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 [www.gpo.gov]
[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: http://comments.cftc.gov. 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: http://www.regulations.gov. 
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 
http://www.cftc.gov. 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, http://www.cftc.gov.

    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 http://www.cftc.gov 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, 
[email protected]; Thomas Smith, Deputy Director, Division of Swap 
Dealer and Intermediary Oversight, 202-418-5495, [email protected]
Jennifer C.P. Bauer, Special Counsel, Division of Swap Dealer and 
Intermediary Oversight, 202-418-5472, [email protected]; Joshua Beale, 
Special Counsel, Division of Swap Dealer and Intermediary Oversight, 
202-418-5446, [email protected]; Rafael Martinez, Senior Financial Risk 
Analyst, Division of Swap Dealer and Intermediary Oversight, 202-418-
5462, [email protected]; Paul Schlichting, Assistant General Counsel, 
Office of the General Counsel, 202-418-5884, [email protected]; or 
Lihong McPhail, Research Economist, 202-418-5722, [email protected]
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]