Featured Product

    CFTC Publishes Rules for Swap Dealers and Major Swap Participants

    September 15, 2020

    CFTC approved a final rule imposing new capital requirements on swap dealers and major swap participants that are not subject to supervision by a banking regulator and imposing financial reporting requirements for swap dealers and major swap participants; this final rule will be effective from November 16, 2020. Market participants must be compliant by October 06, 2021. CFTC also approved a final rule on the cross-border application of certain swap provisions under the Commodity Exchange Act (CEA); this final rule will be effective from November 13, 2020. In addition, CFTC approved an Amendment Order that exempted certain EU trading facilities from the requirement to register as swap execution facilities.

    Final Rule on Capital Requirements of Swap Dealers and Major Swap Participants

    The final rule provides swap dealers with the option to elect one of three alternative methods to establish and meet minimum capital requirements, depending on the characteristics of their business:

    • A net liquid assets method, which is based primarily on existing capital requirements for futures commission merchants, and on the capital requirements adopted by the SEC for security-based swap dealers and major security-based swap participants
    • A bank-based method, which is based primarily on existing capital requirements for bank holding companies under the supervision of FED
    • A tangible net worth method, designed specifically for swap dealers which are part of a larger commercial enterprise

    Major swap participants are required to maintain positive tangible net worth. The final rule also makes several amendments to existing capital requirements for futures commission merchants to impose specific requirements for swaps and security-based swaps. In addition, the final rule includes a comprehensive model approval process; accompanying financial reporting, recordkeeping, and notification requirements; and a substituted compliance determination process for those swap dealers which may already be required to maintain capital in accordance with a foreign regulator. 

    Final Rule on Cross-Border Application of Certain Swap Provisions under the CEA

    CFTC adopted a final rule that addresses the cross-border application of the swap dealer and major swap participant registration thresholds and certain requirements applicable to swap dealers and major swap participants. The final rule also establishes a formal process for requesting comparability determinations for the requirements from CFTC, and defines key terms for the purpose of applying the CEA’s swaps provisions to cross-border transactions. The final rule includes a risk-based approach that advances the goals of Title VII of Dodd-Frank Act’s swap reforms, while fostering greater liquidity and competitive markets, promoting enhanced regulatory cooperation, and improving the global harmonization of swap regulation. This approach considers international comity principles and CFTC’s interest in focusing its authority on potential significant risks to the U.S. financial system. 

    Amendment Order Regarding EU Trading Facilities

    CFTC approved an amended order that exempted sixteen additional multilateral trading facilities and organized trading facilities authorized within EU from the requirement to register as swap execution facilities. The order also clarified the application of the existing order to UK based multilateral trading facilities and organized trading facilities during the UK’s Brexit transition period. Under the existing order, CFTC allowed EC to request that additional multilateral trading facilities and organized trading facilities, which satisfy certain legal requirements, be added to the list of multilateral trading facilities and organized trading facilities that were granted exempt swap execution facility status under the order. Entities covered by the exemption are subject to certain continuing statutory standards and other requirements under the CEA and CFTC regulations. CEA section 5h(g) provides that the CFTC may grant an exemption from swap execution facility registration if it determines that a foreign facility is subject to comparable supervision and regulation by the appropriate governmental authorities in the facility’s home country. The amended order is effective from July 23, 2020.

     

    Related Links

    Effective Date: November 16, 2020/November 13, 2020/July 23, 2020

    Keywords: Europe, Americas, EU, UK, US, Banking, Securities, Regulatory Capital, Swap Dealers, Dodd-Frank Act, Commodity Exchange Act, Reporting, Cross-Border, Swaps, Swap Execution Facility, Brexit Transition, CFTC

    Featured Experts
    Related Articles
    News

    EBA Sets Out Work Priorities and Deliverables for 2021

    EBA published its annual work program for 2021. The work program describes the activities and deliverables for the coming year in the context of the six key strategic areas of work.

    September 30, 2020 WebPage Regulatory News
    News

    PRA Proposes to Amend SS11/13 on Internal Ratings-Based Approaches

    PRA is proposing, via the consultation paper CP14/20, to introduce two complementary expectations on the level of mortgage risk-weights in UK for banks applying the internal ratings-based approaches.

    September 30, 2020 WebPage Regulatory News
    News

    ECB Confirms Compliance of €STR with Financial Benchmark Principles

    ECB published its statement of compliance with the IOSCO principles for financial benchmarks developed by IOSCO.

    September 30, 2020 WebPage Regulatory News
    News

    OSFI Updates Timelines for Implementation of IFRS 17

    OSFI updated the timelines for implementation of IFRS 17 on insurance contracts.

    September 30, 2020 WebPage Regulatory News
    News

    IFRS Consults on Global Approach to Sustainability Reporting

    IFRS launched a consultation to assess the demand for global sustainability standards.

    September 30, 2020 WebPage Regulatory News
    News

    EIOPA Sets Out Work Priorities for 2021-2023

    EIOPA has set out the work priorities for 2021-2023, taking into account the current market situation in light of the COVID-19 pandemic.

    September 30, 2020 WebPage Regulatory News
    News

    US Agencies Finalize Three Interim Final Rules Issued Amid Pandemic

    US Agencies (FDIC, FED, and OCC) finalized three interim final rules that were published in March and April this year to ease the impact of disruptions caused by the COVID-19 pandemic.

    September 30, 2020 WebPage Regulatory News
    News

    US Agencies Finalize Interim Final Rules Issued Amid Pandemic

    US Agencies (FDIC, FED, and OCC) finalized two rules, which are either identical or substantially similar to the interim final rules in effect and issued earlier this year.

    September 29, 2020 WebPage Regulatory News
    News

    APRA Proposes to Increase Transparency of Banking Data

    APRA announced that it is resuming consultation on the confidentiality of data submitted to APRA by the authorized deposit-taking institutions.

    September 29, 2020 WebPage Regulatory News
    News

    EIOPA Consults on Use of Risk Mitigation Techniques Under Solvency II

    EIOPA is consulting on a supervisory statement on the use of risk mitigation techniques by insurance and reinsurance undertakings.

    September 29, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 5873