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

    HKMA Sets Out Regulatory Treatment for Personal Loan Guarantee Scheme

    HKMA has published a circular that sets out the regulatory and reporting treatment for loans that participating authorized institutions may grant to eligible borrowers under the 100% Personal Loan Guarantee Scheme.

    April 20, 2021 WebPage Regulatory News
    News

    ECB Completes Targeted Review of Internal Models of Banks

    ECB published the results of the assessment of internal models that banks use to calculate risk-weighted assets for credit, market, and counterparty credit risks.

    April 19, 2021 WebPage Regulatory News
    News

    PRA on Regulatory Treatment of Loans Under Mortgage Guarantee Scheme

    PRA published a statement on the regulatory treatment of retail residential mortgage loans under the Mortgage Guarantee Scheme, or MGS.

    April 19, 2021 WebPage Regulatory News
    News

    FCA Consults on Rules and Reporting Forms for Investment Firms Regime

    FCA is consulting, via CP21/7, on the second phase of proposed rules to introduce the UK Investment Firm Prudential Regime (IFPR).

    April 19, 2021 WebPage Regulatory News
    News

    HMT and BoE Decide to Explore Central Bank Digital Currency in UK

    HM Treasury and BoE announced the joint creation of a Central Bank Digital Currency (CBDC) Taskforce to coordinate the exploration of a potential central bank digital currency in UK.

    April 19, 2021 WebPage Regulatory News
    News

    EIOPA Sets Out Expectations on Use of Climate Risk Scenarios in ORSA

    EIOPA published an opinion to set out its expectations on the supervision of the integration of climate change risk scenarios by insurers in their Own Risk and Solvency Assessment (ORSA).

    April 19, 2021 WebPage Regulatory News
    News

    EC Sets Out Standards for MREL Reporting by Competent Authorities

    EC published the Implementing Regulation 2021/622 that lays down implementing technical standards for reporting of the minimum requirement for own funds and eligible liabilities (MREL).

    April 16, 2021 WebPage Regulatory News
    News

    BCBS to Advance Work on Suptech, Climate Risk, and Basel Monitoring

    BCBS has set out the strategic work priorities, as part of its the work program for 2021-22.

    April 16, 2021 WebPage Regulatory News
    News

    Bundesbank Updates AnaCredit Reporting Requirements

    Bundesbank published two circulars on AnaCredit reporting requirements. Circular 27/2021 covers changes to the reporting of branches, additional attributes to be reported for investment funds from August 01, 2021, and updates to the list of international organizations.

    April 16, 2021 WebPage Regulatory News
    News

    PRA Finalizes Supervisory Approach for Non-Systemic Banks in UK

    PRA published the policy statement PS8/21, which contains the final supervisory statement SS3/21 on the PRA approach to supervision of the new and growing non-systemic banks in UK.

    April 15, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 6874