CFTC Final Order: Cross-Border Application of Swaps Provisions

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Gavel.png FINAL ORDER: On December 21, 2012, the CFTC issued a final exemptive order delaying cross-border application of swaps rules related to the Dodd-Frank Act.
Dodd-Frank Timeline, Cross-Border Application of Swaps Provisions, CFTC
Proposal Date Comment Deadline Compliance Extension Guidance Effective Date
July 12, 2012 August 27, 2012 July 12, 2013 July 26, 2013

On December 21, 2012, the commission issued a final exemptive order on swap compliance with certain entity-level requirements for non-U.S. persons registering as swap dealer or major swap participant. The order will expire on July 12, 2013. [1] The commission approved the order via seriatim by a vote of 4-1, with Commissioner Sommers voting against the measure.

In addition to the exemptive order, the commission proposed further guidance on certain specific aspects of the proposed guidance.

Both rulemakings appeared in the Federal Register on January 7, 2013. Public comments on the further proposed guidance will be accepted until February 6, 2013. Comments may be filed HERE.


Among the provisions of Title VII of the Dodd-Frank Act is a requirement that swaps reforms 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.” The CFTC is tasked with developing a framework for oversight of the swaps market, and to adapt the Commodity Exchange Act to include swaps oversight.

On June 29, 2012, the CFTC approved proposed guidance and a request for comment regarding cross-border application of swaps rules related to the Dodd-Frank Act. The guidance appeared in the Federal Register on July 12, 2012. The deadline for public comment was August 27, 2012. Comments can be found HERE. The concern is that swap trading by foreign affiliates of large financial entities pose a systemic risk to the U.S., and thus should be under CFTC jurisdiction. The guidance is meant to be the starting point for discussion with market participants regarding the structure of cross-border jurisdiction.

Summary of the Final Order

  • Phase-in of “U.S. Person” Definition: U.S. Persons include:
    • U.S. residents;
    • Any corporation, partnership, limited liability company, or other entity having its principal place of business in the United States;
    • A pension plan for the employees, officers or principals of a legal entity described above, unless the pension plan is primarily for foreign employees of such entity;
    • An estate or of a decedent who was a resident of the United States at the time of death
    • An individual account or joint account (discretionary or not) where the beneficial owner (or one of the beneficial owners in the case of a joint account) is a person described above.

Any person not listed above is a “non-U.S. person” for purposes of this Final Order.

  • De Minimis and MSP Threshold Calculations: A non-U.S. person is not required to include, in its calculation of the aggregate gross notional amount of swaps connected with its swap dealing activity where the counterparty is not a U.S. person or is a foreign branch of a U.S. person.
  • Aggregation for Purposes of the De Minimis Calculation: A non-U.S. person is not required to include the aggregate gross notional amount of swaps connected with the swap dealing activity of its

U.S. affiliates under common control or non-U.S. affiliates under common control.

  • Non-U.S. SD/MSPs: may delay compliance with respect to Entity-Level Requirements until July 12, 2013, but will still be required to comply with swap data repository and large trader reporting rules.
  • Transaction Level Requirements: Until the expiration of the order, as applied to transactions with a non-U.S. counterparty, non-U.S. SD/MSPs may substitute compliance with local jurisdictions, provided that such requirements are in effect for all swaps with U.S. counterparties. Also, foreign branches of U.S. SD/MSPs may comply with those requirements only as may be required by the local jurisdiction of such foreign branches.

Related Document: Federal Register Entries for Final Order; Further Proposed Guidance


  1. CFTC Approves Exemptive Order on Cross-Border Application of the Swaps Provisions of Dodd-Frank. CFTC. Retrieved on December 24, 2012.

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