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RELEASE: pr6348-12

  • September 10, 2012

    CFTC Staff Responds to Questions on Timing of Swap Dealer Registration Rules

    Washington, DC — Today, Commodity Futures Trading Commission (CFTC) staff is responding to questions from market participants and other interested parties on the timing of when entities will be required to register as swap dealers. The CFTC is issuing a Frequently Asked Questions document to help market participants better understand the rules, what is required and by when.

    In sum, the swap dealer registration regulations go into effect on October 12, and entities that have more than the de minimis level of dealing (swaps entered into after Oct 12) must register by no later than two months after the end of the month in which they surpass the de minimis level. By way of example, if an entity reaches $8 billion in swap dealing the day after October 12, then the entity would have to register within two months after the end of October, or by December 31.

    Below is a Frequently Asked Questions document on swap dealer registration timing to help better understand the rule:

    Q1.

    Which regulations are relevant to determining when a person comes within the definition of the term “swap dealer”?

     

    A1.

    Two regulations are relevant to this question. First, CFTC regulation § 1.3(ggg)(4)(i) provides that a person comes within the definition of swap dealer when it has entered into swap positions connected with its swap dealing activities that, in the aggregate, exceed either of the gross notional amount thresholds in CFTC regulation § 1.3(ggg)(4)(i). Second, CFTC regulation § 1.3(ggg)(4)(iii) provides that a person that is not registered as a swap dealer by virtue of satisfying the requirements of CFTC regulation § 1.3(ggg)(4), but that no longer can take advantage of that de minimis exception, is not within the definition of swap dealer until the earlier of the date on which it submits a complete application for registration as a swap dealer, or two months after the end of the month in which that person becomes no longer able to take advantage of the exception.

    Q2.

    When does a person come within the definition of the term “swap dealer”?

     

    A2.

    CFTC regulation § 1.3(ggg)(4)(i) and CFTC regulation § 1.3(ggg)(4)(iii) mean that a person that is not registered as a swap dealer comes within the definition of swap dealer: (1) no earlier than the date, following October 12, 2012, on which that person has entered into swap positions connected with its swap dealing activities that, in the aggregate, exceed either of the gross notional amount thresholds in CFTC regulation § 1.3(ggg)(4)(i); and (2) no later than two months after the end of the month in which such date occurs.

    Thus, for example, a person that is not registered as a swap dealer and whose swaps exceed either of the gross notional amount thresholds on October 13, 2012 may consider itself as coming within the definition of swap dealer as early as October 13, 2012 and as late as December 31, 2012 (i.e., two months after the end of the month in which the person’s swaps exceeded either of the thresholds). Also, for example, a person that is not registered as a swap dealer and whose swaps do not exceed either of the gross notional amount thresholds until November 20, 2012 may consider itself as coming within the definition of swap dealer as early as November 20, 2012 and as late as January 31, 2013 (i.e., two months after the end of the month in which the person first exceeded either of the thresholds).

    Note: The relevant gross notional amount thresholds are $3 billion, subject to a phase in level of $8 billion, or $25 million with regard to swaps in which the counterparty is a “special entity” (as that term is defined in Section 4s(h)(2)(C) of the CEA, 7 U.S.C. 6s(h)(2)(C), and CFTC regulation § 23.401(c)); these thresholds consider all swap positions connected with the swap dealing activity of the person or any other entity controlling, controlled by or under common control with the person. See CFTC regulation § 1.3(ggg)(4)(i).

    Q3.

    Which swaps are relevant to determining if a person is within the definition of swap dealer?

     

    A3.

    Under CFTC regulation § 1.3(ggg)(4)(i), the relevant swaps are all swaps connected with its swap dealing activities that the person (or any other entity controlling, controlled by or under common control with the person) enters into following the effective date, which is October 12, 2012. Thus, the relevant swaps are those that the person enters into from and after the first open of business following October 12, 2012

    Q4.

    To which persons does CFTC regulation § 1.3(ggg)(4)(iii) apply?

     

    A4.

    CFTC regulation § 1.3(ggg)(4)(iii) applies to any person that is not registered as a swap dealer by virtue of satisfying the requirements of CFTC regulation § 1.3(ggg)(4), but that no longer can take advantage of that de minimis exception. It is the CFTC staff’s view that at the first open of business following October 12, 2012, any person that is not registered as a swap dealer may consider itself to have satisfied the requirements of CFTC regulation § 1.3(ggg)(4) and may therefore consider that CFTC regulation § 1.3(ggg)(4)(iii) applies to it.

    Q5.

    Which regulations are relevant to determining when a person is required to apply to be registered as a swap dealer?

     

    A5.

    Two regulations are relevant to this question. CFTC regulation § 3.10(a)(v)(C) provides, in clause (2), that each person who is a swap dealer on the effective date of the swap definition regulations (which is October 12, 2012) must apply to be registered as a swap dealer, and it provides in clause (3) that from and after October 12, 2012, each person who intends to engage in business as a swap dealer must apply to be registered as a swap dealer. CFTC regulation § 23.21 is also relevant. It provides that a person is subject to the registration provisions under the Commodity Exchange Act (CEA) and part 3 of the CFTC regulations when the person comes within the definition of the term “swap dealer” in Section 1a(49) of the CEA and CFTC regulation §1.3(ggg).

    Q6.

    When is a person required to apply to be registered as a swap dealer?

     

    A6.

    CFTC regulation § 3.10(a)(v)(C) and CFTC regulation § 23.21 require a person to apply to be registered as a swap dealer when, on or after October 12, 2012, the person comes within the definition of swap dealer. If a person is within the definition of swap dealer on October 12, 2012, it must apply to be registered on that date. If a person comes within the definition of swap dealer after October 12, 2012, it must apply to be registered on the date that it comes within the definition. As noted above, a person that takes advantage of the de minimis exception in CFTC regulation § 1.3(ggg)(4), as any person is permitted to do, would not be a swap dealer on October 12, 2012 and would not be required to apply to be registered on that date; rather, the person would be required to apply to be registered on the date that it comes within the definition of swap dealer, as described above.

    Q7.

    Is a person permitted to apply to be registered as a swap dealer before it is within the definition of swap dealer?

     

    A7.

    Yes, any person may apply to be registered as a swap dealer at any time.

    Last Updated: September 10, 2012

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