CFTC Final Rule: Registration of Intermediaries

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Gavel.png FINAL RULE: The final rule on registration of intermediaries was approved on August 17, 2012.
Dodd-Frank Timeline, Proposed Rule on Registration of Intermediaries
Proposal Date Final Rule Issue Effective Date
March 9, 2011 August 28, 2012 October 29, 2012

On August 17, 2012, the CFTC issued a final rule that adapts its existing registration rules to changes mandated by the Dodd-Frank Act and, specifically, to the addition of swaps oversight to CFTC jurisdiction. The rule changes affect Part 3 of commission regulations, which encompasses all registration procedures. To view Part 3, click HERE.

Rather than vote upon the final rule in an open meeting, as has been the case with virtually all of the Dodd-Frank related rulemakings, it was passed via seriatim, by a vote of 4-1. Commissioner Scott O'Malia voted against the rule, as it does not specify how the commission and SROs such as the National Futures Association ("NFA") will achieve greater transparency and customer protection under the rulemaking. O'Malia suggests an alternative system that would "follow the lead of the Securities and Exchange Commission (“SEC”) and the Financial Industry Regulatory Authority (“FINRA”) in terms of how professional and disciplinary background information is disclosed to the potential customers of SEC-registered broker-dealers." Read O'Malia's statement of dissent HERE.

Among the provisions of the final rule:

  • The registration process is expanded to include new categories of registrants, such as swap dealers and major swap participants;
  • The rule expands a registration exemption for futures commission merchants to foreign brokers and other foreign intermediaries that execute a swap transaction either bilaterally or on subject to the rules of a designated contract market or on subject a swap execution facility on behalf of non-U.S. persons;
  • The rule adds references to swap-related terms; and
  • The rule will permit legal entities to register as floor traders, in order to implement the exception from swap dealer consideration for cleared swaps entered into by floor traders on a swap execution facility.

Background[edit]

On December 9, 2010, the CFTC held an open meeting on the Twelfth Series of Proposed Rules under the Dodd-Frank Act. Among the topics at this meeting was a rule proposal regarding registration of approved swap intermediaries. Since the Dodd-Frank Act has abolished the market category "Derivatives Transaction Execution Facility" (DTEF) and has created a new entity, the Swap Execution Facility (SEF). The proposed rule deletes all references to DTEFs, adds references to swap-related terms, expands existing exemptions to include foreign-domiciled and other foreign intermediaries that execute transactions on SEFs and harmonizes language to improve the consistency of the definitions, and outdated items were modernized to reflect current registration practices.<ref>Open Meeting on Twelfth Series of Proposed Rules under the Dodd-Frank Act. CFTC. Retrieved on February 26, 2011.</ref>

Aside from a few minor changes, the commission adopts the final regulations as proposed in December 2010.

The final rule appeared in the Federal Register on August 28, 2012. It will become effective on October 29, 2012.

Related Document: Federal Register Entry[edit]

References[edit]

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