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2012-791

  • Federal Register, Volume 77 Issue 12 (Thursday, January 19, 2012)[Federal Register Volume 77, Number 12 (Thursday, January 19, 2012)]

    [Notices]

    [Pages 2708-2709]

    From the Federal Register Online via the Government Printing Office [www.gpo.gov]

    [FR Doc No: 2012-791]

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    COMMODITY FUTURES TRADING COMMISSION

    Performance of Registration Functions by National Futures

    Association With Respect To Swap Dealers and Major Swap Participants

    AGENCY: Commodity Futures Trading Commission.

    ACTION: Notice and Order.

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    SUMMARY: The Commodity Futures Trading Commission (Commission) is

    authorizing the National Futures Association (NFA), effective January

    19, 2012, in accordance with the standards established by the Commodity

    Exchange Act (CEA) and the Commission's regulations issued thereunder,

    to take the following actions: To process and grant applications for

    registration and withdrawals of registration with respect to swap

    dealers (SDs) and major swap participants (MSPs), and to notify of

    provisional registration; to confirm initial compliance with

    requirements applicable to SDs and MSPs under CEA Section 4s; to

    conduct proceedings to deny, condition, suspend, restrict or revoke the

    registration of any SD or MSP or of any applicant for registration in

    either category; to maintain records regarding SDs and MSPs; and to

    serve as the official custodian of those Commission records.

    DATES: Effective date: January 19, 2012.

    FOR FURTHER INFORMATION CONTACT: Barbara S. Gold, Associate Director,

    Christopher W. Cummings, Special Counsel, or Elizabeth Miller,

    Attorney-Advisor, Division of Swap Dealer and Intermediary Oversight,

    1155 21st Street NW., Washington, DC 20581. Telephone Number: (202)

    418-6700 and electronic mail: bgold@cftc.gov, ccummings@cftc.gov, or

    emiller@cftc.gov.

    SUPPLEMENTARY INFORMATION

    I. Authority and Background

    In a separate document published elsewhere in today's Federal

    Register, the Commission is issuing final regulations regarding the

    registration process for SDs and MSPs. These final regulations follow

    the publication of proposed regulations on November 23, 2010,\1\ and

    they implement the registration requirements for SDs and MSPs set forth

    in the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-

    Frank Act).\2\ Specifically, Section 731 of the Dodd-Frank Act added

    Sections 4s(a) and 4s(b) to the CEA \3\ to provide for the registration

    of SDs and MSPs in pertinent part as follows:

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    \1\ 75 FR 71379.

    \2\ Public Law 111-203, 124 Stat. 1376 (2010). The text of the

    Dodd-Frank Act may be accessed through the Commission's Web site,

    http://www.cftc.gov.

    \3\ The CEA and the Commission's regulations issued thereunder

    similarly may be accessed through the Commission's Web site.

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    (a) REGISTRATION.--

    (1) SWAP DEALERS.--It shall be unlawful for any person to act as a

    swap dealer unless the person is registered as a swap dealer with the

    Commission.

    (2) MAJOR SWAP PARTICIPANTS.--It shall be unlawful for any person

    to act as a major swap participant unless the person is registered as a

    major swap participant with the Commission.

    (b) REQUIREMENTS.--

    (1) IN GENERAL.--A person shall register as a swap dealer or major

    swap participant by filing a registration application with the

    Commission.

    (2) CONTENTS.--

    (A). IN GENERAL.--The application shall be made in such form and

    manner as prescribed by the Commission, and shall contain such

    information, as the Commission considers necessary concerning the

    business in which the applicant is or will be engaged.

    Pursuant to CEA Sections 4s(a) and 4s(b), then, the Commission is today

    issuing Regulations 23.21(a) and 23.21(b), which respectively subject

    each person who meets the definition of an SD or MSP to the

    registration provisions under the CEA and to Part 3 of the Commission's

    regulations.\4\

    [[Page 2709]]

    Additionally, pursuant to CEA Sections 4p, 8a and 17, the Commission is

    issuing Regulation 170.16, which provides that each registered SD or

    MSP must become and remain a member of an RFA.

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    \4\ Regulation 23.21(c) makes clear that each affiliate of an

    insured depository institution described in Dodd-Frank Act Section

    716(c) is subject to the registration provisions under the CEA and

    Part 3 of the regulations as an SD, if the affiliate is an SD, or as

    an MSP, if the affiliate is an MSP.

    The Commission also is issuing today such amendments to Part 3

    of its regulations as may be necessary to accommodate the

    registration of SDs and MSPs thereunder.

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    CEA Section 4s further directs the Commission to adopt regulations

    applicable to SDs and MSPs with respect to the following areas: Capital

    and margin, reporting and recordkeeping, daily trading records,

    business conduct standards, documentation standards, duties, chief

    compliance officer,\5\ and, with respect to uncleared swaps,

    segregation.\6\

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    \5\ Sections 4s(e) through 4s(k), respectively, added to the CEA

    by Dodd-Frank Act Section 731.

    \6\ Section 4s(l), added to the CEA by Dodd-Frank Act Section

    724(c).

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    CEA Section 8a(10) provides that the Commission may authorize any

    person--including an RFA--to perform any of the registration functions

    under the CEA. Further, CEA Section 17(o) provides that the Commission

    may require an RFA to perform registration functions under the CEA with

    respect to its members.\7\ The Commission has previously authorized NFA

    to perform the full range of registration functions with regard to

    applicants for and persons registered as: A futures commission

    merchant, commodity pool operator or commodity trading advisor; \8\ an

    introducing broker; \9\ a leverage transaction merchant; \10\ a floor

    broker; \11\ a floor trader; \12\ or a retail foreign exchange

    dealer.\13\ By today's Order, the Commission is authorizing NFA, in

    accordance with the standards established by the CEA and the

    Commission's regulations issued thereunder,\14\ to perform the full

    range of registration functions under the CEA and the Commission's

    regulations with regard to SDs and MSPs. It is also authorizing NFA to

    notify an applicant for registration as an SD or an MSP that it is

    provisionally registered, and to confirm the applicant's initial

    compliance with such regulations as the Commission may adopt to

    implement the requirements for SDs and MSPs in CEA Sections 4s(e)

    through 4s(l).

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    \7\ Section 17(o)(1) excepts from this authority a member who is

    a ``registered entity.'' CEA Section 1a(40) defines this term to

    include, among other persons, a board of trade designated as a

    contract market under CEA Section 5 and a swap execution facility

    registered under CEA Section 5h.

    Although CEA Section 17 provides that `[a]ny association of

    persons may be registered with the Commission as a registered

    futures association,'' to date, NFA is the sole association that has

    applied for and has been granted registration as a futures

    association with the Commission.

    \8\ See 49 FR 39593 (Oct. 9, 1984).

    \9\ See 48 FR 35158 (Aug. 3, 1983).

    \10\ See 54 FR 19556 (May 8, 1989).

    \11\ See 51 FR 34490 (Sep. 29, 1986).

    \12\ See 58 FR 19657 (Apr. 15, 1993).

    \13\ See 75 FR 55310 (Sep. 10, 2010).

    \14\ See, e.g., 49 FR 8208 (Mar. 5, 1984), whereby, among other

    things, the Commission: Amended Part 3 of its regulations, which

    concerns registration under the CEA, by adopting a new Subpart C to

    provide for denial, suspension or revocation of registration; and

    amended Appendix A to Part 3, to provide for interpretative advice

    with respect to statutory disqualification under CEA Sections

    8a(2)(C) and 8a(2)(E) and Sections 8a(3)(J) and 8a(3)(M).

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    The Commission further notes that it has, by prior Orders,

    authorized NFA to maintain various Commission registration records, and

    has certified NFA as the official custodian of such records for the

    Commission.\15\ The Commission has determined, in accordance with its

    authority under Section 8a(10) of the Act, to authorize NFA to maintain

    and serve as the official custodian of the Commission's registration

    records with respect to SDs and MSPs.

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    \15\ See, e.g., 49 FR 39593 (Oct. 9, 1984) (regarding the

    registration records of futures commission merchants, commodity pool

    operators and commodity trading advisors), and 75 FR 55310 (Sep. 10,

    2010) (regarding the registration records of retail foreign exchange

    dealers).

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    In maintaining the Commission's registration records pursuant to

    this Order, NFA shall remain subject to all other requirements and

    obligations imposed upon it by the Commission in existing or future

    Orders or regulations. In this regard, NFA shall also implement such

    additional procedures and shall modify existing procedures as are

    necessary to ensure the security and integrity of these records as may

    be acceptable to the Commission; to facilitate prompt access to these

    records by the Commission and its staff; to facilitate disclosure of

    public or nonpublic information in these records when permitted by

    Commission Orders or regulations; to keep logs as required by the

    Commission concerning disclosures of nonpublic information; and

    otherwise to safeguard the confidentiality of the records.

    II. Conclusion and Order

    The Commission has determined, pursuant to the provisions of CEA

    Sections 8a(10) and 17(o), to authorize NFA, effective January 19,

    2012, to perform the following registration functions:

    (1) To process and grant applications for registration and

    withdrawals from registration of swap dealers (SDs) and major swap

    participants (MSPs), and to notify of provisional registration;

    (2) In connection with processing and granting applications for

    registration of SDs and MSPs, to confirm initial compliance with such

    regulations as the Commission may adopt to implement CEA Sections 4s(e)

    through 4s(k) and, where applicable, CEA Section 4s(l);

    (3) To conduct proceedings to deny, condition, suspend, restrict or

    revoke the registration of any SD or MSP or of any applicant for

    registration in either category; and

    (4) To maintain records regarding SDs and MSPs, and to serve as the

    official custodian of those Commission records.

    NFA shall perform these functions in accordance with the standards

    established by the CEA and the Commission's regulations issued

    thereunder. NFA shall follow the same procedures with respect to

    recordkeeping, disclosure and tracking of fitness investigations and

    adverse action proceedings concerning SDs and MSPs as it must follow in

    cases involving other registrants.

    These determinations are based upon the Congressional intent

    expressed in CEA Sections 4s(a), 4s(b), 8a(10), and 17(o). This Order

    does not, however, authorize NFA to accept or act upon requests for

    exemption from registration, or to render ``no-action'' or

    interpretative letters with respect to applicable registration

    requirements.

    Nothing in this Order, or in CEA Section 8a(10) or 17(o), shall

    affect the Commission's authority to review the performance by NFA of

    Commission registration functions, to adopt and enforce regulations

    applicable to SDs and MSPs as Commission registrants, and to conduct

    on-site examinations of the operations and activities of SDs and MSPs

    as Commission registrants.

    Issued in Washington, DC, on January 11, 2012.

    David A. Stawick,

    Secretary of the Commission.

    Appendices to Performance of Registration Functions by National Futures

    Association With Respect to Swap Dealers and Major Swap Participants--

    Commission Voting Summary and Statements of Commissioners

    Note: The following appendices will not appear in the Code of

    Federal Regulations

    Appendix 1--Commission Voting Summary

    On this matter, Chairman Gensler and Commissioners Sommers,

    Chilton, O'Malia and Wetjen voted in the affirmative; no

    Commissioner voted in the negative.

    [FR Doc. 2012-791 Filed 1-18-12; 8:45 am]

    BILLING CODE P

    Last Updated: January 19, 2012