the
Commission notice of that determination.
* * * * *
9. Part 23 is added to read as follows:
PART 23--SWAP DEALERS AND MAJOR SWAP PARTICIPANTS
Subpart A--[Reserved]
Sec.
23.1-23.20 [Reserved]
Subpart B--Registration
23.21 Registration of swap dealers and major swap participants.
23.22 Prohibition against statutory disqualification in the case of
an associated person of a swap dealer or major swap participant.
23.23-23.40 [Reserved]
Authority: 7 U.S.C. 1a, 2, 6, 6a, 6b, 6c, 6p, 6s, 9, 9a, 13b,
13c, 16a, 18, 19, 21 as amended by Title VII of the Dodd-Frank Wall
Street Reform and Consumer Protection Act, Pub. L. No. 111-203, 124
Stat. 1376 (Jul. 21, 2010).
Subpart A--[Reserved]
Sec. Sec. 23.1-23.20 [Reserved]
Subpart B--Registration
Sec. 23.21 Registration of swap dealers and major swap participants.
(a) Each person who comes within the definition of the term ``swap
dealer'' in section 1a(49) of the Act, as such term may be further
defined by Commission regulations, is subject to the registration
provisions under the Act and to part 3 of this chapter.
(b) Each person who comes within the definition of the term ``major
swap participant'' in section 1a(33) of the Act, as such term may be
further defined by Commission regulations, is subject to the
registration provisions under the Act and to part 3 of this chapter.
(c) Each affiliate of an insured depository institution described
in section 716(c) of the Dodd-Frank Wall Street Reform and Consumer
Protection Act (Pub. L. 111-203 Sec. 716(c), 124 Stat. 1376 (2010)) is
required to be registered as a swap dealer if the affiliate is a swap
dealer, or as a major swap participant if the affiliate is a major swap
participant.
Sec. 23.22 Prohibition against statutory disqualification in the case
of an associated person of a swap dealer or major swap participant.
(a) Definition. For purposes of this section, the term ``person''
means an ``associated person of a swap dealer or major swap
participant'' as defined in section 1a(4) of the Act.
(b) Fitness. No swap dealer or major swap participant may permit a
person who is subject to a statutory disqualification under section
8a(2) or 8a(3) of the Act to effect or be involved in effecting swaps
on behalf of the swap dealer or major swap participant, if the swap
dealer or major swap participant knows, or in the exercise of
reasonable care should know, of the statutory disqualification.
Sec. Sec. 23.23-23.40 [Reserved]
PART 170--REGISTERED FUTURES ASSOCIATIONS
1. The authority citation for part 170 is revised to read as
follows:
Authority: 7 U.S.C. 6p, 12a and 21.
2. Section 170.16 is added to read as follows:
Sec. 170.16 Swap dealers and major swap participants.
Each person registered as a swap dealer or a major swap participant
must become and remain a member of at least one futures association
that is registered under section 17 of the Act and that provides for
the membership therein of such swap dealer or major swap participant,
as the case may be, unless no such futures association is so
registered.
Issued in Washington, DC, on November 10, 2010, by the
Commission.
David A. Stawick,
Secretary of the Commission.
Statement of Chairman Gary Gensler
Registration of Swap Dealers and Major Swap Participants
I support the proposed rulemaking to establish a process for the
registration of swap dealers and major swap participants. This
proposal would implement Congress's mandate that these entities be
subject to registration and regulation for their swaps business.
Registration will enable the Commission to monitor swap dealers and
major swap participants for compliance with the Dodd-Frank Act and
Commission rulemakings. Through regulation of the dealers, the
Commission will be able to protect market participants and the
public and promote sound risk management practices. The proposal
includes a requirement that swaps dealers and major swap
participants register with a registered futures association, such as
the National Futures Association. This would provide the Commission
with flexibility with regard to its oversight of swap dealers and
major swap participants for compliance with the Dodd-Frank Act.
[FR Doc. 2010-29024 Filed 11-22-10; 8:45 am]
BILLING CODE 6351-01-P
Last Updated: November 23, 2010
See Also:
