Swap Dealers and Major Swap Participants Regulation

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Gavel.png FINAL RULES: Registration of Swap Dealers and Major Swap Participants
Business Conduct Standards for Swap Dealers and Major Swap Participants with Counterparties
Reporting, Recordkeeping, and Daily Trading Records Requirements for Swap Dealers and Major Swap Participants
Duties for Swap Dealers and Major Swap Participants
Conflicts of Interest for Swap Dealers, Major Swap Participants, Futures Commission Merchants, and Introducing Brokers
Designation of Chief Compliance Officer and Preparation of Annual Compliance Report
CFTC/SEC Joint Final Rule on Swap Entity Definitions
Dodd-Frank Timeline, Duties for Swap Dealers and Major Swap Participants
Proposal Date Final Rule Issue Effective Date
November 23, 2010 April 3, 2012 June 4, 2012
Dodd-Frank Timeline, Registration of Swap Dealers and Major Swap Participants
Proposal Date Final Rule Issue Effective Date
November 24,2010 January 19, 2012 March 19, 2012
Dodd-Frank Timeline, Conflicts of Interest for Swap Entities, FCMs, IBs
Proposal Date Final Rule Issue Effective Date
November 23, 2010 April 3, 2012 June 4, 2012
Dodd-Frank Timeline, Required Compliance Policies
Proposal Date Final Rule Issue Effective Date
November 19, 2010 April 3, 2012 June 4, 2012
Dodd-Frank Timeline, Reporting, Recordkeeping, and Daily Trading Records Requirements for Swap Dealers and Major Swap Participants
Proposal Date Final Rule Issue Effective Date
December 9, 2010 April 3, 2012 June 4, 2012
Dodd-Frank Timeline, Further Defining “Swap Dealer,” “Major Swap Participant” and “Eligible Contract Participant”
Proposal Date Comment Deadline Final Rule Issue
December 21, 2010 June 3, 2011 April 2012
Dodd-Frank Timeline, Proposed Rules and Interpretive Guidance on Product Definitions
Proposal Date Comment Deadline Final Rule Issue
May 23, 2011 July 22, 2011 2nd Qtr. 2012
Dodd-Frank Timeline, Business Conduct Standards for Swap Dealers and Major Swap Participants
Proposal Date Final Rule Issue Effective Date
December 23, 2010 February 17, 2012 April 17, 2012
Dodd-Frank Timeline, Confirmation, Reconciliation, and Compression, Swap Dealers and Major Swap Participants
Proposal Date Comment Deadline Final Rule Issue
December 28, 2010 June 3, 2011 First Qtr. 2012
Dodd-Frank Timeline, Swap Trading Relationship Documentation for Swap Dealers and Major Swap Participants
Proposal Date Comment Deadline Final Rule Issue
February 8, 2011 June 3, 2011 First Qtr. 2012
Dodd-Frank Timeline, Orderly Liquidation Termination Provision in Swap Trading Relationship Documentation
Proposal Date Comment Deadline Final Rule Issue
February 8, 2011 June 3, 2011 First Qtr. 2012
Dodd-Frank Timeline, Margin Requirements for Uncleared Swaps for Swap Dealers and Major Swap Participants, CFTC
Proposal Date Comment Deadline Final Rule Proposal
May 12, 2011 July 11, 2011 First Qtr. 2012
Dodd-Frank Timeline, Business Conduct Standards for Security-Based Swap Dealers and Major Security-Based Swap Participants, SEC
Proposal Date Comment Deadline Final Rule Issue
July 18, 2011 August 29, 2011 Fall 2011/Spring 2012
Dodd-Frank Timeline, Registration of Security-Based Swap Dealers and Major Security-Based Swap Participants, SEC
Proposal Date Comment Deadline Final Rule Issue
October 24, 2011 December 19, 2011 Early 2012

The CFTC has issued rule proposals under Dodd-Frank regarding swap dealers (SDs) and major swap participants (MSPs) at six different meetings in 2010 and 2011. The issues discussed were: duties; registration; conflicts of interest; required compliance policies; reporting and recordkeeping; further defining “swap dealer,” “major swap participant” and “eligible contract participant”; business conduct standards, confirmation; confirmation, reconciliation and compression; swap trading relationship documentation; orderly liquidation termination; and margin requirements for uncleared swaps.

In late 2011, the commission began issuing final rules pertaining to SD/MSPs. Topics for which a final rulemaking has been issued can be found in the alert box at the top of the page. Summaries and links can also be found below.

Descriptions of the open meetings and their corresponding proposals can be found below.

Contents

CFTC Open Meetings

SD-MSP Proposals from the November 10, 2010 CFTC Meeting

Duties for Swap Dealers and Major Swap Participants

The Duties proposal requires swap dealers and major swap participants to:

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Note: the SD/MSP Duties Final Rule approved at the CFTC Open Meeting, February 23, 2012

Registration of Swap Dealers and Major Swap Participants

The SD-MSP registration proposal would require:

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Note: the final rule on SD/MSP registration approved at the CFTC Open Meeting, January 11, 2012

Conflicts of Interest for Swap Dealers, Major Swap Participants, Futures Commission Merchants, and Introducing Brokers

The Conflicts of Interest proposal is intended to create partitions within such entities between individuals involved with research or analysis and those involved with trading and clearing activities, by:

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Note: the SD/MSP/FCM Conflicts of Interest Final Rule approved at the CFTC Open Meeting, February 23, 2012

Required Compliance Policies, Designation of Chief Compliance Officer

According to the proposal, each swap dealer, major swap participant, and futures commission merchant must appoint a "chief compliance officer" (CCO), who should have an "appropriate background," must register with the commission, and will be responsible for:

The CCO shall report to the board of directors and senior officers of the entity.

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Note: the Compliance Policies and CCO Duties Final Rule approved at the CFTC Open Meeting, February 23, 2012

SD-MSP Proposals from the November 19, 2010 CFTC Meeting

Protection of Collateral of Counterparties to Uncleared Swaps

Requirements of the rule:

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SD-MSP Proposals from the December 1, 2010 CFTC Meeting

Reporting, Recordkeeping, and Daily Trading Records Requirements for Swap Dealers and Major Swap Participants

According to the proposal, swap dealers and major swap participants will be required to retain and submit:[4]

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Note: the SD/MSP Reporting, Recordkeeping, and Daily Trading Records Requirements approved at the CFTC Open Meeting, February 23, 2012 Further Defining “Swap Dealer,” “Major Swap Participant” and “Eligible Contract Participant”

The SEC and CFTC each approved proposals that would further define a series of terms related to the swaps market, including “swap dealer,” “security-based swap dealer,” “major swap participant,” “major security-based swap participant” and “eligible contract participant.”[5] For more information, see Swaps Definitions Regulation.

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Note: the CFTC/SEC Joint Final Rule on Swap Entity Definitions approved at the CFTC Open Meeting, April 18, 2012, 2012

SD-MSP Proposal from the December 9, 2010 CFTC Meeting

Business Conduct Standards for Swap Dealers and Major Swap Participants with Counterparties

According to the proposal, certain activities will be prohibited and certain duties will be imposed on SDs/MSPs in their dealings with counterparties. The general policies and procedures to ensure compliance and prevent evasion of the Act and proposed rules are:

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Note: The CFTC Final Rule: Business Conduct Standards for Swap Dealers and Major Swap Participants with Counterparties was approved at the CFTC Open Meeting, January 11, 2012

SD-MSP Proposal from the December 16, 2010 CFTC Meeting

Confirmation, Portfolio Reconciliation, and Portfolio Compression Requirements for Swap Dealers and Major Participants

According to the proposal, each swap dealer and major swap participant must:

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SD-MSP Proposal from the January 13, 2011 CFTC Meeting

Swap Trading Relationship Documentation Requirements for Swap Dealers and Major Swap Participants

According to the proposal, each swap dealer or major swap participant also would be required to include in its swap trading relationship documentation written documentation in which the parties agree on the methods, procedures, rules, and inputs for determining the value of each swap at any time from execution to the termination, maturity, or expiration of the swap. The regulations also would require swap dealers and major swap participants to notify the commission of swap valuation disputes that have not been resolved within set time periods.[8]

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SD-MSP Proposal from the January 20, 2011 CFTC Meeting

Orderly Liquidation Termination Provision in Swap Trading Relationship Documentation for Swap Dealers and Major Swap Participants

Summary of the proposal:

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SD-MSP Proposal from the April 12, 2011 CFTC Meeting

Margin Requirements for Uncleared Swaps for Swap Dealers and Major Swap Participants

Under the CFTC Proposal, margin requirements will vary depending upon the counterparty of the SD/MSP:

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SD-MSP Proposal from the April 27, 2011 CFTC Meeting

Parts 1, 23, and 140 Capital Requirements of Swap Dealers and Major Swap Participants

Under the CFTC Proposal:

SD/MSPs that are also FCMs must hold the greater of:

SD/MSPs not FCMs, but are nonbank subsidiaries of U.S. bank holding companies:

SD/MSPs that are neither FCMs nor subsidiaries of a bank holding company

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SEC Meetings

SD-MSP Proposal from the June 29, 2011 SEC Meeting

Business Conduct Standards for Security-Based Swap Dealers and Major Security-Swap Participants

Under the SEC proposal, security-based swap dealers and major security-based swap participants would be required to:

The proposed rules also would require security-based swap dealers to:

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SD-MSP Proposal from the October 12, 2011 SEC Meeting

Registration of Security-Based Swap Dealers and Major Security-Based Swap Participants

"In addition, the proposed rule would require the security-based swap entities to:

The proposed rule also would also require each security-based swap entity that resides outside the U.S. to:

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References

  1. Open Meeting on Fourth Series of Proposed Rules under the Dodd-Frank Act. CFTC. Retrieved on March 7, 2011.
  2. Open Meeting on Fourth Series of Proposed Rules under the Dodd-Frank Act. CFTC. Retrieved on March 7, 2011.
  3. Open Meeting on Fourth Series of Proposed Rules under the Dodd-Frank Act. CFTC. Retrieved on March 7, 2011.
  4. Open Meeting on Sixth Series of Proposed Rules under the Dodd-Frank Act. CFTC. Retrieved on February 16, 2011.
  5. SEC Proposes Joint Rules with CFTC to Define Swap Related Terms. Securities and Exchange Commission. Retrieved on January 25, 2011.
  6. Open Meeting on Seventh Series of Proposed Rules under the Dodd-Frank Act. CFTC. Retrieved on March 21, 2011.
  7. Open Meeting on Eighth Series of Proposed Rules under the Dodd-Frank Act. CFTC. Retrieved on March 21, 2011.
  8. Open Meeting on Ninth Series of Proposed Rules under the Dodd-Frank Act. CFTC. Retrieved on March 21, 2011.
  9. Open Meeting on Tenth Series of Proposed Rules under the Dodd-Frank Act. CFTC. Retrieved on March 21, 2011.
  10. Open Meeting on Thirteenth Series of Proposed Rules under the Dodd-Frank Act. CFTC. Retrieved on April 15, 2011.
  11. Open Meeting on Fourteenth Series of Proposed Rules under the Dodd-Frank Act. CFTC. Retrieved on July 13, 2011.
  12. SEC Proposes Business Conduct Standards for Security-Based Swap Dealers and Major Security-Based Swap Participants. SEC. Retrieved on June 29, 2011.
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