Dodd-Frank Act Rulemaking: Derivatives. Background: In 2000, Congress passed the Commodity Futures Modernization Act (CFMA) to provide legal certainty for swap agreements. The CFMA explicitly prohibited the SEC and CFTC from regulating the over-the-counter (OTC) swaps markets, but provided the SEC with antifraud authority over “security-based swap agreements,” such as credit default swaps. However, the SEC was specifically prohibited from, among other things, imposing reporting, recordkeeping, or disclosure requirements or other prophylactic measures designed to prevent fraud with respect to such agreements.
This limited the SEC’s ability to detect and deter fraud in the swaps markets. Title VII of Dodd-Frank Wall Street Reform and Consumer Protection Act addresses the gap in U.S. financial regulation of OTC swaps by providing a comprehensive framework for the regulation of the OTC swaps markets. The CFTC has primary regulatory authority over all other swaps, such as energy and agricultural swaps. Interim Actions Road Map. Approves Rules and Interpretations on Key Terms for Regulating Derivatives. Washington, D.C., July 9, 2012 — The Securities and Exchange Commission late Friday took another step toward regulating the over-the-counter derivatives market by unanimously approving rules and interpretations for key definitions of certain derivative products.
The SEC rules and interpretations further define the terms “swap” and “security-based swap” and whether a particular instrument is a “swap” regulated by the Commodity Futures Trading Commission (CFTC) or a “security-based swap” regulated by the SEC. The SEC action also addresses “mixed swaps,” which are regulated by both agencies, and “security-based swap agreements,” which are regulated by the CFTC but over which the SEC has antifraud and other authority.
The rules and interpretations written jointly with the CFTC implement provisions of the 2010 Dodd-Frank Act that establish a comprehensive framework for regulating over-the-counter derivatives. U.S. Securities and Exchange Commission | Homepage. U.S. Commodity Futures Trading Commission. FIA-Swap-Dealer-Presentation. Dodd-Frank Act. Dodd-Frank Act. Swap Dealers (SDs) and Major Swap Participants (MSPs) As part of the registration process, SDs and MSPs are required to submit documentation to demonstrate compliance with CFTC regulations Implementing Sections 4s(e), 4s(f), 4s(g), 4s(h) and 4s(i) of the CEA (Section 4s Implementing Regulations*) that have an effective compliance date as of the completed registration application date and are applicable to the applicant. SDs and MSPs must submit this documentation to NFA for review via a web-based system called the Registration Documentation Submission System (RDSS), which is part of NFA's EasyFile system.
Once NFA receives the completed Form 7-R application (and required Forms 8-R) and 4s documentation, NFA will notify the applicant that it is provisionally registered. View The Registration Process: The 4s Document Submission Process for Swap Dealers and Major Swap Participants video tutorial for more information on the 4s submission process. Registered SDs and MSPs must become Members of NFA. JPMorgan Among 65 to Register as Swap Dealers Under Dodd-Frank.
JPMorgan Chase & Co., Goldman Sachs Group Inc. and Barclays Plc are among the first banks to register swap-dealer divisions under the Dodd-Frank Act, which requires higher capital, collateral and trading standards. The 65 trading units that have registered include the biggest banks in the U.S., U.K., France, Germany, Switzerland and Japan, according to the Commodity Futures Trading Commission. The list, which is expected to grow, reflects companies that had at least $8 billion in swap-dealing business in October and had to register by the end of last year. “This is at the heart of financial reform: dealers registering and coming under common-sense rules of business practice, reporting, capital and margin and that the public gets to see the actual transactions,” CFTC Chairman Gary Gensler said in a telephone interview yesterday. The Dodd-Frank rules, more than two years in the making, seek to improve oversight of a market that for three decades largely escaped federal regulation.
Swap Dealer (SD) The Registration Process SDs and MSPs are required to be registered with the CFTC. Firms register with the CFTC through NFA's Online Registration System (ORS). SDs and MSPs begin the application process by submitting a completed Form 7-R application, a completed Form 8-R application and fingerprint cards for each of its principals, the application fee and documentation required to demonstrate compliance with CFTC regulations Implementing Sections 4s(e), 4s(f), 4s(g), 4s(h) and 4s(i) of the CEA (Section 4s Implementing Regulations*) that have an effective compliance date as of the completed registration application date and are applicable to the applicant. SDs and MSPs must submit this documentation to NFA for review via its web-based Registration Documentation Submission System (RDSS), which is part of NFA's EasyFile system. CFTC Regulation 170.16 requires each registered SD and MSP to become and remain a member of at least one registered futures association.