Federal Register, Volume 81 Issue 13 (Thursday, January 21, 2016)  
[Federal Register Volume 81, Number 13 (Thursday, January 21, 2016)]
[Pages 3390-3391]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-01051]



Performance of Certain Functions by the National Futures 
Association Related to Notices of Swap Valuation Disputes Filed by Swap 
Dealers and Major Swap Participants

AGENCY: Commodity Futures Trading Commission.

ACTION: Notice and order.


SUMMARY: The Commodity Futures Trading Commission (``Commission'') is 
authorizing the National Futures Association (``NFA'') to receive, 
review, maintain, and serve as the official custodian of records for 
notices provided by swap dealers (``SDs'') and major swap participants 
(``MSPs'') of swap valuation disputes in excess of $20 million U.S. 
dollars (or its equivalent in any other currency), as provided in 
Commission regulation 23.502(c).

DATES: Effective Date: March 1, 2016.

FOR FURTHER INFORMATION CONTACT: Erik F. Remmler, Deputy Director, 202-
418-7630, [email protected], or Brian G. Mulherin, Associate Director, 
202-418-6622, [email protected], Division of Swap Dealer and 
Intermediary Oversight (``DSIO''), Commodity Futures Trading 
Commission, Three Lafayette Centre, 1155 21st Street NW., Washington, 
DC 20581.


I. Background and Authority

    Section 8a(10) of the Commodity Exchange Act \1\ (the ``Act'' or 
``CEA'') provides that the Commission may authorize any person to 
perform any portion of the registration functions under the Act, 
notwithstanding any other provision of law. The performance of such 
functions shall be undertaken in accordance with rules adopted by such 
person and approved by the Commission or reviewed by the Commission 
pursuant to Section 17(j) of the Act.\2\

    \1\ 7 U.S.C. 12a(10) (2014).
    \2\ 7 U.S.C. 21(j) (2014).

    The purpose of the Act is explained in CEA Section 3(a) \3\ as 
serving the public interest ``through a system of effective self-
regulation of . . . market participants and market professionals under 
the oversight of the Commission.'' Section 17(o) of the Act \4\ 
provides that the Commission may require NFA to perform Commission 
registration functions in accordance with the Act and NFA rules. The 
Commission has delegated to NFA the authority to conduct many functions 
previously conducted by the Commission. Such delegated functions 
include: Processing applications for registration of intermediaries 
under the Act; \5\ reviewing disclosure documents, and providing the 
Commission with related summaries and periodic reports; \6\ and acting 
as the Commission's official custodian of records.\7\ The Commission 
has found that NFA exercises its delegated authority with 
proficiency.\8\ Authorizing NFA to perform such functions allows the 
Commission to devote resources to other aspects of its regulatory 

    \3\ 7 U.S.C. 5(a) (2014).
    \4\ 7 U.S.C. 21(o) (2014).
    \5\ See, e.g., 48 FR 35158 (Aug. 3, 1983) (introducing brokers 
and associated persons thereof); 49 FR 39593 (Oct. 9, 1984) (futures 
commission merchants, commodity pool operators, commodity trading 
advisors, and associated persons thereof); 51 FR 34490 (Sep. 29, 
1986) (floor brokers); 58 FR 19657 (Apr. 15, 1993) (floor traders); 
and 77 FR 2708 (Jan. 19, 2012) (swap dealers and major swap 
    \6\ See 62 FR 52088 (Oct. 6, 1997); 64 FR 29273 (June 1, 1999).
    \7\ See, e.g., 49 FR 39593 (Oct. 9, 1984) (regarding the 
registration records of future commission merchants, commodity pool 
operators, and commodity trading advisors); 66 FR 43227 (Aug. 17, 
2001) (regarding notice registration filings as futures commission 
merchants or introducing brokers); 67 FR 77470 (Dec. 18, 2002) 
(regarding commodity pool operator annual financial reports required 
by regulation 4.22 and 4.7(b)(3)); 75 FR 55310 (Sep. 10, 2010) 
(regarding the registration records of retail foreign exchange 
dealers); and 77 FR 2708 (Jan. 19, 2012) (regarding registration 
records of swap dealers and major swap participants).
    \8\ See, e.g., 67 FR 77470 (Dec. 18, 2002).

    CEA Section 4s(f)(1) authorizes the Commission to require SDs and 
MSPs to ``make such reports as are required by the Commission by rule 
or regulation regarding the transactions and positions . . .'' of SDs 
and MSPs.\9\ Upon consideration, the Commission has determined to 
authorize NFA, to receive and review notices of swap valuation 
disputes, as specified in Regulation 23.502(c).\10\ Regulation 
23.502(c) requires SDs and MSPs to notify the Commission of swap 
valuation disputes in excess of $20 million U.S. dollars (or its 
equivalent in any other currency), if not resolved within certain 
stated time frames. While those notices are currently submitted 
directly to the Commission, NFA is capable of receiving and reviewing 
those notices on the Commission's behalf.

    \9\ 7 U.S.C. 6s(f)(1) (2014).
    \10\ Commission regulations referred to herein may be found at 
17 CFR Ch. I (2014).

    NFA Compliance Rule 2-49 is capable of being used by NFA to collect 
notices of swap valuation disputes. That rule states:

    A Swap Dealer or Major Swap Participant Member must promptly 
submit any reports, documents or notices, including those required 
under CFTC Regulation 3.3 or Part 23 of the CFTC's regulations, and 
any other supplemental information, to NFA and CFTC, as required by 
NFA, in the form and manner prescribed by NFA.

Under this rule, NFA has already required SDs and MSPs to submit copies 
of the Chief Compliance Officer annual reports required under 
Regulation 3.3,\11\ and periodic risk exposure reports required under 
Regulation 23.600(c)(2)(ii).\12\ Because notices of swap valuation 
disputes are also required under Part 23, NFA is able to require SDs 
and MSPs to submit those notices to NFA under Compliance Rule 2-49.

    \11\ See NFA Notice to Members I-14-22.
    \12\ See NFA Notice to Members I-14-20.

    NFA has confirmed its willingness to perform the functions 
described herein and Commission staff has made NFA staff aware of the 
requirements that shall apply to NFA in maintaining these records. In 
particular, NFA, its officers, employees and agents shall ensure the 
confidentiality of those nonpublic portions of the Commission's records 
furnished to, compiled or maintained by NFA, including any reports 
generated by NFA based on the swap valuation dispute notices received 
by NFA except as allowed by existing or future Commission orders or 
regulations.\13\ In

[[Page 3391]]

addition, NFA will maintain these records in accordance with the 
Commission's Records Disposition Schedule. Further, the work of the 
Commission requires that Commission staff have ready electronic access 
to the information contained in the documents encompassed by this 
Order. Commission staff will have electronic access to a database 
containing the pertinent information contained in the subject filings. 
Moreover, NFA will make physical copies of any of the documents 
encompassed by this Order available to the Commission, Commission 
staff, the Department of Justice, the Securities and Exchange 
Commission, and all applicable prudential regulators promptly.

    \13\ See Performance of Registration Functions by National 
Futures Association, 49 FR 39593, 39596 n.23 (Oct. 9, 1984) (``In 
this regard, NFA shall take special precautions to protect any 
information which appears in these [ ] records but which, by its 
nature, is among the types of information described in sections 
8(a), 8(e), and 8a(6) of the Act, so that any such information will 
not be disclosed inadvertently or without authority.'').

    In light of NFA's experience in receiving and reviewing disclosure 
documents on behalf of the Commission, the Commission has determined to 
delegate to NFA the responsibility to receive and review notices of 
swap valuation disputes required to be filed pursuant to Regulation 
23.502(c), to provide the Commission with such summaries and periodic 
reports as the Commission, through the Director of DSIO, may determine 
are necessary for the effective oversight of SDs and MSPs, and to 
maintain and serve as the official custodian of records for those 
documents. This determination is based upon NFA's representations 
regarding procedures for maintaining and safeguarding all such records. 
In maintaining the Commission's records pursuant to this Order, NFA 
shall be subject to all other requirements and obligations imposed on 
it by the Commission in existing or future orders or regulations. In 
this regard, NFA shall also implement such additional procedures (or 
modify existing procedures) as are acceptable to the Commission and as 
are necessary and acceptable to the Commission to accomplish the 
following: Ensure the security and integrity of the records in NFA's 
custody; facilitate prompt access to those records by the Commission 
and its staff, particularly as described in other Commission orders or 
rules; facilitate disclosure of public or nonpublic information in 
those records when permitted by Commission orders or rules and keep 
logs as required by the Commission concerning disclosure of nonpublic 
information; and otherwise safeguard the confidentiality of the 
records. NFA shall also make such reports regarding those notices as 
shall be specified by the Commission or the Director of DSIO.

II. Conclusion and Order

    The Commission has determined, in accordance with Sections 
4s(f)(1), 8a(10) and 17(o)(1) of the CEA, to authorize NFA to perform 
the following functions:
    (1) To receive in the form and manner prescribed by NFA, and 
conduct reviews of, the notices of swap valuation disputes specified in 
Regulation 23.502(c), as described above; and
    (2) To maintain and serve as the official custodian of those 
Commission records.
    NFA shall perform these functions in accordance with the standards 
established by the Act and the regulations and orders promulgated 
thereunder, and shall provide the Commission with such summaries and 
periodic reports regarding those records and their contents as the 
Commission or the Director of DSIO may determine are necessary for the 
effective oversight of this program.
    These determinations are based, in part, on the Commission's 
authority to delegate to NFA portions of the Commission's 
responsibilities under the CEA, in furtherance of carrying out these 
responsibilities in the most efficient and cost-effective manner, and 
upon NFA's representations concerning the standards and procedures to 
be followed and the reports to be generated in administering these 
    This Order does not, however, authorize NFA to render ``no-action'' 
positions, exemptions or interpretations with respect to applicable 
disclosure, reporting, recordkeeping and registration requirements.
    Nothing in this Order or in CEA Sections 8a(10) or 17(o) shall 
affect the Commission's authority to review NFA's performance of 
Commission functions listed above.
    NFA is authorized to perform all functions specified herein until 
such time as the Commission orders otherwise. Nothing in this Order 
shall prevent the Commission from exercising the authority delegated 
herein. NFA may submit to the Commission for decision any specific 
matter regarding the functions delegated to it, and Commission staff 
will be available to discuss with NFA staff issues relating to the 
implementation of this Order. Nothing in this Order affects the 
applicability of any previous Orders issued by the Commission.

    Issued in Washington, DC, on January 14, 2016, by the 
Christopher J. Kirkpatrick,
Secretary of the Commission.
[FR Doc. 2016-01051 Filed 1-20-16; 8:45 am]