Swap Dealers

There has been a flurry of activity at the Commodity Futures Trading Commission (“CFTC”) in recent weeks.  As we reported previously, the CFTC approved three final rules, including the much-anticipated position limits rule, at its October 15 open meeting, and announced significant organizational changes to its operating divisions on November 3.  This post highlights additional significant actions by the CFTC in October and November and previews what is next for the CFTC under a Biden Administration.
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Continue Reading CFTC News Roundup for October and November and a Look Ahead

At an open meeting on October 15, 2020, the Commodity Futures Trading Commission (“CFTC” or the “Commission”) voted to adopt three final rules.  First, the Commission adopted by a 3–2 vote a final rule overhauling its regulatory framework governing speculative position limits on a large variety of commodities.  Second, the Commission unanimously approved amendments to margin requirements for uncleared swaps for swap dealers and major swap participants.  Third, the Commission unanimously voted to finalize amendments to Regulation 3.10(c), which sets forth exemptions from registration for certain foreign intermediaries.
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Continue Reading CFTC Approves Three Final Rules at Open Meeting

During an open meeting on July 22, 2020, the CFTC Commissioners heard a staff presentation on three specific recommendations for changes to the margin requirements for uncleared swaps for swap dealers and major swap participants.  These changes would:

  • Align the timing and methodology for both the material swaps exposure calculations and the post phase‐in compliance periods with the Basel Committee on Banking Supervision and the International Organization of Securities Commissions and other global regulations;
  • Codify relief related to minimum transfer amounts as addressed by CFTC staff letters 17‐12 and 19‐25; and
  • Codify an alternative method for calculating the initial margin that must be collected from the counterparty, in which small swap dealers may rely on the initial margin models of a larger swap dealer counterparty.

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Continue Reading CFTC To Consider Proposals for Refining Uncleared Margin Rules

For several years Swap Dealers registered with the Commodity Futures Trading Commission (“CFTC”) have been awaiting action by the Securities and Exchange Commission (“SEC”) related to security-based swap dealers.  While the wait is by no means over, on October 11, 2018 the SEC voted 4 to 1 to reopen the comment period for proposed rules…

On October 26, 2017, the Commodity Futures Trading Commission (“CFTC”) issued an order postponing the automatic lowering of the swap dealer de minimis threshold. Instead of dropping from $8 billion in notional value (measured over the prior 12-month period) to $3 billion on December 31, 2018, which would have required firms to begin tracking swap activity on January 1, 2018, the threshold will drop on December 31, 2019, unless the CFTC determines to change the threshold prior to this date. Thus, firms will not have to start tracking swap activity for the $3 billion threshold until January 1, 2019; firms will, of course, need to track for the $8 billion threshold. Chairman Giancarlo forecast this delay in his appearance before the House Committee on Agriculture on October 11, 2017, testifying that he would seek the delay because he wanted “to get the right result, not a rushed result,” and noting that recent turnover in the Commission made it difficult to implement “such an important decision in a rush.” However, Chairman Giancarlo indicated that no further delays were expected, and that the CFTC would establish a de minimis threshold in the first half of 2018.
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Continue Reading CFTC Further Delays Swap Dealer De Minimis Threshold Drop

On December 2, 2016, the Commodity Futures Trading Commission (“CFTC”) proposed rules establishing capital requirements for swap dealers (“SDs”) and major swap participants (“MSPs”). The CFTC’s proposed capital rules would cover those swap dealers and major swap participants that are not subject to prudential regulation. Chairman Timothy Massad noted in his attached statement that the proposed rule attempts to recognize the different types of firms that act as SDs and allow for those differences in setting the capital requirements for each. Commissioner J. Christopher Giancarlo stated that his support of the proposed rule was predicated on the inclusion of several questions that he hopes market participants will specifically address in their comments on the rule. Commissioner Giancarlo’s questions relate to his ongoing concern that capital requirements imposed on financial institutions have worked to constrain markets instead of supporting market strength and stability. His questions also address the scope of the proposed rule and the appropriateness of the proposed capital model review and approval process. Market participants seeking to comment on the rule should focus on responding to the questions raised by Commissioner Giancarlo, as comments addressing these points likely will have a significant impact in shaping the final rule.
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Continue Reading CFTC Proposes Capital Rules for Swap Dealers and Major Swap Participants

On October 13, 2016, the Commodity Futures Trading Commission (CFTC) issued an order postponing until December 31, 2018, the lowering of the swap dealer de minimis threshold to $3 billion.  The Dodd-Frank Act provided that, absent action by the CFTC, the swap dealer de minimis threshold — the gross notional amount of swap dealing activity a firm could engage in before the firm is considered a “swap dealer” — would automatically drop from $8 billion to $3 billion on December 31, 2017.  Firms would also have been required to start tracking their swap activity on January 1, 2017 to determine their level of swap dealing activity, but the CFTC’s order means that firms do not have to begin tracking their swap activity until January 1, 2018.
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Continue Reading CFTC Issues Order Postponing Swap Dealer De Minimis Threshold Drop