2016-01051
Federal Register, Volume 81 Issue 13 (Thursday, January 21, 2016)
[Federal Register Volume 81, Number 13 (Thursday, January 21, 2016)]
[Notices]
[Pages 3390-3391]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-01051]
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COMMODITY FUTURES TRADING COMMISSION
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.
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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.
SUPPLEMENTARY INFORMATION:
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\
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\1\ 7 U.S.C. 12a(10) (2014).
\2\ 7 U.S.C. 21(j) (2014).
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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
mission.
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\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
participants).
\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).
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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.
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\9\ 7 U.S.C. 6s(f)(1) (2014).
\10\ Commission regulations referred to herein may be found at
17 CFR Ch. I (2014).
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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.
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\11\ See NFA Notice to Members I-14-22.
\12\ See NFA Notice to Members I-14-20.
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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.
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\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.'').
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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
functions.
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
Commission.
Christopher J. Kirkpatrick,
Secretary of the Commission.
[FR Doc. 2016-01051 Filed 1-20-16; 8:45 am]
BILLING CODE 6351-01-P