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: [email protected], [email protected], or

[email protected]

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