The Commodity Futures Trading Commission (CFTC) Friday approved a proposed phased compliance program for certain swaps involving foreign swap dealers (SDs), foreign major swap participants (MSPs), U.S. SDs, U.S. MSPs, and foreign branches of U.S. SDs and MSPs.
The CFTC’s notice of proposed exemptive order would give the entities more time to comply with the reforms under the Dodd-Frank Wall Street Reform Act. The agency said it took this action to “provide greater legal certainty to market participants regarding their obligations under CEA [Commodity Exchange Act] with respect to their cross-border activities.”
The Commission approved the proposal by 5-0. It will be open for comment for 30 days following its publication in the Federal Register.
Specifically, the CFTC is proposing exemptive relief to allow non-U.S. (foreign) SDs and MSPs to delay compliance with certain entity-level requirements for swaps — requirements that apply to an entire company, such as capital adequacy, chief compliance officers, risk management and record keeping. Non-U.S. SDs and MSPs refer to those that are not based in the U.S., as well as those that are foreign affiliates of a U.S. company.
Additionally, with respect to transaction-level requirements for swaps (clearing and swap processing, margining and segregation for uncleared swaps, trade execution and real-time reporting), the relief would allow foreign SDs and MSPs, as well as foreign branches of U.S. SDs a and MSPs, to comply only with those requirements as may be required in the home jurisdiction of an SD and MSP, (or in the case of foreign branches of a U.S. SD or MSP, the foreign location of the branch).
“This relief would become effective concurrently with the date upon which swap dealers and major swap participants must first apply for registration, and expire 12 months following the publication of this proposed order in the Federal Register,” the proposed order said. The registration date has not been determined yet.
Moreover, the proposed order would allow U.S. SDs and MSPs to delay compliance with certain entity level requirements of the CEA from the date upon which SDs and MSPs must apply for registration until Jan. 1, 2013.
Foreign SDs and MSPs and foreign branches of U.S. SDs and MSPs seeking to avail themselves of the proposed phased compliance would be required to file an application to register as an SD or an MSP with the National Futures Association (NFA), and within 60 days of applying for registration submit to the NFA a compliance plan addressing how it plans to comply with all the requirements under the CEA.
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