Release Number 7468-16

October 11, 2016

CFTC Approves Proposed Rule on the Application of Certain Swap Provisions of the Commodity Exchange Act in Cross-Border Transactions

Washington, DC — The U.S. Commodity Futures Trading Commission (Commission) today voted unanimously to propose rules and interpretations addressing the application of certain swap provisions of the Commodity Exchange Act (CEA) and Commission regulations to cross-border transactions (Proposed Rule). The proposal defines key terms for cross-border transactions and addresses the cross-border application of the registration thresholds and external business conduct standards for swap dealers and major swap participants. It also addresses whether and to what extent these thresholds and standards would apply to swap transactions that are arranged, negotiated, or executed using personnel located in the United States (ANE transactions). The unanimous vote was conducted via seriatim. The comment period ends 60 days after publication of the proposal in the Federal Register.

The Proposed Rule defines the terms “U.S. person” and “Foreign Consolidated Subsidiary” (FCS) based on the definition of these terms in the Commission’s recent cross-border margin rulemaking. The definitions would apply not only for purposes of this Proposed Rule, but also for future cross-border rulemakings. The Proposed Rule also provides an interpretation of the types of activities that would fall within the scope of ANE transactions; an interpretation that would similarly apply to future rulemakings addressing the application of particular swaps requirements to ANE transactions.

In addition, the Proposed Rule addresses the following:

Registration thresholds: Under the Proposed Rule, a U.S. person would be required to count all swap dealing transactions, irrespective of the counterparty. A non-U.S. person that is an FCS, or whose swap transactions are guaranteed by a U.S. person, would be required to do the same. Other non-U.S. persons would count swap dealing transactions with U.S. persons and with non-U.S. persons that are FCSs or whose swap transactions are guaranteed by a U.S. person, unless the swap is executed anonymously on a registered platform and cleared. The Proposed Rule provides a similar counting framework for major swap participant registration thresholds.

External business conduct (EBC) standards: Under the Proposed Rule, U.S. swap dealers (except their foreign branches) would be required to comply with applicable EBC standards. Non-U.S. swap dealers and foreign branches of U.S. swap dealers would be required to comply with applicable EBC standards only for their transactions with a U.S. person counterparty (that is not a foreign branch of a U.S. entity), except that certain EBC standards prohibiting fraud, manipulation or other abusive conduct would apply to ANE transactions.

The Commission expects to address the cross-border application of other swap requirements, including their application to ANE transactions, in subsequent rulemakings.

For more information, see the Fact Sheet and Federal Register Notice under Related Links.

Last Updated: October 11, 2016