Release Number 8402-21

CFTC Staff Issues Interpretation to Swap Dealers Regarding Calculating Capital Requirements

June 29, 2021

Washington, D.C. — The Commodity Futures Trading Commission’s Market Participants Division today issued an interpretation concerning capital and financial reporting obligations for swap dealers (SDs) and major swap participants (MSPs) that compute minimum capital requirements based on the respective firm’s tangible net worth.

The interpretation clarifies that a non-bank SD that utilizes the tangible net worth method of calculating net capital may satisfy the requisite eligibility tests at either the non-bank SD entity level or at the level of the entity’s ultimate consolidated parent. 

The interpretation also clarifies that certain non-bank SDs and non-bank MSPs that maintain books and records in accordance international financial reporting standards (IFRS) in lieu of U.S. generally accepted accounting principles (U.S. GAAP), and file financial reports with the CFTC in accordance with IFRS in lieu of U.S. GAAP, may also use IFRS in lieu of U.S. GAAP to compute tangible net worth. Finally, the interpretation clarifies that eligible non-bank SDs and non-bank MSPs utilizing the tangible net worth capital method may satisfy certain reporting requirements on a quarterly basis, rather than on a monthly basis.

The interpretation was issued in response to inquiries received from SDs in their effort to comply by October 6, 2021 under newly adopted capital and financial reporting requirements.