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  • Federal Register, Volume 82 Issue 50 (Thursday, March 16, 2017)

    [Federal Register Volume 82, Number 50 (Thursday, March 16, 2017)]

    [Proposed Rules]

    [Pages 13971-13972]

    From the Federal Register Online via the Government Publishing Office []

    [FR Doc No: 2017-05277]


    Proposed Rules

    Federal Register


    This section of the FEDERAL REGISTER contains notices to the public of

    the proposed issuance of rules and regulations. The purpose of these

    notices is to give interested persons an opportunity to participate in

    the rule making prior to the adoption of the final rules.


    Federal Register / Vol. 82, No. 50 / Thursday, March 16, 2017 /

    Proposed Rules

    [[Page 13971]]


    17 CFR Parts 1, 23, and 40

    RIN 3038-AD54

    Capital Requirements of Swap Dealers and Major Swap Participants

    AGENCY: Commodity Futures Trading Commission.

    ACTION: Notice of proposed rulemaking; extension of comment period.


    SUMMARY: On December 16, 2016, the Commodity Futures Trading Commission

    (Commission or CFTC) published in the Federal Register a notice of

    proposed rulemaking (Proposal) to adopt new regulations and to amend

    existing regulations to implement sections 4s(e) and (f) of the

    Commodity Exchange Act (CEA), as added by section 731 of the Wall

    Street Reform and Consumer Protection Act (Dodd-Frank Act). Section

    4s(e) requires the Commission to adopt capital requirements for swap

    dealers (SDs) and major swap participants (MSPs) that are not subject

    to capital rules of a prudential regulator. Section 4s(f) requires the

    Commission to adopt financial reporting and recordkeeping requirements

    for SDs and MSPs. The Commission also proposed to amend existing

    capital rules for futures commission merchants (FCMs), providing

    specific capital deductions for market risk and credit risk for swaps

    and security-based swaps entered into by an FCM. The Commission further

    proposed several technical amendments to the regulations. As is

    explained below, the Commission is extending for 60 days the comment

    period for the Proposal.

    DATES: The comment period for the Proposal published on December 16,

    2016, at 81 FR 91252, is extended until May 15, 2017.

    ADDRESSES: You may submit comments, identified by RIN 3038-AD54 and

    ``Capital Requirements for Swap Dealers and Major Swap Participants'',

    by any of the following methods:

    CFTC Web site, via its Comments Online process: Follow the instructions for submitting comments

    through the Web site.

    Mail: Send to Chris Kirkpatrick, Secretary, Commodity

    Futures Trading Commission, 1155 21st Street NW., Washington, DC 20581.

    Hand delivery/Courier: Same as Mail above.

    Federal eRulemaking Portal:

    Follow the instructions for submitting comments.

    Please submit your comments using only one of these methods.

    All comments must be submitted in English, or if not, accompanied

    by an English translation. Comments will be posted as received to You should submit only information that you wish

    to make available publicly. If you wish the Commission to consider

    information that is exempt from disclosure under the Freedom of

    Information Act, a petition for confidential treatment of the exempt

    information may be submitted according to the procedures set forth in

    Regulation 145.9 of the Commission's regulations.\1\


    \1\ Commission regulations referred to herein are found at 17

    CFR chapter 1. Commission regulations are accessible on the

    Commission's Web site,


    The Commission reserves the right, but shall have no obligation, to

    review, pre-screen, filter, redact, refuse or remove any or all of your

    submission from that it may deem to be

    inappropriate for publication, such as obscene language. All

    submissions that have been redacted or removed that contain comments on

    the merits of the rulemaking will be retained in the public comment

    file and will be considered as required under the Administrative

    Procedure Act and other applicable laws, and may be accessible under

    the Freedom of Information Act.

    FOR FURTHER INFORMATION CONTACT: Eileen T. Flaherty, Director, Division

    of Swap Dealer and Intermediary Oversight, 202-418-5326,; Thomas Smith, Deputy Director, Division of Swap

    Dealer and Intermediary Oversight, 202-418-5495,;

    Jennifer C.P. Bauer, Special Counsel, Division of Swap Dealer and

    Intermediary Oversight, 202-418-5472,; Joshua Beale,

    Special Counsel, Division of Swap Dealer and Intermediary Oversight,

    202-418-5446,; Rafael Martinez, Senior Financial Risk

    Analyst, Division of Swap Dealer and Intermediary Oversight, 202-418-

    5462,; Paul Schlichting, Assistant General Counsel,

    Office of the General Counsel, 202-418-5884,; or

    Lihong McPhail, Research Economist, 202-418-5722,,

    Office of the Chief Economist; Commodity Futures Trading Commission,

    Three Lafayette Centre, 1155 21st Street NW., Washington, DC 20581.


    I. Background

    Section 731 of the Dodd-Frank Act amended the CEA by adding

    sections 4s(e) and 4s(f). Section 4s(e) requires that the Commission

    adopt rules establishing capital requirements for SDs and MSPs to help

    ensure the safety and soundness of the SDs and MSPs. Section 4s(f),

    among other things, requires that the Commission adopt regulations

    related to financial reporting and recordkeeping by SDs and MSPs. The

    Proposal would adopt new regulations and amend existing regulations to

    implement the requirements of these CEA sections.\2\


    \2\ The Commission previously proposed capital and financial

    reporting rules for SDs and MSPs in 2011. See Capital Requirements

    of Swap Dealers and Major Swap Participants, 76 FR 27802 (May 12,



    The Proposal generally permits the application of three alternative

    approaches to the treatment of capital based upon existing U.S. bank

    regulators' capital requirements or the CFTC's future commission

    merchant and the Securities and Exchange Commission's broker-dealer net

    liquid asset capital requirements. The Proposal further provides that

    SDs predominantly engaged in non-financial activities and MSPs may

    elect minimum capital requirements based upon the tangible net worth of

    the entities. SDs may use internal models for purposes of computing

    their regulatory capital, subject to prior approval by either the

    Commission or the National Futures Association. The Proposal would also

    require certain SDs and MSPs to satisfy defined liquidity and funding

    requirements and would place certain

    [[Page 13972]]

    limitations on the withdrawal of capital from SDs as part of the SD

    capital requirements.

    In implementing the provisions of Section 4s(f) of the CEA, the

    Proposal includes recordkeeping, reporting and notification

    requirements for SDs and MSPs relative to their respective capital

    requirements. The Proposal would also allow foreign SDs to comply with

    comparable capital requirements in the home jurisdiction under a

    program of substituted compliance.

    In addition to proposing minimum capital and financial reporting

    requirements for SDs and MSPs, the Proposal would also amend existing

    capital requirements for FCMs to establish specific capital

    requirements for FCMs that engage in swaps or security-based swaps that

    are not cleared by a clearing organization. The Proposal also includes

    certain technical amendments to several regulations as part of the

    proposed capital and financial recordkeeping and reporting


    II. Extension of Comment Period

    The comment period for the Proposal is due to expire on March 16,

    2017. By letters dated February 24, 2017 and March 2, 2017,

    respectively, the Securities Industry and Financial Markets Association

    (SIFMA) and The Futures Industry Association (FIA), membership

    organizations representing many firms that would be affected by the

    Proposal, requested a 60-day extension of the comment period. In

    support of their requests, SIFMA and FIA explained that firms have

    extensive work to do in order to calculate the effect on their

    activities of the different types of proposed capital requirements.

    SIFMA further explained that the initial comment period overlaps with

    firms' year-end accounting and reporting cycles as well as with the

    deadline for firms' compliance with the Commission's uncleared swaps

    margin rules, resulting in a significant drain on their resources.

    SIFMA and FIA noted that given the complexity of the Proposal it will

    require significant time beyond the Commission's initial March 16

    comment deadline to fully assess the potential impact of the Proposal

    on firms' operations.

    In light of the foregoing, and in response to the SIFMA and FIA

    requests, by this Federal Register release the Commission is extending

    the comment period for the Proposal for 60 days, until May 15, 2017.

    Issued in Washington, DC, on March 13, 2017, by the Commission.

    Robert N. Sidman,

    Deputy Secretary of the Commission.

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

    Federal Regulations.

    Appendix to Capital Requirements of Swap Dealers and Major Swap

    Participants--Commission Voting Summary

    On this matter, Acting Chairman Giancarlo and Commissioner Bowen

    voted in the affirmative. No Commissioner voted in the negative.

    [FR Doc. 2017-05277 Filed 3-15-17; 8:45 am]

    BILLING CODE 6351-01-P

    Last Updated: March 16, 2017