Federal Register / Vol. 75, No. 161 / Friday, August 20, 2010 / Proposed Rules 51429 

1 Dodd-Frank Wall Street Reform and Consumer 

Protection Act, Public Law No. 111–203, 124 Stat. 

1376 (2010). 

2Under Section 701 of the Dodd-Frank Act, Title 

VII may be cited as the ‘‘Wall Street Transparency 

and Accountability Act of 2010.’’ 

3These terms are defined in Sections 721 and 761 

of the Dodd-Frank Act and, with respect to the term 

‘‘eligible contract participant’’, in Section 1a(18) of 

the Commodity Exchange Act, 7 U.S.C. 1a(18), as 

re-designated and amended by Section 721 of the 

Dodd-Frank Act. 

COMMODITY FUTURES TRADING 

COMMISSION 

17 CFR Part 1 

SECURITIES AND EXCHANGE 

COMMISSION 

17 CFR Part 240 

[Release No. 34–62717; File No. S7–16–10] 

RIN 3235–AK65; 3038–AD06 

Definitions Contained in Title VII of 

Dodd-Frank Wall Street Reform and 

Consumer Protection Act 

AGENCY: Securities and Exchange 

Commission; Commodity Futures 

Trading Commission. 

ACTION: Advance notice of proposed 

rulemaking; request for comments. 

SUMMARY: The Dodd-Frank Wall Street 

Reform and Consumer Protection Act 

(the ‘‘Dodd-Frank Act’’), provides for the 

comprehensive regulation of swaps and 

security-based swaps. Title VII of the 

Dodd-Frank Act (‘‘Title VII’’), provides 

that the Securities and Exchange 

Commission (‘‘SEC’’) and the 

Commodity Futures Trading 

Commission (‘‘CFTC’’) (collectively, ‘‘the 

Commissions’’), in consultation with the 

Board of Governors of the Federal 

Reserve System, shall jointly further 

define certain key terms (specifically, 

‘‘swap’’, ‘‘security-based swap’’, ‘‘swap 

dealer’’, ‘‘security-based swap dealer’’, 

‘‘major swap participant’’, ‘‘major 

security-based swap participant’’, 

‘‘eligible contract participant’’, and 

‘‘security-based swap agreement’’), and 

shall jointly prescribe regulations 

regarding ‘‘mixed swaps,’’ as that term is 

used in Title VII of the Dodd-Frank Act. 

To assist the SEC and CFTC in further 

defining such terms, the Commissions 

are issuing this Notice and request for 

public comment. 

DATES: Comments must be in writing 

and received by September 20, 2010. 

ADDRESSES: Comments may be 

submitted by any of the following 

methods: 

SEC 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/proposed.shtml); 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number S7–12–10 on the subject line; 

or 

• Use the Federal eRulemaking Portal 

(http://www.regulations.gov). Follow the 

instructions for submitting comments. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number S7—16–10. This file number 

should be included on the subject line 

if e-mail is used. To help us process and 

review your comments more efficiently, 

please use only one method. The 

Commission will post all comments on 

the Commission’s Internet Web site 

(http://www.sec.gov/rules/ 

proposed.shtml). Comments are also 

available for Web site viewing and 

copying in the Commission’s Public 

Reference Room, 100 F Street, NE., 

Washington, DC 20549, on official 

business days between the hours of 10 

a.m. and 3 p.m. All comments received 

will be posted without change; we do 

not edit personal identifying 

information from submissions. You 

should submit only information that 

you wish to make available publicly. 

CFTC 

Comments may be submitted by any 

of the following methods: 

• Mail: David A. Stawick, Secretary, 

Commodity Futures Trading 

Commission, Three Lafayette Centre, 

1155 21st Street, NW., Washington, DC 

20581. 

• Hand Delivery/Courier: Same as 

mail above. 

• Fax: 202–418–5521. 

• E-mail: Comments may be 

submitted via e-mail at 

dfadefinitions@cftc.gov. 

• Agency Web Site: Comments may 

be submitted to http://www.cftc.gov. 

Follow the instructions for submitting 

comments on the Web site. 

• Federal eRulemaking Portal: 

Comments also may be submitted at 

http://www.regulations.gov. Follow the 

instructions for submitting comments. 

‘‘Definitions’’ must be in the subject 

field of responses submitted via e-mail, 

and clearly indicated on written 

submissions. All comments must be 

submitted in English, or if not, 

accompanied by an English translation. 

All comments provided in any 

electronic form or on paper will be 

published on the CFTC Web site, 

without review and without removal of 

personally identifying information. All 

comments are subject to the CFTC 

Privacy Policy. 

FOR FURTHER INFORMATION CONTACT: SEC: 

Matthew A. Daigler, Senior Special 

Counsel, at 202–551–5578, or Cristie L. 

March, Attorney Adviser, at 202–551– 

5574, Division of Trading and Markets, 

or Michael J. Reedich, Special Counsel, 

at 202–551–3279, Office of Chief 

Counsel, Division of Corporate Finance, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–7010; CFTC: Terry S. Arbit, 

Deputy General Counsel, at 202–418– 

5357, tarbit@cftc.gov, Julian E. Hammar, 

Assistant General Counsel, at 202–418– 

5118, jhammar@cftc.gov, Mark Fajfar, 

Assistant General Counsel, at 202–418– 

6636, mfajfar@cftc.gov, or David Aron, 

Counsel, at 202–418–6621, 

daron@cftc.gov, Office of General 

Counsel, Commodity Futures Trading 

Commission, Three Lafayette Centre, 

1155 21st Street, NW., Washington, DC 

20581. 

SUPPLEMENTARY INFORMATION: 

I. Background 

The Dodd-Frank Act was enacted on 

July 21, 2010.1 Title VII of the DoddFrank Act provides for the 

comprehensive regulation of swaps and 

security-based swaps and includes 

definitions of key terms relating to such 

regulation.2 Section 712(d) of the DoddFrank Act provides that the SEC and 

CFTC, in consultation with the Board of 

Governors of the Federal Reserve 

System, shall jointly further define the 

terms ‘‘swap’’, ‘‘security-based swap’’, 

‘‘swap dealer’’, ‘‘security-based swap 

dealer’’, ‘‘major swap participant’’, 

‘‘major security-based swap participant’’, 

‘‘eligible contract participant’’, and 

‘‘security-based swap agreement’’ 

(collectively ‘‘Key Definitions’’).3

Section 712(d) further provides that 

such jointly prescribed rules and 

regulations shall be comparable to the 

maximum extent possible, taking into 

consideration differences in instruments 

and in the applicable statutory 

requirements. 

Further, Section 721(c) requires the 

CFTC to adopt a rule to further define 

the terms ‘‘swap’’, ‘‘swap dealer’’, ‘‘major 

swap participant’’, and ‘‘eligible contract 

participant’’, and Section 761(b) requires 

the SEC to adopt a rule to further define 

the terms ‘‘security-based swap’’, 

‘‘security-based swap dealer’’, ‘‘major 

security-based swap participant’’ and 

‘‘eligible contract participant’’, with 

regard to security-based swaps, for the 

purpose of including transactions and 


jdjones on DSK8KYBLC1PROD with PROPOSALS-1
51430 Federal Register / Vol. 75, No. 161 / Friday, August 20, 2010 / Proposed Rules 

4Sections 721 and 761 of the Dodd-Frank Act 

amend the Commodity Exchange Act, 7 U.S.C. 1 et 

seq., and the Securities Exchange Act of 1934, 15 

U.S.C. 78a et seq., respectively, to define ‘‘mixed 

swap’’. 

entities that have been structured to 

evade Title VII of the Dodd-Frank Act. 

Finally, Section 712(a) of the DoddFrank Act provides that the SEC and 

CFTC, after consultation with the Board 

of Governors of the Federal Reserve 

System, shall jointly prescribe 

regulations regarding ‘‘mixed swaps,’’ 4

as may be necessary to carry out the 

purposes of Title VII. 

To assist the SEC and CFTC in further 

defining the Key Definitions specified 

above, and to prescribe regulations 

regarding ‘‘mixed swaps’’ as may be 

necessary to carry out the purposes of 

Title VII, the Commissions are seeking 

comment from interested parties. 

II. Solicitation for Comments About the 

Key Definitions and the Regulation of 

‘‘Mixed Swaps’’ 

The Commissions invite comment 

with respect to all aspects of the Key 

Definitions, and also the regulation of 

‘‘mixed swaps’’ as may be necessary to 

carry out the purposes of Title VII. 

Commenters are encouraged to address 

aspects of the Key Definitions such as 

the extent to which the definitions 

should be based on qualitative or 

quantitative factors and what those 

factors should be, any analogous areas 

of law, economics, or industry practice, 

and any factors specific to the 

commenter’s experience. Commenters 

also are encouraged to express views on 

the regulation of ‘‘mixed swaps’’, as may 

be necessary to carry out the purposes 

of Title VII. Please comment generally 

and specifically, and please include 

empirical data and other information in 

support of such comments, where 

appropriate and available, regarding any 

of the Key Definitions described above 

and the regulation of ‘‘mixed swaps’’. 

When commenting, please also take 

into account the statutory definitions of 

these terms that have been enacted in 

the Dodd-Frank Act. These statutory 

definitions are reprinted herein as 

follows: 

Swap: Section 721(a)(21) of the DoddFrank Act: 

‘‘(47) Swap.— 

(A) In general.—Except as provided in 

subparagraph (B), the term ‘swap’ means any 

agreement, contract, or transaction— 

(i) That is a put, call, cap, floor, collar, or 

similar option of any kind that is for the 

purchase or sale, or based on the value, of 1 

or more interest or other rates, currencies, 

commodities, securities, instruments of 

indebtedness, indices, quantitative measures, 

or other financial or economic interests or 

property of any kind; 

(ii) That provides for any purchase, sale, 

payment, or delivery (other than a dividend 

on an equity security) that is dependent on 

the occurrence, nonoccurrence, or the extent 

of the occurrence of an event or contingency 

associated with a potential financial, 

economic, or commercial consequence; 

(iii) That provides on an executory basis 

for the exchange, on a fixed or contingent 

basis, of 1 or more payments based on the 

value or level of 1 or more interest or other 

rates, currencies, commodities, securities, 

instruments of indebtedness, indices, 

quantitative measures, or other financial or 

economic interests or property of any kind, 

or any interest therein or based on the value 

thereof, and that transfers, as between the 

parties to the transaction, in whole or in part, 

the financial risk associated with a future 

change in any such value or level without 

also conveying a current or future direct or 

indirect ownership interest in an asset 

(including any enterprise or investment pool) 

or liability that incorporates the financial risk 

so transferred, including any agreement, 

contract, or transaction commonly known 

as— 

(I) An interest rate swap; 

(II) A rate floor; 

(III) A rate cap; 

(IV) A rate collar; 

(V) A cross-currency rate swap; 

(VI) A basis swap; 

(VII) A currency swap; 

(VIII) A foreign exchange swap; 

(IX) A total return swap; 

(X) An equity index swap; 

(XI) An equity swap; 

(XII) A debt index swap; 

(XIII) A debt swap; 

(XIV) A credit spread; 

(XV) A credit default swap; 

(XVI) A credit swap; 

(XVII) A weather swap; 

(XVIII) An energy swap; 

(XIX) A metal swap; 

(XX) An agricultural swap; 

(XXI) An emissions swap; and 

(XXII) A commodity swap; 

(iv) That is an agreement, contract, or 

transaction that is, or in the future becomes, 

commonly known to the trade as a swap; 

(v) Including any security-based swap 

agreement which meets the definition of 

‘swap agreement’ as defined in section 206A 

of the Gramm-Leach-Bliley Act (15 U.S.C. 

78c note) of which a material term is based 

on the price, yield, value, or volatility of any 

security or any group or index of securities, 

or any interest therein; or 

(vi) That is any combination or 

permutation of, or option on, any agreement, 

contract, or transaction described in any of 

clauses (i) through (v). 

(B) Exclusions.—The term ‘swap’ does not 

include— 

(i) Any contract of sale of a commodity for 

future delivery (or option on such a contract), 

leverage contract authorized under section 

19, security futures product, or agreement, 

contract, or transaction described in section 

2(c)(2)(C)(i) or section 2(c)(2)(D)(i); 

(ii) Any sale of a nonfinancial commodity 

or security for deferred shipment or delivery, 

so long as the transaction is intended to be 

physically settled; 

(iii) Any put, call, straddle, option, or 

privilege on any security, certificate of 

deposit, or group or index of securities, 

including any interest therein or based on the 

value thereof, that is subject to— 

(I) The Securities Act of 1933 (15 U.S.C. 

77a et seq.); and 

(II) The Securities Exchange Act of 1934 

(15 U.S.C. 78a et seq.); 

(iv) Any put, call, straddle, option, or 

privilege relating to a foreign currency 

entered into on a national securities 

exchange registered pursuant to section 6(a) 

of the Securities Exchange Act of 1934 (15 

U.S.C. 78f(a)); 

(v) Any agreement, contract, or transaction 

providing for the purchase or sale of 1 or 

more securities on a fixed basis that is subject 

to— 

(I) The Securities Act of 1933 (15 U.S.C. 

77a et seq.); and 

(II) The Securities Exchange Act of 1934 

(15 U.S.C. 78a et seq.); 

(vi) Any agreement, contract, or transaction 

providing for the purchase or sale of 1 or 

more securities on a contingent basis that is 

subject to the Securities Act of 1933 (15 

U.S.C. 77a et seq.) and the Securities 

Exchange Act of 1934 (15 U.S.C. 78a et seq.), 

unless the agreement, contract, or transaction 

predicates the purchase or sale on the 

occurrence of a bona fide contingency that 

might reasonably be expected to affect or be 

affected by the creditworthiness of a party 

other than a party to the agreement, contract, 

or transaction; 

(vii) Any note, bond, or evidence of 

indebtedness that is a security, as defined in 

section 2(a)(1) of the Securities Act of 1933 

(15 U.S.C. 77b(a)(1)); 

(viii) Any agreement, contract, or 

transaction that is— 

(I) Based on a security; and 

(II) Entered into directly or through an 

underwriter (as defined in section 2(a)(11) of 

the Securities Act of 1933 (15 U.S.C. 

77b(a)(11)) by the issuer of such security for 

the purposes of raising capital, unless the 

agreement, contract, or transaction is entered 

into to manage a risk associated with capital 

raising; 

(ix) Any agreement, contract, or transaction 

a counterparty of which is a Federal Reserve 

bank, the Federal Government, or a Federal 

agency that is expressly backed by the full 

faith and credit of the United States; and 

(x) Any security-based swap, other than a 

security-based swap as described in 

subparagraph (D). 

(C) Rule of Construction regarding master 

agreements.— 

(i) In general.—Except as provided in 

clause (ii), the term ‘swap’ includes a master 

agreement that provides for an agreement, 

contract, or transaction that is a swap under 

subparagraph (A), together with each 

supplement to any master agreement, 

without regard to whether the master 

agreement contains an agreement, contract, 

or transaction that is not a swap pursuant to 

subparagraph (A). 

(ii) Exception.—For purposes of clause (i), 

the master agreement shall be considered to 

be a swap only with respect to each 

agreement, contract, or transaction covered 

by the master agreement that is a swap 

pursuant to subparagraph (A). 


jdjones on DSK8KYBLC1PROD with PROPOSALS-1
Federal Register / Vol. 75, No. 161 / Friday, August 20, 2010 / Proposed Rules 51431 

(D) Mixed swap.—The term ‘security-based 

swap’ includes any agreement, contract, or 

transaction that is as described in section 

3(a)(68)(A) of the Securities Exchange Act of 

1934 (15 U.S.C. 78c(a)(68)(A)) and also is 

based on the value of 1 or more interest or 

other rates, currencies, commodities, 

instruments of indebtedness, indices, 

quantitative measures, other financial or 

economic interest or property of any kind 

(other than a single security or a narrowbased security index), or the occurrence, nonoccurrence, or the extent of the occurrence of 

an event or contingency associated with a 

potential financial, economic, or commercial 

consequence (other than an event described 

in subparagraph (A)(iii)). 

(E) Treatment of foreign exchange swaps 

and forwards.— 

(i) In general.—Foreign exchange swaps 

and foreign exchange forwards shall be 

considered swaps under this paragraph 

unless the Secretary makes a written 

determination under section 1b that either 

foreign exchange swaps or foreign exchange 

forwards or both— 

(I) Should be not be regulated as swaps 

under this Act; and 

(II) Are not structured to evade the DoddFrank Wall Street Reform and Consumer 

Protection Act in violation of any rule 

promulgated by the [Commodity Futures 

Trading] Commission pursuant to section 

721(c) of that Act. 

(ii) Congressional notice; effectiveness.— 

The Secretary shall submit any written 

determination under clause (i) to the 

appropriate committees of Congress, 

including the Committee on Agriculture, 

Nutrition, and Forestry of the Senate and the 

Committee on Agriculture of the House of 

Representatives. Any such written 

determination by the Secretary shall not be 

effective until it is submitted to the 

appropriate committees of Congress. 

(iii) Reporting.—Notwithstanding a written 

determination by the Secretary under clause 

(i), all foreign exchange swaps and foreign 

exchange forwards shall be reported to either 

a swap data repository, or, if there is no swap 

data repository that would accept such swaps 

or forwards, to the [Commodity Futures 

Trading] Commission pursuant to section 4r 

within such time period as the [Commodity 

Futures Trading] Commission may by rule or 

regulation prescribe. 

(iv) Business standards.—Notwithstanding 

a written determination by the Secretary 

pursuant to clause (i), any party to a foreign 

exchange swap or forward that is a swap 

dealer or major swap participant shall 

conform to the business conduct standards 

contained in section 4s(h). 

(v) Secretary.—For purposes of this 

subparagraph, the term ‘Secretary’ means the 

Secretary of the Treasury. 

(F) Exception for certain foreign exchange 

swaps and forwards.— 

(i) Registered entities.—Any foreign 

exchange swap and any foreign exchange 

forward that is listed and traded on or subject 

to the rules of a designated contract market 

or a swap execution facility, or that is cleared 

by a derivatives clearing organization, shall 

not be exempt from any provision of this Act 

or amendments made by the Wall Street 

Transparency and Accountability Act of 2010 

prohibiting fraud or manipulation. 

(ii) Retail transactions.—Nothing in 

subparagraph (E) shall affect, or be construed 

to affect, the applicability of this Act or the 

jurisdiction of the [Commodity Futures 

Trading] Commission with respect to 

agreements, contracts, or transactions in 

foreign currency pursuant to section 2(c)(2).’’ 

Security-Based Swap: Section 

761(a)(6) of the Dodd-Frank Act: 

‘‘(68) Security-Based Swap.— 

(A) In general.—Except as provided in 

subparagraph (B), the term ‘security-based 

swap’ means any agreement, contract, or 

transaction that— 

(i) Is a swap, as that term is defined under 

section 1a of the Commodity Exchange Act 

(without regard to paragraph (47)(B)(x) of 

such section); and 

(ii) Is based on— 

(I) An index that is a narrow-based security 

index, including any interest therein or on 

the value thereof; 

(II) A single security or loan, including any 

interest therein or on the value thereof; or 

(III) The occurrence, nonoccurrence, or 

extent of the occurrence of an event relating 

to a single issuer of a security or the issuers 

of securities in a narrow-based security 

index, provided that such event directly 

affects the financial statements, financial 

condition, or financial obligations of the 

issuer. 

(B) Rule of construction regarding master 

agreements.—The term ‘security-based swap’ 

shall be construed to include a master 

agreement that provides for an agreement, 

contract, or transaction that is a securitybased swap pursuant to subparagraph (A), 

together with all supplements to any such 

master agreement, without regard to whether 

the master agreement contains an agreement, 

contract, or transaction that is not a securitybased swap pursuant to subparagraph (A), 

except that the master agreement shall be 

considered to be a security-based swap only 

with respect to each agreement, contract, or 

transaction under the master agreement that 

is a security-based swap pursuant to 

subparagraph (A). 

(C) Exclusions.—The term ‘security-based 

swap’ does not include any agreement, 

contract, or transaction that meets the 

definition of a security-based swap only 

because such agreement, contract, or 

transaction references, is based upon, or 

settles through the transfer, delivery, or 

receipt of an exempted security under 

paragraph (12), as in effect on the date of 

enactment of the Futures Trading Act of 1982 

(other than any municipal security as defined 

in paragraph (29) as in effect on the date of 

enactment of the Futures Trading Act of 

1982), unless such agreement, contract, or 

transaction is of the character of, or is 

commonly known in the trade as, a put, call, 

or other option. 

(D) Mixed swap.—The term ‘security-based 

swap’ includes any agreement, contract, or 

transaction that is as described in 

subparagraph (A) and also is based on the 

value of 1 or more interest or other rates, 

currencies, commodities, instruments of 

indebtedness, indices, quantitative measures, 

other financial or economic interest or 

property of any kind (other than a single 

security or a narrow-based security index), or 

the occurrence, non-occurrence, or the extent 

of the occurrence of an event or contingency 

associated with a potential financial, 

economic, or commercial consequence (other 

than an event described in subparagraph 

(A)(ii)(III)). 

(E) Rule of construction regarding use of 

the term index.—The term ‘index’ means an 

index or group of securities, including any 

interest therein or based on the value 

thereof.’’ 

Swap Dealer: Section 721(a)(21) of the 

Dodd-Frank Act: 

‘‘(49) Swap dealer.— 

(A) In general.—The term ‘swap dealer’ 

means any person who— 

(i) Holds itself out as a dealer in swaps; 

(ii) Makes a market in swaps; 

(iii) Regularly enters into swaps with 

counterparties as an ordinary course of 

business for its own account; or 

(iv) Engages in any activity causing the 

person to be commonly known in the trade 

as a dealer or market maker in swaps, 

provided however, in no event shall an 

insured depository institution be considered 

to be a swap dealer to the extent it offers to 

enter into a swap with a customer in 

connection with originating a loan with that 

customer. 

(B) Inclusion.—A person may be 

designated as a swap dealer for a single type 

or single class or category of swap or 

activities and considered not to be a swap 

dealer for other types, classes, or categories 

of swaps or activities. 

(C) Exception.—The term ‘swap dealer’ 

does not include a person that enters into 

swaps for such person’s own account, either 

individually or in a fiduciary capacity, but 

not as a part of a regular business. 

(D) De minimis exception.—The 

[Commodity Futures Trading] Commission 

shall exempt from designation as a swap 

dealer an entity that engages in a de minimis 

quantity of swap dealing in connection with 

transactions with or on behalf of its 

customers. The [Commodity Futures Trading] 

Commission shall promulgate regulations to 

establish factors with respect to the making 

of this determination to exempt.’’ 

Security-Based Swap Dealer: Section 

761(a)(6) of the Dodd-Frank Act: 

‘‘(71) Security-Based Swap Dealer.— 

(A) In general.—The term ‘security-based 

swap dealer’ means any person who— 

(i) Holds themself out as a dealer in 

security-based swaps; 

(ii) Makes a market in security-based 

swaps; 

(iii) Regularly enters into security-based 

swaps with counterparties as an ordinary 

course of business for its own account; or 

(iv) Engages in any activity causing it to be 

commonly known in the trade as a dealer or 

market maker in security-based swaps. 

(B) Designation by type or class.—A person 

may be designated as a security-based swap 

dealer for a single type or single class or 

category of security-based swap or activities 

and considered not to be a security-based 


jdjones on DSK8KYBLC1PROD with PROPOSALS-1
51432 Federal Register / Vol. 75, No. 161 / Friday, August 20, 2010 / Proposed Rules 

5Section 741(b)(10) of the Dodd-Frank Act 

provides that ‘‘Section 1a(19)(A)(iv)(II) of the 

Commodity Exchange Act (7 U.S.C. 

1a(19)(A)(iv)(II)) (as redesignated by section 

721(a)(1)) is amended by inserting before the 

semicolon at the end the following: ‘‘provided, 

however, that for purposes of section 2(c)(2)(B)(vi) 

and section 2(c)(2)(C)(vii), the term ‘eligible 

contract participant’ shall not include a commodity 

pool in which any participant is not otherwise an 

eligible contract participant’’. The probable intent of 

Congress was to amend the definition of ‘‘eligible 

contract participant’’, which is in paragraph 

(18)(A)(iv)(II), not paragraph (19)(A)(iv)(II). 

swap dealer for other types, classes, or 

categories of security based swaps or 

activities. 

(C) Exception.—The term ‘security-based 

swap dealer’ does not include a person that 

enters into security-based swaps for such 

person’s own account, either individually or 

in a fiduciary capacity, but not as a part of 

regular business. 

(D) De minimis exception.—The [Securities 

and Exchange] Commission shall exempt 

from designation as a security-based swap 

dealer an entity that engages in a de minimis 

quantity of security-based swap dealing in 

connection with transactions with or on 

behalf of its customers. The [Securities and 

Exchange] Commission shall promulgate 

regulations to establish factors with respect 

to the making of any determination to 

exempt.’’ 

Major Swap Participant: Section 

721(a)(16) of the Dodd-Frank Act: 

‘‘(33) Major Swap Participant.— 

(A) In general.—The term ‘major swap 

participant’ means any person who is not a 

swap dealer, and— 

(i) Maintains a substantial position in 

swaps for any of the major swap categories 

as determined by the [Commodity Futures 

Trading] Commission, excluding— 

(I) Positions held for hedging or mitigating 

commercial risk; and 

(II) Positions maintained by any employee 

benefit plan (or any contract held by such a 

plan) as defined in paragraphs (3) and (32) 

of section 3 of the Employee Retirement 

Income Security Act of 1974 (29 U.S.C. 1002) 

for the primary purpose of hedging or 

mitigating any risk directly associated with 

the operation of the plan; 

(ii) Whose outstanding swaps create 

substantial counterparty exposure that could 

have serious adverse effects on the financial 

stability of the United States banking system 

or financial markets; or 

(iii)(I) Is a financial entity that is highly 

leveraged relative to the amount of capital it 

holds and that is not subject to capital 

requirements established by an appropriate 

Federal banking agency; and 

(II) Maintains a substantial position in 

outstanding swaps in any major swap 

category as determined by the [Commodity 

Futures Trading] Commission. 

(B) Definition of substantial position.—For 

purposes of subparagraph (A), the 

[Commodity Futures Trading] Commission 

shall define by rule or regulation the term 

‘substantial position’ at the threshold that the 

[Commodity Futures Trading] Commission 

determines to be prudent for the effective 

monitoring, management, and oversight of 

entities that are systemically important or 

can significantly impact the financial system 

of the United States. In setting the definition 

under this subparagraph, the [Commodity 

Futures Trading] Commission shall consider 

the person’s relative position in uncleared as 

opposed to cleared swaps and may take into 

consideration the value and quality of 

collateral held against counterparty 

exposures. 

(C) Scope of designation.—For purposes of 

subparagraph (A), a person may be 

designated as a major swap participant for 1 

or more categories of swaps without being 

classified as a major swap participant for all 

classes of swaps. 

(D) Exclusions.—The definition under this 

paragraph shall not include an entity whose 

primary business is providing financing, and 

uses derivatives for the purpose of hedging 

underlying commercial risks related to 

interest rate and foreign currency exposures, 

90 percent or more of which arise from 

financing that facilitates the purchase or 

lease of products, 90 percent or more of 

which are manufactured by the parent 

company or another subsidiary of the parent 

company.’’ 

Major Security-Based Swap 

Participant: Section 761(a)(6) of the 

Dodd-Frank Act: 

‘‘(67) Major Security–Based Swap 

Participant.— 

(A) In general.—The term ‘major securitybased swap participant’ means any person— 

(i) Who is not a security-based swap dealer; 

and 

(ii)(I) Who maintains a substantial position 

in security-based swaps for any of the major 

security-based swap categories, as such 

categories are determined by the [Securities 

and Exchange] Commission, excluding both 

positions held for hedging or mitigating 

commercial risk and positions maintained by 

any employee benefit plan (or any contract 

held by such a plan) as defined in paragraphs 

(3) and (32) of section 3 of the Employee 

Retirement Income Security Act of 1974 (29 

U.S.C. 1002) for the primary purpose of 

hedging or mitigating any risk directly 

associated with the operation of the plan; 

(II) Whose outstanding security-based 

swaps create substantial counterparty 

exposure that could have serious adverse 

effects on the financial stability of the United 

States banking system or financial markets; 

or 

(III) That is a financial entity that— 

(aa) Is highly leveraged relative to the 

amount of capital such entity holds and that 

is not subject to capital requirements 

established by an appropriate Federal 

banking agency; and 

(bb) Maintains a substantial position in 

outstanding security-based swaps in any 

major security-based swap category, as such 

categories are determined by the [Securities 

and Exchange] Commission. 

(B) Definition of substantial position.—For 

purposes of subparagraph (A), the [Securities 

and Exchange] Commission shall define, by 

rule or regulation, the term ‘substantial 

position’ at the threshold that the [Securities 

and Exchange] Commission determines to be 

prudent for the effective monitoring, 

management, and oversight of entities that 

are systemically important or can 

significantly impact the financial system of 

the United States. In setting the definition 

under this subparagraph, the [Securities and 

Exchange] Commission shall consider the 

person’s relative position in uncleared as 

opposed to cleared security-based swaps and 

may take into consideration the value and 

quality of collateral held against counterparty 

exposures. 

(C) Scope of designation.—For purposes of 

subparagraph (A), a person may be 

designated as a major security-based swap 

participant for 1 or more categories of 

security-based swaps without being classified 

as a major security-based swap participant 

for all classes of security-based swaps.’’ 

Eligible Contract Participant: Section 

1a(18) of the Commodity Exchange Act, 

7 U.S.C. 1a(18), as re-designated and 

amended by Sections 721(a)(9) and 

741(b)(10) 5 of the Dodd-Frank Act: 

‘‘(18) Eligible Contract Participant.—The 

term ‘eligible contract participant’ means— 

(A) Acting for its own account— 

(i) A financial institution; 

(ii) An insurance company that is regulated 

by a State, or that is regulated by a foreign 

government and is subject to comparable 

regulation as determined by the [Commodity 

Futures Trading] Commission, including a 

regulated subsidiary or affiliate of such an 

insurance company; 

(iii) An investment company subject to 

regulation under the Investment Company 

Act of 1940 (15 U.S.C. 80a–1 et seq.) or a 

foreign person performing a similar role or 

function subject as such to foreign regulation 

(regardless of whether each investor in the 

investment company or the foreign person is 

itself an eligible contract participant); 

(iv) A commodity pool that— 

(I) Has total assets exceeding $5,000,000; 

and 

(II) Is formed and operated by a person 

subject to regulation under this Act or a 

foreign person performing a similar role or 

function subject as such to foreign regulation 

(regardless of whether each investor in the 

commodity pool or the foreign person is itself 

an eligible contract participant) provided, 

however, that for purposes of section 

2(c)(2)(B)(vi) and section 2(c)(2)(C)(vii), the 

term ‘eligible contract participant’ shall not 

include a commodity pool in which any 

participant is not otherwise an eligible 

contract participant; 

(v) A corporation, partnership, 

proprietorship, organization, trust, or other 

entity— 

(I) That has total assets exceeding 

$10,000,000; 

(II) The obligations of which under an 

agreement, contract, or transaction are 

guaranteed or otherwise supported by a letter 

of credit or keepwell, support, or other 

agreement by an entity described in 

subclause (I), in clause (i), (ii), (iii), (iv), or 

(vii), or in subparagraph (C); or 

(III) That— 

(aa) Has a net worth exceeding $1,000,000; 

and 

(bb) Enters into an agreement, contract, or 

transaction in connection with the conduct of 


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Federal Register / Vol. 75, No. 161 / Friday, August 20, 2010 / Proposed Rules 51433 

the entity’s business or to manage the risk 

associated with an asset or liability owned or 

incurred or reasonably likely to be owned or 

incurred by the entity in the conduct of the 

entity’s business; 

(vi) An employee benefit plan subject to 

the Employee Retirement Income Security 

Act of 1974 (29 U.S.C. 1001 et seq.), a 

governmental employee benefit plan, or a 

foreign person performing a similar role or 

function subject as such to foreign 

regulation— 

(I) That has total assets exceeding 

$5,000,000; or 

(II) The investment decisions of which are 

made by— 

(aa) An investment adviser or commodity 

trading advisor subject to regulation under 

the Investment Advisers Act of 1940 (15 

U.S.C. 80b–1 et seq.) or this Act; 

(bb) A foreign person performing a similar 

role or function subject as such to foreign 

regulation; 

(cc) A financial institution; or 

(dd) An insurance company described in 

clause (ii), or a regulated subsidiary or 

affiliate of such an insurance company; 

(vii)(I) A governmental entity (including 

the United States, a State, or a foreign 

government) or political subdivision of a 

governmental entity; 

(II) A multinational or supranational 

government entity; or 

(III) An instrumentality, agency, or 

department of an entity described in 

subclause (I) or (II); 

except that such term does not include an 

entity, instrumentality, agency, or 

department referred to in subclause (I) or (III) 

of this clause unless (aa) the entity, 

instrumentality, agency, or department is a 

person described in clause (i), (ii), or (iii) of 

paragraph (17)(A); (bb) the entity, 

instrumentality, agency, or department owns 

and invests on a discretionary basis 

$50,000,000 or more in investments; or (cc) 

the agreement, contract, or transaction is 

offered by, and entered into with, an entity 

that is listed in any of subclauses (I) through 

(VI) of section 2(c)(2)(B)(ii); 

(viii)(I) A broker or dealer subject to 

regulation under the Securities Exchange Act 

of 1934 (15 U.S.C. 78a et seq.) or a foreign 

person performing a similar role or function 

subject as such to foreign regulation, except 

that, if the broker or dealer or foreign person 

is a natural person or proprietorship, the 

broker or dealer or foreign person shall not 

be considered to be an eligible contract 

participant unless the broker or dealer or 

foreign person also meets the requirements of 

clause (v) or (xi); 

(II) An associated person of a registered 

broker or dealer concerning the financial or 

securities activities of which the registered 

person makes and keeps records under 

section 15C(b) or 17(h) of the Securities 

Exchange Act of 1934 (15 U.S.C. 78o–5(b), 

78q(h)); 

(III) An investment bank holding company 

(as defined in section 17(i) of the Securities 

Exchange Act of 1934 (15 U.S.C. 78q(i)); 

(ix) A futures commission merchant 

subject to regulation under this Act or a 

foreign person performing a similar role or 

function subject as such to foreign regulation, 

except that, if the futures commission 

merchant or foreign person is a natural 

person or proprietorship, the futures 

commission merchant or foreign person shall 

not be considered to be an eligible contract 

participant unless the futures commission 

merchant or foreign person also meets the 

requirements of clause (v) or (xi); 

(x) A floor broker or floor trader subject to 

regulation under this Act in connection with 

any transaction that takes place on or through 

the facilities of a registered entity (other than 

an electronic trading facility with respect to 

a significant price discovery contract) or an 

exempt board of trade, or any affiliate 

thereof, on which such person regularly 

trades; or 

(xi) An individual who has amounts 

invested on a discretionary basis, the 

aggregate of which is in excess of— 

(I) $10,000,000; or 

(II) $5,000,000 and who enters into the 

agreement, contract, or transaction in order to 

manage the risk associated with an asset 

owned or liability incurred, or reasonably 

likely to be owned or incurred, by the 

individual; 

(B)(i) A person described in clause (i), (ii), 

(iv), (v), (viii), (ix), or (x) of subparagraph (A) 

or in subparagraph (C), acting as broker or 

performing an equivalent agency function on 

behalf of another person described in 

subparagraph (A) or (C); or 

(ii) An investment adviser subject to 

regulation under the Investment Advisers Act 

of 1940, a commodity trading advisor subject 

to regulation under this Act, a foreign person 

performing a similar role or function subject 

as such to foreign regulation, or a person 

described in clause (i), (ii), (iv), (v), (viii), 

(ix), or (x) of subparagraph (A) or in 

subparagraph (C), in any such case acting as 

investment manager or fiduciary (but 

excluding a person acting as broker or 

performing an equivalent agency function) 

for another person described in subparagraph 

(A) or (C) and who is authorized by such 

person to commit such person to the 

transaction; or 

(C) Any other person that the [Commodity 

Futures Trading] Commission determines to 

be eligible in light of the financial or other 

qualifications of the person.’’ 

Security-Based Swap Agreement: 

Section 761(a)(6) of the Dodd-Frank Act: 

‘‘(78) Security-Based Swap Agreement.— 

(A) In general.—For purposes of sections 9, 

10, 16, 20, and 21A of this Act, and section 

17 of the Securities Act of 1933 (15 U.S.C. 

77q), the term ‘security-based swap 

agreement’ means a swap agreement as 

defined in section 206A of the Gramm-LeachBliley Act (15 U.S.C. 78c note) of which a 

material term is based on the price, yield, 

value, or volatility of any security or any 

group or index of securities, or any interest 

therein. 

(B) Exclusions.—The term ‘security-based 

swap agreement’ does not include any 

security-based swap.’’ 

By the Securities and Exchange 

Commission. 

Dated: August 13, 2010. 

Elizabeth M. Murphy, 

Secretary. 

By the Commodity Futures Trading 

Commission. 

Dated: August 13, 2010. 

David A. Stawick, 

Secretary. 

[FR Doc. 2010–20567 Filed 8–19–10; 8:45 am] 

BILLING CODE P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 1 

[REG–106750–10] 

RIN 1545–BJ30 

Modifications of Debt Instruments; 

Hearing Cancellation 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Cancellation of notice of public 

hearing on proposed rulemaking. 

SUMMARY: This document cancels a 

public hearing on proposed rulemaking 

relating to the modification of debt 

instruments. 

DATES: The public hearing, originally 

scheduled for Wednesday, September 8, 

2010, at 10 a.m., is cancelled. 

FOR FURTHER INFORMATION CONTACT: 

Richard A. Hurst of the Publications and 

Regulations Branch, Legal Processing 

Division, Associate Chief Counsel 

(Procedure and Administration), at 

Richard.A.Hurst@irscounsel.treas.gov. 

SUPPLEMENTARY INFORMATION: A notice 

of public hearing that appeared in the 

Federal Register on Friday, June 4, 2010 

(75 FR 31736), announced that a public 

hearing was scheduled for September 8, 

2010, at 10 a.m., in the auditorium, 

Internal Revenue Building, 1111 

Constitution Avenue, NW., Washington, 

DC. The subject of the public hearing is 

under section 1001 of the Internal 

Revenue Code. 

The public comment period for these 

regulations expired on Tuesday, August 

3, 2010. Outlines of topics to be 

discussed at the hearing were due on 

Wednesday, August 11, 2010. The 

notice of proposed rulemaking and 

notice of public hearing instructed those 

interested in testifying at the public 

hearing to submit an outline of the 

topics to be addressed. As of Tuesday, 

August 17, 2010, no one has requested 

to speak. Therefore, the public hearing 


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