Federal Register / Vol. 75, No. 225 / Tuesday, November 23, 2010 / Proposed Rules 71379 

1 5 U.S.C. 552. 

2Commission regulations referred to herein are 

found at 17 CFR Ch. 1 (2010), as amended by 75 

FR 55409 (Sep. 10, 2010). They are accessible on 

the Commission’s Web site. 

3See Dodd-Frank Wall Street Reform and 

Consumer Protection Act, Public Law 111–203, 124 

Stat. 1376 (2010). The text of the Dodd-Frank Act 

may be accessed at http://www.cftc.gov./ 

LawRegulation/OTCDERIVATIVES/index.htm. 

4Pursuant to Section 701 of the Dodd-Frank Act, 

Title VII may be cited as the ‘‘Wall Street 

Transparency and Accountability Act of 2010.’’ 

5 7 U.S.C. 1 et seq. (2006). 

6See Sections 721(b) and (c) of the Dodd-Frank 

Act, which provide the Commission with authority 

to define these new terms. 

7See also Paragraph C of this Section I, below. 

8New Section 1a(49) further provides: 

(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 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 Commission shall 

Continued 

COMMODITY FUTURES TRADING 

COMMISSION 

17 CFR Parts 3, 23 and 170 

RIN 3038—AC95 

Registration of Swap Dealers and 

Major Swap Participants 

AGENCY: Commodity Futures Trading 

Commission. 

ACTION: Proposed rules. 

SUMMARY: The Commodity Futures 

Trading Commission (‘‘Commission’’ or 

‘‘CFTC’’) is proposing to adopt 

regulations that would establish the 

process for registering swap dealers 

(‘‘SDs’’) and major swap participants 

(‘‘MSPs,’’ and collectively with SDs, 

‘‘swaps entities’’). The proposed 

regulations also would require swaps 

entities to become members of the 

National Futures Association (‘‘NFA’’) 

and to confirm that persons associated 

with them are not subject to a statutory 

disqualification under the Commodity 

Exchange Act (‘‘CEA’’) (‘‘Proposal’’). The 

Commission is making the Proposal in 

accordance with Section 4s of the CEA, 

which was recently added to the CEA by 

the Dodd-Frank Wall Street Reform and 

Consumer Protection Act (‘‘Dodd-Frank 

Act’’). 

DATES: Comments must be received on 

or before January 24, 2011. 

ADDRESSES: You may submit comments, 

identified by RIN 3038–AC95, by any of 

the following methods: 

• Agency Web Site, via its Comments 

Online process: http:// 

comments.cftc.gov. Follow the 

instructions on the Web site for 

submitting comments. 

• Mail: Send to David A. Stawick, 

Secretary, Commodity Futures Trading 

Commission, 1155 21st Street, NW., 

Washington, DC 20581. 

• Hand delivery/Courier: Same as 

Mail above. 

• Federal eRulemaking Portal: http:// 

www.regulations.gov/search/index.jsp. 

Follow the instructions for submitting 

comments. 

All comments must be submitted in 

English, or if not, accompanied by an 

English translation. Comments will be 

posted as received to http:// 

www.cftc.gov. You should submit only 

information that you wish to make 

available publicly. If you wish the 

Commission to consider information 

that is exempt from disclosure under the 

Freedom of Information Act,1 a petition 

for confidential treatment of the exempt 

information may be submitted according 

to the procedures set forth in 

Commission Regulation 145.9.2 The 

Commission reserves the right, but shall 

have no obligation, to review, prescreen, filter, redact, refuse or remove 

any or all of your submission from 

http://www.cftc.gov that it may deem to 

be inappropriate for publication, such as 

obscene language. All submissions that 

have been redacted or removed that 

contain comments on the merits of the 

rulemaking will be retained in the 

public comment file and will be 

considered as required under the 

Administrative Procedure Act and other 

applicable laws, and may be accessible 

under the Freedom of Information Act. 

FOR FURTHER INFORMATION CONTACT: 

Barbara S. Gold, Associate Director, 

Christopher W. Cummings, Special 

Counsel, or Elizabeth Miller, AttorneyAdvisor, Division of Clearing and 

Intermediary Oversight, 1155 21st 

Street, NW., Washington, DC 20581. 

Telephone number: 202–418–5450 and 

electronic mail: bgold@cftc.gov, 

ccummings@cftc.gov or 

emiller@cftc.gov. 

SUPPLEMENTARY INFORMATION: 

I. Background 

On July 21, 2010, President Obama 

signed the Dodd-Frank Act.3 Title VII of 

the Dodd-Frank Act 4 amended the CEA5

to establish a comprehensive new 

regulatory framework for swaps and 

security-based swaps. The goal of this 

legislation was to reduce risk, increase 

transparency, and promote market 

integrity within the financial system by, 

among other things: (1) Providing for the 

registration and comprehensive 

regulation of SDs and MSPs; (2) 

imposing clearing and trade execution 

requirements on standardized derivative 

products; (3) creating robust 

recordkeeping and real-time reporting 

regimes; and (4) enhancing the 

Commission’s rulemaking and 

enforcement authorities with respect to, 

among others, all registered entities and 

intermediaries subject to the 

Commission’s oversight. The regulations 

in the Proposal concern the process for 

registering SDs and MSPs. 

A. Relevant Definitions 

In furtherance of the foregoing 

legislative goals, Section 721(a) of the 

Dodd-Frank Act amended the 

definitions of various existing terms in 

the CEA and added definitions of 

numerous new terms to the CEA. 

Relevant to the Proposal are the 

definitions of the new terms ‘‘swap 

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

‘‘associated person of a swap dealer or 

major swap participant.’’ The 

Commission currently is developing 

regulations to implement the new ‘‘swap 

dealer’’ and ‘‘major swap participant’’ 

definitions (‘‘Definitional 

Rulemakings’’).6 In light of the statutory 

mandate in new Section 4s(b)(5) of the 

CEA that ‘‘Rules under this section shall 

provide for the registration of swap 

dealers and major swap participants not 

later than 1 year after the date of 

enactment of the [Dodd-Frank] Act,’’ the 

Commission is proposing rules that will 

establish a process for the registration of 

swaps entities by this one-year 

deadline—i.e., by July 21, 2011.7

1. Swap Dealer 

New Section 1a(49) of the CEA 

defines the term ‘‘swap dealer’’ as 

follows: 

(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.8


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71380 Federal Register / Vol. 75, No. 225 / Tuesday, November 23, 2010 / Proposed Rules 

promulgate regulations to establish factors with 

respect to the making of this determination to 

exempt. 

9This section further provides: 

(B) DEFINITION OF SUBSTANTIAL 

POSITION.—For purposes of subparagraph (A), the 

Commission shall define by rule or regulation the 

term ‘substantial position’ at the threshold that the 

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 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. 

10New section 1a(4) further provides: 

(B) EXCLUSION.— Other than for purposes of 

section 4s(b)(6), the term ‘associated person of a 

swap dealer or major swap participant’ does not 

include any person associated with a swap dealer 

or major swap participant the functions of which 

are solely clerical or ministerial. 

11Section 4s(a) was added to the CEA by Section 

731 of the Dodd-Frank Act. 

12Section 4s(b) similarly was added to the CEA 

by Section 731 of the Dodd-Frank Act. 

13 7 U.S.C. 12a(2) and 12a(3). These sections of 

the CEA contain an extensive list of matters that 

constitute grounds to refuse to register a person, 

including, without limitation, felony convictions, 

commodities or securities law violations, and bars 

or other adverse actions taken by financial 

regulators. 

14New Sections 4s(e) through (k), respectively, 

added to the CEA by Dodd-Frank Section 731. 

15New Section 4s(l), added to the CEA by DoddFrank Section 724(c). 

16Specifically, the prohibition against Federal 

assistance to swaps entities is set forth in paragraph 

(a) of Section 716 as follows: 

(a) PROHIBITION ON FEDERAL ASSISTANCE.— 

Notwithstanding any other provision of law 

(including regulations), no Federal assistance may 

be provided to any swaps entity with respect to any 

swap, security-based swap, or other activity of the 

swaps entity. 

Dodd-Frank Section 716(d) carves out certain 

swap activities of an IDI that is an SD, and therefore 

a ‘‘swaps entity,’’ from the prohibition against 

‘‘Federal assistance.’’ In particular, the prohibition 

against Federal assistance does not apply to the 

extent the IDI SD engages in: (1) Hedging and other 

risk-mitigating activities of the IDI; or (2) acting as 

an SD for swaps and security-based swaps 

involving rates (e.g., interest rate swaps) or 

reference assets that are permissible investments. 

Engaging in non-cleared credit default swaps, 

however, would subject an IDI SD to the prohibition 

against Federal assistance. 

17Section 716(c) provides for the Push-Out 

Affiliate exception as follows: 

(c) AFFILIATES OF INSURED DEPOSITORY 

INSTITUTIONS.—The prohibition on Federal 

assistance contained in subsection (a) does not 

2. Major Swap Participant 

New Section 1a(33) of the CEA 

defines the term ‘‘major swap 

participant’’ as follows: 

(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 

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 

Commission.9

3. Associated Person of a Swap Dealer 

or Major Swap Participant 

New Section 1a(4) of the CEA defines 

the term ‘‘associated person of a swap 

dealer or major swap participant’’ as 

follows: 

(A) IN GENERAL.— The term 

‘associated person of a swap dealer or 

major swap participant’ means a person 

who is associated with a swap dealer or 

major swap participant as a partner, 

officer, employee, agent (or any person 

occupying a similar status or performing 

similar functions), in any capacity that 

involves— 

(i) the solicitation or acceptance of 

swaps; or 

(ii) the supervision of any person or 

persons so engaged.10

B. Registration Requirements for SDs 

and MSPs 

New Section 4s(a) of the CEA 11 sets 

forth the registration requirements for 

SDs and MSPs as follows: 

(a) REGISTRATION.— 

(1) SWAP DEALERS.— It shall be 

unlawful for any person to act as a swap 

dealer unless the person is registered as 

a swap dealer with the Commission. 

(2) MAJOR SWAP PARTICIPANTS.— 

It shall be unlawful for any person to act 

as a major swap participant unless the 

person is registered as a major swap 

participant with the Commission. 

New Section 4s(b) 12 directs the 

Commission to adopt rules that provide 

for the registration of SDs and MSPs. 

New Section 4s does not direct the 

Commission to adopt rules that provide 

for the registration of associated persons 

of SDs or MSPs. However, new Section 

4s(b)(6) makes it unlawful for a swaps 

entity to permit a person to associate 

with it if the person is subject to a 

statutory disqualification as follows: 

Except to the extent otherwise specifically 

provided by rule, regulation, or order, it shall 

be unlawful for a swap dealer or major swap 

participant to permit any person associated 

with a swap dealer or major swap participant 

who is subject to a statutory disqualification 

to effect or be involved in effecting swaps on 

behalf of the swap dealer or major swap 

participant, if the swap dealer or major swap 

participant knew, or in the exercise of 

reasonable care should have known, of the 

statutory disqualification. 

For the purpose of the Proposal, the 

Commission intends that a statutory 

disqualification is a disqualification 

under Section 8a(2) or 8a(3) of the 

CEA.13

Section 4s further directs the 

Commission to adopt rules that provide 

for the regulation of SDs and MSPs with 

respect to, among others, the following 

areas: Capital and margin, reporting and 

recordkeeping, daily trading records, 

business conduct standards, 

documentation standards, trading 

duties, chief compliance officer,14 and, 

with respect to uncleared swaps, 

segregation 15 (collectively, ‘‘Section 4s 

Requirements’’). The Section 4s 

Requirements are being addressed by 

other rulemakings. Their impact on the 

registration process is discussed below 

at Paragraph C of this Section I. 

Additionally, Section 716 of the 

Dodd-Frank Act prohibits an insured 

depository institution (‘‘IDI’’) from 

receiving Federal assistance if it is also 

an SD that engages in swaps activities 

that are not covered by the exclusion in 

Section 716(d).16 Under Section 716(c), 

an IDI can retain its access to Federal 

assistance if it transfers covered 

activities to a non-IDI affiliate (a ‘‘PushOut Affiliate’’) that is an SD or MSP, if 

the affiliate complies with the 

requirements of Section 716(c), 

including such requirements as the 

Commission may establish.17 The PushVerDate Mar<15>2010 14:36 Nov 22, 2010 Jkt 223001 PO 00000 Frm 00013 Fmt 4702 Sfmt 4702 E:\FR\FM\23NOP1.SGM 23NOP1

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apply to and shall not prevent an insured 

depository institution from having or establishing 

an affiliate which is a swaps entity, as long as such 

insured depository institution is part of a bank 

holding company, or savings and loan holding 

company, that is supervised by the Federal Reserve 

and such swaps entity affiliate complies with 

sections 23A and 23B of the Federal Reserve Act 

and such other requirements as the Commodity 

Futures Trading Commission * * * may determine 

to be necessary and appropriate. 

18New Regulation 23.22 would pertain to 

requirements applicable to SDs and MSPs with 

regard to associated persons and new Regulation 

170.16 would require SDs and MSPs to become 

members of NFA. As is discussed in Item II.C.2.b. 

below, the Commission specifically is requesting 

comment on certain matters related to these 

proposed requirements. 

19New Section 4s(b)(5) of the CEA. 

20Section 754 provides that: 

Unless otherwise provided in this title, the 

provisions of this subtitle [Subtitle A—Regulation 

of Over-the-Counter Swaps Markets] shall take 

effect on the later of 360 days after the date of 

enactment of this subtitle [i.e., July 15, 2011], or, 

to the extent a provision of this subtitle requires a 

rulemaking, not less than 60 days after publication 

of the final rule or regulation implementing such 

provision of this subtitle. 

21This advance application procedure is 

authorized by Section 712(f) of the Dodd-Frank Act, 

which states in relevant part: 

[N]otwithstanding the effective date of any 

provision of this Act, the Commodity Futures 

Trading Commission * * * may, in order to 

prepare for the effective dates of the provisions of 

this Act * * * register persons under the provision 

of this Act * * * provided, however, that no [such] 

action * * * shall become effective prior to the 

effective date applicable to such action under the 

provisions of this Act. 

22See Dodd-Frank Act Sections 721(b) and (c). 

23For the purpose of this Federal Register 

release, the term ‘‘compliance’’ includes ‘‘ability to 

comply,’’ to the extent that a regulation 

subsequently adopted requires demonstration of the 

ability to comply. See proposed Regulation 

3.10(a)(1)(v)(A). 

24See Section II.B.2., Regulation 3.10, for a fuller 

discussion of this matter. 

25NFA is registered as a futures association in 

accordance with Section 17 of the CEA, 7 U.S.C. 21. 

Out Affiliate, however, would not have 

access to Federal assistance. The 

Commission is not proposing any 

specific requirements at this time for 

any Push-Out Affiliate. The Commission 

does intend, however, that any PushOut Affiliate that comes within the 

statutory definition of an SD or an MSP 

be subject to registration and regulation 

as an SD or as an MSP, as the case may 

be. 

Part 3 of the Commission’s regulations 

governs registration under the CEA. 

Currently, Part 3 is not applicable to 

swaps entities. To fulfill the statutory 

mandates of the Dodd-Frank Act, and as 

is discussed more fully below, the 

Commission is proposing amendments 

to Regulations 3.2, 3.4, 3.10, 3.21, 3.30, 

3.31 and 3.33, and adoption of new 

Regulation 23.21. To further accomplish 

these aims, the Commission also is 

proposing adoption of new Regulations 

23.22 and 170.16.18

C. Phased Implementation 

As is noted above, the Dodd-Frank 

Act requires the Commission to 

promulgate rules providing for the 

registration of SDs and MSPs not later 

than July 21, 2011.19 Section 754 of the 

Dodd-Frank Act, however, permits the 

other separate rulemakings establishing 

specific criteria in the SD and MSP 

definitions that determine who must 

register, as well as the Section 4s 

Requirements, to become effective after 

July 21, 2011.20 In order to meet the 

prescribed deadline to adopt rules 

providing for registration of swaps 

entities, even though the Definitional 

Rulemakings will not be effective until 

a later date and the criteria of many of 

the Section 4s Requirements will not be 

known with certainty until a later date, 

the Commission is proposing a 

provisional registration procedure for 

the transitional period between the July 

21, 2011 date by which regulations 

establishing a process for swaps entities’ 

registration must be in place and the 

effective dates of the Definitional 

Rulemakings and the rulemakings 

implementing the Section 4s 

Requirements. This approach is 

intended to ensure continuity of the 

business operations of existing swaps 

entities, and to avoid undue market 

disruption. 

Moreover, to provide sufficient 

processing time for the initial set of 

applicants so that persons may be 

registered at the earliest possible date, 

persons would be able to begin applying 

for registration ahead of the July 21 date, 

beginning on April 15, 2011.21 This 

process, which would be entirely 

voluntary, would permit a person that 

anticipates that it may be considered to 

be a ‘‘swap dealer’’ or ‘‘major swap 

participant’’ to apply for and obtain 

registration—albeit on a provisional 

basis—as soon as possible. SDs and 

MSPs who had not applied for 

registration by July 21 would be 

required to apply for registration not 

later than the effective date of the 

applicable Definitional Rulemaking.22

In light of the possibility that the 

rulemakings regarding the operations 

and activities of swaps entities will have 

later compliance deadlines than the 

effective date of the Definitional 

Rulemakings, provisionally registered 

swaps entities would be permitted to 

come into compliance with the Section 

4s Requirements within the compliance 

deadlines set forth in the respective 

final implementing rulemakings.23 The 

Commission intends that upon the filing 

of an application these swaps entities 

would be provisionally registered, and 

would remain registered so long as they 

timely established compliance with the 

various Section 4s Requirements and 

met the standard fitness requirements. 

Swaps entities applying for registration 

after July 21, 2011 would be subject to 

the same provisional registration 

process but would have to demonstrate 

compliance with any applicable 

regulation for which a compliance 

deadline had passed by the time of the 

initial filing. 

Once all of the Section 4s 

Requirements are adopted and effective, 

provisional registrants would become 

fully registered SDs and MSPs, provided 

that they demonstrate compliance with 

all applicable regulations. SDs and 

MSPs who failed to demonstrate 

compliance would cease to be 

registered, would be required to 

withdraw their registration application 

and would be prohibited from engaging 

in any subsequent new activity within 

the SD or MSP definition, as the case 

may be.24 After all of the rulemakings 

implementing the Section 4s 

Requirements became effective, no 

provisional registrations would be 

granted. 

By proposing a system of phased 

implementation, the Commission has 

endeavored to accomplish the 

registration of SDs and MSPs in a 

manner that is both efficient and 

minimally disruptive to on-going 

business. The Commission seeks 

comment on this or alternative 

approaches to registration, including 

extension of the effective date of the 

registration rules until such time as 

rules further defining the terms ‘‘swap 

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

and rulemakings implementing the 

Section 4s Requirements, become 

effective. 

D. Request for Comment on Allocation 

of Responsibilities 

Currently, when a person registers 

with the Commission, they apply 

electronically via NFA’s online 

registration system.25 NFA conducts a 

fitness review of the applicant, 

including background checks of 

principals and associated persons, and 

proficiency testing of associated 

persons. Presently, all registered futures 

commission merchants (‘‘FCMs’’), 

introducing brokers (‘‘IBs’’), retail 

foreign exchange dealers (‘‘RFEDs’’), 

commodity pool operators (‘‘CPOs’’) and 

those registered commodity trading 

advisors (‘‘CTAs’’) who manage or 

exercise discretion over client accounts 

must be members of NFA in order to 

conduct futures business with the 


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26See NFA Bylaw 1101. 

27See NFA Bylaw 301(b). 

28Form 7–R is the form filed with NFA by 

entities—e.g., FCMs, IBs, RFEDs, CPOs and CTAs. 

The information called for includes the firm’s full 

legal name and form of organization, business 

address, business records location, branch office 

location, principals, contact information and any 

disciplinary history. Form 7–R is filed 

electronically and not as a paper form. 

29Form 8–R is the form that is filed with NFA 

by the entity applicant on behalf of certain natural 

persons. It calls for the person’s name, address and 

other identifying information, any criminal history, 

any regulatory disciplinary history, employment, 

and educational history. The entity submits the 

Form 8–R and the person confirms the accuracy of 

the information. Form 8–R also is filed 

electronically and not as a paper form. 

30See, e.g., 75 FR 55310 (Sep. 10, 2010), 

delegating registration functions for RFEDs, which 

includes the determination of compliance with net 

capital requirements, to NFA. 

31Although Section 17 of the CEA provides that 

‘‘[a]ny association of persons may be registered with 

the Commission as a registered futures association,’’ 

to date, NFA is the sole association that has applied 

for and has been issued registration as a futures 

association with the Commission. 

32See generally, Hartford Fire Insurance Co. v. 

California, 509 U.S. 764, 113 S.Ct. 2891, 125 

L.Ed.2d 612 (1993); 1 Restatement (Third) of 

Foreign Relations Law of the United States §§ 402– 

403 (1987). 

33Cf. 17 CFR 3.10 (foreign broker not required to 

register as FCM if it: (1) Limits its customers to 

customers located outside the U.S.; (2) confines its 

commodity interest activities to areas outside the 

U.S.; and (3) submits its trades for clearing on an 

omnibus basis through a registered FCM; also, 

registration exemption for any foreign person acting 

in the capacity of an IB, CTA or CPO solely with 

respect to customers located outside the U.S., 

provided that all commodity interest transactions 

are submitted for clearing to a registered FCM). 

34Such persons, however, may be subject to other 

requirements imposed on swap dealers, such as 

reporting obligations. Further, the provisions of the 

CEA and the Commission’s regulations applicable 

to ‘‘any person’’ will apply as well, such as those 

prohibiting fraud and manipulation. 

public.26 Associated persons of NFA 

Members must become NFA 

Associates.27 On an ongoing basis, NFA 

audits registrants for compliance with 

regulatory requirements applicable to 

the particular registration category. 

In the case of SDs and MSPs, the 

Commission proposes that an 

application for registration would 

commence with the filing of Form 7–R 

by means of NFA’s online registration 

system.28 SDs and MSPs would also file 

accompanying Forms 8–R for the 

entity’s principals by means of NFA’s 

online registration system to verify that 

the principal is not subject to a statutory 

disqualification.29 NFA would conduct 

a background check, and would provide 

to the SD or MSP and to the 

Commission any information that would 

indicate the principal is unfit or subject 

to a statutory disqualification. 

Currently, the structure for oversight of 

existing registrants’ activities is that the 

Commission has delegated to NFA 

responsibility for conducting all aspects 

of the registration process and for 

monitoring for compliance with all 

subsequent requirements.30 Along these 

lines, then, the Commission is 

proposing to adopt Regulation 170.16 to 

include SDs and MSPs among the 

registrants that are required to become 

and remain members of at least one 

registered futures association.31

The Commission believes that there 

are three options with respect to who 

should be responsible for determining 

initial and ongoing compliance by 

swaps entities with respect to the 

Section 4s Requirements and all other 

applicable requirements. Option 

number one would involve the 

Commission being directly responsible 

for ensuring compliance by swaps 

entities with all requirements applicable 

to them under the CEA and Commission 

regulations. Option number two would 

involve NFA (or any other association 

that may subsequently be registered as 

a futures association) being responsible 

for ensuring compliance, subject to 

Commission oversight. Option number 

three would involve certain compliance 

oversight activities being performed by 

the Commission and others being 

delegated to NFA (or a subsequently 

registered futures association). The 

Commission requests comment on these 

options. In the case of option number 

three, commenters should specify which 

oversight activities should be performed 

by the Commission and which should 

be delegated to, or performed by NFA 

(or another registered futures 

association). 

E. Extraterritorial Application of Swap 

Dealer and Major Swap Participant 

Registration Requirements 

New Section 2(i) of the CEA, which 

was added by Section 722(d) of the 

Dodd-Frank Act, states that provisions 

of the CEA that were enacted by Title 

VII of the Dodd-Frank Act (which 

includes the definition of swap dealer, 

and the registration requirement) shall 

not apply to activities outside the 

United States unless those activities 

‘‘have a direct and significant 

connection with activities in, or effect 

on, commerce of the United States,’’ or 

contravene rules or regulations the 

Commission may promulgate to prevent 

evasion. 

In view of Sections 2(i) and 4s(a)(1), 

the Commission must determine under 

which circumstances a person who 

engages in the activities set forth in new 

Section 1a(49) of the CEA (‘‘swap 

dealing activities’’) outside the U.S. shall 

be required to register as an SD. By its 

terms, Section 2(i) sets a floor that must 

be met for the swap provisions of the 

CEA to apply abroad. Thus, a person 

whose swap dealing activity has no 

connection or effect of any kind, direct 

or indirect, whether through affiliates or 

otherwise, to U.S. commerce would not 

be required to register as a swap dealer. 

The Commission also recognizes the 

role that considerations of international 

comity play in determining the proper 

scope of extraterritorial application of 

federal statutes.32

The Commission generally would not 

require a person to register as a swap 

dealer if their only connection to the 

U.S. was that the person uses a U.S.- 

registered swap execution facility, 

designated clearing organization or 

designated contract market in 

connection with their swap dealing 

activities,33 or reports swaps to a U.S.- 

registered swap data repository.34 On 

the other hand, a person outside the 

U.S. who engages in swap dealing 

activities and regularly enters into 

swaps with U.S. persons would likely 

be required to register as a swap dealer. 

The Commission requests comment as 

to what level of swap dealing activity 

outside the U.S. would qualify as having 

a direct and significant connection with 

activities in or effect on commerce of 

the U.S., thereby requiring a person 

outside the U.S. to register as an SD. In 

particular, in view of the global nature 

of the swap markets and the ability to 

transfer swap-related risks within 

affiliated groups, the Commission 

requests comment on when swap 

dealing activity with or by non-U.S. 

affiliates of U.S. persons has a ‘‘direct 

and significant connection with 

activities in, or effect on’’ U.S. 

commerce for purposes of Section 2(i) of 

the CEA. For example, to what extent do 

persons outside the U.S. who engage in 

swap dealing activity with non-U.S. 

affiliates of U.S. persons (such as the 

non-U.S. subsidiary of a corporate 

parent headquartered in the U.S.) 

engage in swap dealing activity that has 

a direct and significant connection with 

activities in, or effect on, U.S. 

commerce? 

Registration of MSPs raises different 

jurisdictional issues, because the 

definition of MSP specifically focuses 

on the degree of risk that an entity’s 

swaps pose to U.S. counterparties and 

the U.S. market. Thus, the analysis of 

whether a non-U.S. entity should 

register as an MSP would turn upon, 

among other things, swap positions with 

U.S. counterparties (including the use of 

a U.S. clearing agency or swap 

execution facility) or that involve U.S. 

mails or any means or instrumentality of 

interstate commerce. The Commission 


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35 In this regard, however, it has not been 

necessary for the Commission to propose any 

amendments to the following Part 3 regulations in 

order to subject SDs and MSPs to registration with 

the CFTC: 3.1, 3.11, 3.12, 3.13, 3.22, 3.40–3.47, 

3.50–3.64, 3.70, and 3.75. This is because these 

regulations either apply to ‘‘applicants’’ or 

‘‘registrants’’ generally, such that they would also 

apply to swaps entities, or they apply to other 

specific registration categories (such as floor broker 

or floor trader), such that they would not pertain 

to swaps entities. 

36See the proposed amendments to Regulations: 

3.4(a); 3.10 title and paragraphs (a)(1)(i), (b)(1) and 

(d); 3.21(c); 3.30(a); 3.31(a)(1) and (c); and 3.33(a), 

(b) introductory text and (e). 

37See the proposed amendment to Regulation 

3.10(a)(1)(i). SDs and MSPs would thus be subject 

to the requirement in Regulation 3.10(a)(2) to file 

a Form 8–R for each natural person who is a 

principal of the firm, along with a fingerprint card 

for that person. 

38See Section 8a(1) of the CEA. The term 

‘‘principal’’ is defined in Regulation 3.1(a) to 

include generally: An officer, director, partner or 

similar person exercising control over an entity’s 

activities; a person who owns or has power to vote 

ten percent or more of the entity’s securities; or a 

person who has contributed ten percent or more of 

the entity’s capital. 

39 In the event that final registration rules are 

adopted and published pursuant to the Proposal, 

the Commission would issue an order officially 

delegating these application and background check 

functions to NFA. The delegation order would 

require NFA to notify the Commission if it found 

information regarding an applicant indicating that 

the applicant was unfit or that it was subject to a 

statutory disqualification. 

40See proposed Regulation 3.10(a)(1)(v)(A). 

41See proposed Regulation 3.10(a)(1)(v)(B). 

requests comment on these interpretive 

issues. 

II. Section-by-Section Analysis 

A. Structure and Approach 

As noted above, the Dodd-Frank Act 

requires SDs and MSPs to be registered 

as such with the Commission, and it 

requires the Commission to adopt rules 

providing for registration of SDs and 

MSPs, as well as rules regulating their 

activities. To the extent practicable, the 

Commission intends to place 

requirements that are unique to SDs and 

MSPs in a new Part 23 of its regulations. 

However, as is noted above, the 

Commission’s existing registration 

process for futures, commodity options 

and retail forex intermediaries, as well 

as for floor traders and floor brokers, is 

extensively set forth in Part 3 of the 

regulations. Replication in new Part 23 

of all of the registration process 

requirements appropriate for SDs and 

MSPs would be unwieldy and 

potentially confusing. Accordingly, 

while two proposed new regulations 

would be in new Part 23, and one 

proposed new regulation would be in 

Part 170, most of the proposed changes 

in this rulemaking concern amendments 

to existing provisions of Part 3.35

B. Proposed Amendments to Existing 

Regulations 

Some of the proposed amendments to 

Part 3 consist entirely of adding 

appropriate references to SDs and MSPs 

in existing regulations.36 These 

proposed amendments will not be 

separately discussed. Other proposed 

amendments, however, involve 

substantive changes to existing 

regulations because of the particular 

attributes or characteristics of SDs, 

MSPs and swaps. They are separately 

discussed below. 

1. Regulation 3.2—Registration 

Processing by the National Futures 

Association; Notification and Duration 

of Registration 

Regulation 3.2 generally provides for 

performance by NFA of registration, 

temporary licensing and denial, 

revocation or suspension of registration. 

Paragraph (c) of this regulation currently 

requires NFA to notify various 

registration applicants when a 

temporary license has been granted 

under provisions of Regulation 3.40. 

The Commission proposes to amend 

Regulation 3.2(c) to add paragraph 

(c)(3), which would provide that NFA 

will notify an applicant for registration 

as an SD or MSP (pursuant to the 

provisional application procedure 

described below, in the discussion of 

proposed amendments to Regulation 

3.10) that the applicant has been granted 

provisional registration. 

2. Regulation 3.10—Registration of 

Futures Commission Merchants, Retail 

Foreign Exchange Dealers, Introducing 

Brokers, Commodity Trading Advisors, 

Commodity Pool Operators and 

Leverage Transaction Merchants 

Regulation 3.10 sets forth the basic 

registration scheme for various firms. 

The Proposal would amend the 

regulation to accommodate SD and MSP 

registration. It would require an 

applicant for registration as an SD or 

MSP to commence the registration 

process by filing Form 7–R with NFA.37

This is the same form currently used by 

an entity applying for registration as an 

FCM, IB, RFED, CPO, or CTA. Like 

those other registrants, an SD’s or MSP’s 

Form 7–R would be accompanied by a 

Form 8–R and a fingerprint card for 

each principal.38 NFA would then 

conduct the same background check it 

performs with respect to other 

applicants for registration.39

Concurrently with or subsequent to 

the filing of the Form 7–R, the applicant 

for SD or MSP registration would be 

required to demonstrate their 

compliance with such regulations as the 

Commission adopts implementing the 

Section 4s Requirements.40 Moreover, 

filing of Form 7–R by an SD or MSP 

would authorize the Commission to 

conduct on-site inspection to ascertain 

compliance with those obligations.41

However, this filing would not require 

the Commission to conduct such 

inspection. As is stated above, the 

Commission specifically is requesting 

comment on whether it or NFA (by 

delegation and subject to Commission 

oversight) should be directly 

responsible for ensuring compliance 

with the Section 4s Requirements. 

As is noted above, the Commission is 

proposing a provisional registration 

process for the transitional period 

between adoption of regulations 

providing for registration of swaps 

entities, and the latest date by which 

applicants must comply with the final 

rulemakings for the Section 4s 

Requirements. This provisional 

registration process and the transition to 

full compliance would be incorporated 

into Regulation 3.10(a)(1)(v)(C). As 

proposed, a swaps entity would be able 

to file a Form 7–R at any time beginning 

April 15, 2011, which filing would 

cause the person to be provisionally 

registered. From and after the effective 

date(s) of the Definitional Rulemakings, 

a person within the SD or MSP 

definition must file a Form 7–R, and 

until such time as the last of the 

rulemakings implementing the Section 

4s Requirements becomes effective, 

such person will also be provisionally 

registered. As each of the Section 4s 

Requirements rulemakings becomes 

effective, a provisionally registered SD 

or MSP would be required to 

demonstrate compliance within the 

timeframe required by such rulemaking. 

Once all of the Section 4s Requirement 

rulemakings are effective and an 

applicant has timely demonstrated 

compliance, the applicant would be 

notified that its provisional registration 

has become a full registration. If the 

applicant failed to demonstrate 

compliance within the prescribed 

period of time, it would be so notified 

and required to withdraw its registration 

application and its provisional 

registration would cease. In the event 

the applicant failed to withdraw its 

registration application within 30 days 

following receipt of notice that its 

application was deficient, the 

application would be deemed 

withdrawn and its provisional 

registration would cease. The regulation 

would provide that the Commission 

could extend the time to cure the 

deficiency upon written request from 


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42See Proposed Regulation 3.10(a)(1)(v)(D)(3). 

Section 739 of the Dodd-Frank Act, in language to 

be codified as new Section 22(a)(5)(A) of the CEA, 

states: 

EFFECT ON SWAPS—Unless specifically 

reserved in the applicable swap, neither the 

enactment of the Wall Street Transparency and 

Accountability Act of 2010, nor any requirement 

under that Act or an amendment made by that Act, 

shall constitute a termination event, force majeure, 

illegality, increased costs, regulatory change, or 

similar event under a swap (including any related 

credit support arrangement) that would permit a 

party to terminate, renegotiate, modify, amend, or 

supplement 1 or more transactions under the swap. 

43See the proposed amendment to Regulation 

3.10(d). 

44See the proposed amendment to Regulation 

3.21(c). 

45See the proposed amendment to Regulation 

3.33(b)(6)(vi). 

46See proposed Regulation 3.33(b)(6)(viii). 

47See proposed Regulation 3.33(b)(6)(ix). 

48 [Footnote in original] As used in § 1.10f, the 

term ‘‘customer’’ includes the customers of FCMs 

and the clients of CTAs, as well as the customers 

of any category of registrant that may be established 

in the future. Section 1.10f also refers to 

‘‘commodity pool participants’’—i.e., those persons 

who have a direct financial interest in a commodity 

pool. See § 4.10(c), 46 FR 26004, 26014 (May 8, 

1981). 

49 [Footnote in original] A request will be 

considered to be ‘‘received’’ when it is delivered to 

the address specified in the rule. 

50 46 FR 48915 (Oct. 5, 1981). 

51The Commission intends that regulations 

applicable to the SD and MSP definitions will be 

placed in Subpart A of Part 23, and accordingly is 

proposing to reserve Regulations 23.1 through 23.20 

for that purpose. 

the applicant. Upon withdrawal— 

whether on the part of the applicant or 

upon receipt of notice of deficiency— 

the applicant would be prohibited from 

subsequently engaging in any new 

activity described in Section 1a(33) or 

1a(49) of the CEA. Finally, the 

regulation would make clear that it 

would not affect the terms of any swap 

transaction to which the applicant is a 

party entered into prior to the notice of 

deficiency.42

The same process would apply for 

persons applying for registration as an 

SD or MSP on or after July 21, 2011. 

Filing of Form 7–R would commence 

provisional registration, and would 

subject the applicant to immediate 

compliance with any rulemaking 

affecting it as an SD or MSP, insofar as 

the rulemaking was effective and 

compliance required at the time the 

applicant filed its Form 7–R. As 

additional rulemakings phase in, the 

provisionally registered SD or MSP 

would be required to meet the 

applicable compliance deadlines. 

Failure to do so would result in 

cessation of registration under the terms 

and conditions discussed in the 

preceding paragraph of this Federal 

Register release. 

Swaps entities, like other registrants, 

would be required to review and update 

at least annually the information they 

had provided to NFA in their 

application. Additionally, swaps 

entities would be required to review and 

update at least annually the information 

they had provided to the Commission.43

3. Regulation 3.21—Exemption From 

Fingerprinting Requirement in Certain 

Cases 

Regulation 3.21 generally provides for 

submission of a copy of a fingerprint 

card previously submitted to the Federal 

Bureau of Investigation (‘‘FBI’’), instead 

of a new fingerprint card, and it 

provides for exemption from the 

fingerprint requirement for outside 

directors of a firm who are not directly 

involved in the firm’s activities subject 

to Commission regulation. As is 

currently true with other firms 

registering with the Commission, in lieu 

of submitting a fingerprint card in 

connection with the firm’s registration, 

under the Proposal an outside director 

of an SD or MSP would be able to 

submit a notice stating that the outside 

director is not engaged in soliciting 

business for the firm, handling its 

transactions, keeping its records or 

supervising those who are so engaged.44

4. Regulation 3.31—Deficiencies, 

Inaccuracies and Changes To Be 

Reported 

Regulation 3.31 generally sets forth 

the requirements and responsibility for 

correcting and updating the information 

submitted by applicants for registration 

on Form 7–R and Form 8–R. Each 

applicant for registration or registrant as 

a swaps entity would be required to 

promptly correct any inaccuracy or 

deficiency of the information in a Form 

7–R or Form 8–R it has filed. Each 

principal of a swaps entity would 

likewise be responsible for correcting 

anything that renders the information in 

a Form 8–R filed on behalf of such 

person inaccurate or incomplete. 

5. Regulation 3.33—Withdrawal From 

Registration 

Regulation 3.33 generally sets forth 

the forms, procedures and requirements 

for withdrawal from registration, and 

when such withdrawal becomes 

effective. In order to withdraw from 

registration, under the Proposal the 

Form 7–W that a swaps entity would 

file would specify the nature and extent 

of any swap counterparty actual, 

anticipated or threatened claims against 

the registrant.45 Additionally, an SD’s 

Form 7–W would specify that the 

person will not engage in any new 

activity described in the definition of 

the term ‘‘swap dealer’’ 46 and an MSP’s 

Form 7–W would specify that the 

person will not engage in any new 

activity described in the definition of 

the term ‘‘major swap participant.’’ 47

As the Commission noted in adopting 

Regulation 3.33 (then designated as 

Regulation 1.10f): 

Rule 1.10f provides that a request for 

withdrawal must contain information which 

is intended to inform the Commission of the 

status of the registrant making the 

withdrawal request, to substantiate the 

registrant’s eligibility to withdraw from 

registration, and to enumerate any 

outstanding claims of its customers.48

Withdrawal of a registration under § 1.10f 

will become effective 30 days after receipt by 

the Registration Unit of the Commission’s 

Division of Trading and Markets of a 

properly completed request.49 The purpose 

of the 30 day period is to give the 

Commission time to review the information 

provided by the registrant to determine if 

there is any reason why withdrawal should 

not be allowed. 50

C. New Part 23 

As is stated above, the Commission 

expects that, to the extent practicable, 

various Section 4s Requirements will be 

included in new Part 23. At this 

juncture, by this Federal Register 

release, the Commission is proposing 

that Subpart B of Part 23 include the 

general requirements for the registration 

of SDs and MSPs and their obligations 

with respect to persons associated with 

them.51

1. Proposed Regulation 23.21— 

Registration of Swap Dealers and Major 

Swap Participants 

Proposed Regulation 23.21 has three 

paragraphs. Paragraph (a) states that 

anyone coming within the statutory 

definition of the term ‘‘swap dealer’’ in 

Section 1a(49) of the CEA and the 

Commission’s regulations issued 

thereunder is subject to the registration 

provisions under the CEA, and to Part 

3 of the Commission’s regulations, and 

paragraph (b) states that anyone coming 

within the statutory definition of the 

term ‘‘major swap participant’’ in 

Section 1a(33) of the CEA and the 

Commission’s regulations issued 

thereunder is subject to the registration 

provisions under the CEA, and to Part 

3 of the Commission’s regulations. 

Paragraph (c) deals with Push-Out 

Affiliates, and requires that any PushOut Affiliate that comes within the 

statutory definition of an SD or an MSP 

be registered as an SD or as an MSP, as 

the case may be. As is stated above, this 

requirement would apply to Push-Out 

Affiliates in existence on July 21, 2011, 


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52See Regulation 166.4, which provides in 

pertinent part that ‘‘[e]ach branch office of each 

Commission registrant must use the name of the 

firm of which it is a branch for all purposes, and 

must hold itself out to the public under such name.’’ 

and 48 FR 35248, 35252 (Aug. 3, 1983), in which 

the Commission explained the history of the 

regulation. See also CFTC Staff Letters 84–10, 

Comm. Fut. L. Rep. (CCH) ¶22,252 (May 29, 1984) 

and 84–26, Comm. Fut. L. Rep. (CCH) ¶22,472 (Dec. 

6, 1984), in which Commission staff further 

explained and interpreted this requirement. An 

entity that solicits for a registrant, but that is not 

a branch office of the registrant, must register as an 

IB. 

53As is noted above, NFA is the sole association 

that has applied for and has been issued registration 

as a futures association with the Commission. 

54Application forms for NFA membership are 

incorporated in Form 7–R. 

55Regulation 3.10(a)(3) provides for notice 

registration of an FCM (or IB) in the case of certain 

persons registered as securities brokers or dealers in 

connection with trading security futures products. 

56 5 U.S.C. 601 et seq. 

57 47 FR 18618 (Apr. 30, 1982). 

58 Id. at 18619. 

59 47 FR at 18620. 

60 Id. 

as well as to those that are organized 

and are active subsequent thereto. 

2. Proposed Regulation 23.22— 

Requirements Applicable in the Case of 

an Associated Person of a Swap Dealer 

or Major Swap Participant 

a. The Proposed Regulation 

Proposed Regulation 23.22 

incorporates the statutory prohibition in 

new Section 4s(b)(6) against swaps 

entities permitting persons subject to a 

statutory disqualification to be 

associated with them. For the purposes 

of this regulation, paragraph (a) defines 

the term ‘‘person’’ as a shorthand 

substitute for the statutory term 

‘‘associated person of a swap dealer or 

major swap participant.’’ Paragraph (b) 

restates the statutory prohibition. 

b. Request for Comment 

Associated persons of existing 

Commission registrants (e.g., FCMs, IBs, 

RFEDs, CPOs or CTAs) are required to 

be registered. The term ‘‘associated 

person’’ in the context of existing 

Commission registrants is not defined in 

the CEA. That term is defined in the 

Commission’s regulations. Specifically, 

Regulation 1.3(aa) provides that ‘‘[T]his 

term [i.e., associated person] means any 

natural person who is associated with’’, 

e.g., an FCM, IB, CPO or CTA in any 

capacity that involves solicitation or the 

supervision of any person or persons so 

engaged (emphasis added). ‘‘Associated 

person’’ has typically referred to a 

salesperson of a registrant. Thus, a 

corporation, partnership or other legal 

entity has never been considered an 

associated person. The use of the term 

‘‘natural person’’ in the current 

associated person definition is intended 

to distinguish between the rights and 

responsibilities of persons acting as 

associated persons of a registrant and 

persons acting as IBs.52 However, in the 

absence of any language in the DoddFrank Act restricting associated persons 

of swaps entities to natural persons, the 

Commission is not proposing such a 

definition. The Commission nonetheless 

requests comment on whether it should 

by regulation in fact restrict associated 

persons of swaps entities to natural 

persons. 

The Commission also requests 

comment on implementing the statutory 

prohibition against SDs and MSPs 

permitting persons subject to a statutory 

disqualification to be associated with 

them. Currently, in connection with 

registration applications for associated 

persons of existing registrants, NFA 

conducts a thorough background check 

in order to determine whether an 

individual is subject to statutory 

disqualification. This process includes 

submission of fingerprint cards, which 

are sent to the FBI to determine if the 

applicant has a criminal record. As for 

associated persons of swaps entities, the 

Commission is proposing that the 

responsibility of ensuring that such 

persons are not subject to statutory 

disqualification would fall upon the SD 

or MSP employing them. The 

Commission seeks comment on how 

SDs and MSPs could conduct 

background checks or otherwise fulfill 

this requirement. Possible alternatives 

include voluntary or required 

submission of identification information 

and fingerprint cards to NFA for the 

type of fitness review NFA conducts for 

existing registrants. 

D. New Regulation 170.16 

Part 170 of the Commission’s 

regulations pertains to registered futures 

associations.53 It concerns standards 

governing Commission review of 

applications for registration as a futures 

association, the registration statement 

that a futures association must submit to 

the Commission, and membership in a 

registered futures association.54 With 

respect to the last subject area, 

Regulation 170.15 requires that, with 

the exception of certain ‘‘noticeregistered’’ FCMs,55 each person 

registered as an FCM ‘‘must become and 

remain a member of’’ at least one 

registered futures association that 

provides for FCM membership (unless 

no such registered futures association 

exists). The Commission is proposing 

that, like FCMs, SDs and MSPs be 

required to become and remain 

members of a registered futures 

association. Proposed Regulation 170.16 

would thus closely follow the existing 

requirement for FCMs in Regulation 

170.15. 

III. Related Matters 

A. Regulatory Flexibility Act 

The Regulatory Flexibility Act 

(‘‘RFA’’) 56 requires that agencies 

consider whether the rules they propose 

will have a significant economic impact 

on a substantial number of small entities 

and if so, provide a regulatory flexibility 

analysis respecting the impact. The 

Commission has already established 

certain definitions of ‘‘small entities’’ to 

be used in evaluating the impact of its 

rules on such small entities in 

accordance with the RFA.57 SDs and 

MSPs are new categories of registrant. 

Accordingly, the Commission has not 

previously addressed the question of 

whether such persons are, in fact, small 

entities for purposes of the RFA. 

The Commission previously has 

determined that FCMs should not be 

considered to be small entities for 

purposes of the RFA. The Commission’s 

determination was based in part upon 

their obligation to meet the minimum 

financial requirements established by 

the Commission to enhance the 

protection of customers’ segregated 

funds and protect the financial 

condition of FCMs generally.58 Like 

FCMs, SDs will be subject to minimum 

capital and margin requirements, and 

are expected to comprise the largest 

global financial firms. The Commission 

is required to exempt from designation 

entities that engage in a de minimis 

level of swaps dealing in connection 

with transactions with or on behalf of 

customers. Accordingly, for purposes of 

the RFA for this and future rulemakings, 

the Commission is hereby proposing 

that SDs not be considered ‘‘small 

entities’’ for essentially the same reasons 

that FCMs have previously been 

determined not to be small entities. 

The Commission has also previously 

determined that large traders are not 

‘‘small entities’’ for RFA purposes.59 The 

Commission considered the size of a 

trader’s position to be the only 

appropriate test for purposes of large 

trader reporting.60 MSPs maintain 

substantial positions in swaps, creating 

substantial counterparty exposure that 

could have serious adverse effects on 

the financial stability of the United 

States banking system or financial 

markets. Accordingly, for purposes of 

the RFA for this and future rulemakings, 

the Commission is hereby proposing 


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61 44 U.S.C. 3501 et seq. 

62 5 U.S.C. 552a. 63 7 U.S.C. 19(a). 

that MSPs not be considered ‘‘small 

entities’’ for essentially the same reasons 

that large traders have previously been 

determined not to be small entities. 

The Commission is carrying out 

Congressional mandates by proposing 

these rules. The Commission is 

incorporating registration of SDs and 

MSPs into the existing registration 

structure applicable to other registrants. 

In so doing, the Commission has 

attempted to accomplish registration of 

SDs and MSPs in the manner that is 

least disruptive to ongoing business and 

most efficient and expeditious, 

consistent with the public interest, and 

accordingly believes that these 

registration rules will not present a 

significant economic burden on any 

entity subject thereto. Accordingly, the 

Chairman, on behalf of the Commission, 

hereby certifies pursuant to 5 U.S.C. 

605(b) that the proposed rules will not 

have a significant economic impact on 

a substantial number of small entities. 

B. Paperwork Reduction Act 

The Paperwork Reduction Act of 1995 

(PRA) 61 imposes certain requirements 

on Federal agencies (including the 

Commission) in connection with their 

conducting or sponsoring any collection 

of information as defined by the PRA. 

This proposed rulemaking would result 

in new collection of information 

requirements within the meaning of the 

PRA. The Commission therefore is 

submitting this proposal to the Office of 

Management and Budget (OMB) for 

review. If adopted, responses to this 

collection of information would be 

mandatory. The Commission will 

protect proprietary information 

according to the Freedom of Information 

Act and 17 CFR Part 145, ‘‘Commission 

Records and Information.’’ In addition, 

Section 8(a)(1) of the CEA strictly 

prohibits the Commission, unless 

specifically authorized by the CEA, from 

making public ‘‘data and information 

that would separately disclose the 

business transactions or market 

positions of any person and trade 

secrets or names of customers.’’ The 

Commission is also required to protect 

certain information contained in a 

government system of records according 

to the Privacy Act of 1974.62

An agency may not conduct or 

sponsor, and a person is not required to 

respond to, a collection of information 

unless it displays a currently valid 

control number. OMB has not yet 

assigned a control number to the new 

collection. 

1. Information Provided/by Reporting 

Entities/Persons 

The burden associated with the 

proposed new rules implementing 

registration of SDs and MSPs is 

estimated to be 752 hours, which will 

result from (1) application for 

registration by SDs and MSPs and 

submission of required information on 

behalf of their respective principals; 

(2) initially, no withdrawals from 

registration by SDs or MSPs and a 

relatively small decrease in the number 

of their respective principals; and 

(3) initially, no reported corrections. 

Burden means the total time, effort, or 

financial resources expended by persons 

to generate, maintain, retain, disclose or 

provide information to or for a federal 

agency. 

The respondent burden for this 

collection is estimated to average 0.5 

hours per response for the Form 7–R; 

0.4 hours per response for the Form 

8–R; 3 minutes per response for the 

Form 7–W; 6 minutes per response for 

the Form 8–T; and 3 minutes per 

response for the Form 3–R. These 

estimates include the time needed to 

review instructions; develop, acquire, 

install, and utilize technology and 

systems for the purposes of collecting, 

validating, and verifying information, 

processing and maintaining information 

and disclosing and providing 

information; adjust the existing ways to 

comply with any previously applicable 

instructions and requirements; train 

personnel to be able to respond to a 

collection of information; and transmit 

or otherwise disclose the information. 

While staff believes that there may 

likely be approximately 200 swap 

dealers, we have taken a conservative 

approach in estimating that there will be 

250 SDs for PRA purposes. The 

estimated burden was thus calculated as 

follows: 

Form 7–R 

Respondents/Affected Entities: 300. 

Estimated number of responses: 300. 

Estimated total annual burden on 

respondents: 0.5 hours. 

Frequency of collection: On occasion 

and annually. 

Burden statement: 300 respondents × 

0.5 hours = 150 Burden Hours. 

Form 8–R 

Respondents/Affected Entities: 5 

principals per each of 300 SDs and 

MSPs. 

Estimated number of responses: 

1,500. 

Estimated total annual burden on 

respondents: 0.4 hours. 

Frequency of collection: On occasion. 

Burden statement: 1,500 respondents 

× 0.4 hours = 600 Burden Hours. 

Form 8–T 

Respondents/Affected Entities: 1 

principal per each of 20 SDs and MSPs. 

Estimated number of responses: 20. 

Estimated total annual burden on 

respondents: 6 minutes. 

Frequency of collection: On occasion. 

Burden statement: 20 respondents × 

0.1 hours = 2 Burden Hours. 

2. Information Collection Comments 

The Commission invites the public 

and other Federal agencies to comment 

on any aspect of the reporting and 

recordkeeping burdens discussed above. 

Pursuant to 44 U.S.C. 3506(c)(2)(B), the 

Commission solicits comments in order 

to: (1) Evaluate whether the proposed 

collection of information is necessary 

for the proper performance of the 

functions of the Commission, including 

whether the information will have 

practical utility; (2) evaluate the 

accuracy of the Commission’s estimate 

of the burden of the proposed collection 

of information; (3) determine whether 

there are ways to enhance the quality, 

utility, and clarity of the information to 

be collected; and (4) minimize the 

burden of the collection of information 

on those who are to respond, including 

through the use of automated collection 

techniques or other forms of information 

technology. 

Comments may be submitted directly 

to the Office of Information and 

Regulatory Affairs, by fax at (202) 395– 

6566 or by e-mail at 

OIRAsubmissions@omb.eop.gov. Please 

provide the Commission with a copy of 

submitted comments so that all 

comments can be summarized and 

addressed in the final rule preamble. 

Refer to the ADDRESSES section of this 

notice of proposed rulemaking for 

comment submission instructions to the 

Commission. A copy of the supporting 

statements for the collections of 

information discussed above may be 

obtained by visiting RegInfo.gov. OMB 

is required to make a decision 

concerning the collection of information 

between 30 and 60 days after 

publication of this document in the 

Federal Register. Therefore, a comment 

is best assured of having its full effect 

if OMB receives it within 30 days of 

publication. 

C. Cost-Benefit Analysis 

Section 15(a) of the CEA 63 requires 

the Commission to consider the costs 

and benefits of its action before issuing 

a rulemaking under the CEA. By its 

terms, Section 15(a) does not require the 

Commission to quantify the costs and 

benefits of a rule or to determine 


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whether the benefits of the rulemaking 

outweigh its costs; rather, it simply 

requires that the Commission ‘‘consider’’ 

the costs and benefits of its actions. 

Section 15(a) further specifies that the 

costs and benefits shall be evaluated in 

light of five broad areas of market and 

public concern: (1) Protection of market 

participants and the public; (2) 

efficiency, competitiveness and 

financial integrity of futures markets; (3) 

price discovery; (4) sound risk 

management practices; and (5) other 

public interest considerations. The 

Commission may in its discretion give 

greater weight to any one of the five 

enumerated areas and could in its 

discretion determine that, 

notwithstanding its costs, a particular 

rule is necessary or appropriate to 

protect the public interest or to 

effectuate any of the provisions or 

accomplish any of the purposes of the 

CEA. 

Summary of Proposed Requirements. 

The proposed rules would create a 

process to implement the registration 

requirements for swaps entities under 

the CEA pursuant to the Dodd-Frank 

Act generally through amendments to 

the existing regulatory framework. 

Costs. With respect to costs, the 

Commission has determined that the 

costs of the new registration 

requirements imposed on SDs and MSPs 

will consist primarily of the fees that 

NFA will charge: (1) For application for 

registration of SDs and MSPs, which are 

expected to be $500 per application; (2) 

to process fingerprints and background 

information for principals, which are 

expected to be $85 per person; and (3) 

for NFA membership, which are 

expected to be $7,500 for an SD and 

$5,600 for an MSP annually. Time and 

expense to registrants relating to the 

registration process alone are expected 

to be relatively minimal as the forms are 

not complicated. Time and expense 

relating to the new registration 

requirements are therefore not expected 

to be a barrier to entry of registrants or 

to adversely affect the liquidity of any 

markets. 

For purposes of this rulemaking, the 

costs of the new registration 

requirements do not include costs to 

registrants resulting from any need to 

create or augment an internal 

compliance and reporting infrastructure 

as a result of the Section 4s 

Requirements that are being addressed 

by other Commission rulemakings. The 

Commission therefore views the costs of 

the new registration requirements to be 

insubstantial when viewed in the 

context of the broader purpose of 

Congress to promote systemic safety for 

the financial markets as embodied in the 

Dodd-Frank Act. 

Benefits. With respect to benefits, the 

Commission has determined that the 

benefits of registering swaps entities are 

significant. Registration will enable the 

Commission to identify the universe of 

SDs and MSPs, which will enable these 

entities to be monitored for compliance 

with the Dodd-Frank Act and the rules 

being implemented by the Commission 

thereunder. This will enable the 

protection of market participants and 

the public, promote efficiency and 

transparency of markets, promote sound 

risk management practices and promote 

the public interest, as described in the 

rules being proposed by the 

Commission implementing the 

substantive provisions of the DoddFrank Act. Similarly, the Commission 

has determined that the benefits of 

requiring swaps entities to become and 

remain members of a registered futures 

association are significant. Membership 

will provide the Commission with 

flexibility with regard to its oversight of 

compliance with the Dodd-Frank Act 

and Commission regulations. 

Public Comment. The Commission 

invites public comment on its costbenefit considerations. Commenters are 

also invited to submit any data or other 

information that they may have 

quantifying or qualifying the costs and 

benefits of the Proposal with their 

comment letters. 

List of Subjects 

17 CFR Part 3 

Definitions, Customer protection, 

Licensing, Registration, Swaps. 

17 CFR Part 23 

Swaps, Swap dealers, Major swap 

participants, Registration. 

17 CFR Part 170 

Authority delegations (Government 

agencies), Commodity futures, Swaps, 

Reporting and recordkeeping 

requirements. 

For the reasons presented above, the 

Commission proposes to amend Chapter 

I of Title 17 of the Code of Federal 

Regulations as follows: 

PART 3—REGISTRATION 

1. The authority citation for part 3 is 

amended to read as follows: 

Authority: 7 U.S.C. 1a, 2, 6, 6a, 6b, 6c, 6d, 

6e, 6f, 6g, 6h, 6i, 6k, 6m, 6n, 6o, 6p, 6s, 8, 

9, 9a, 12, 12a, 13b, 13c, 16a, 18, 19, 21, and 

23, as amended by Title VII of the DoddFrank Wall Street Reform and Consumer 

Protection Act, Pub. L. No. 111–203, 124 Stat. 

1376 (Jul. 21, 2010). 

2. Section 3.2 is amended by adding 

paragraph (c)(3) to read as follows: 

§ 3.2 Registration processing by the 

National Futures Association; notification 

and duration of registration. 

* * * * * 

(c) * * * 

(3) Upon filing of an application for 

registration pursuant to § 3.10(a)(1)(v) of 

this part by a swap dealer or major swap 

participant the National Futures 

Association shall notify the swap dealer 

or major swap participant that it is 

provisionally registered pending 

completion of a fitness review by the 

National Futures Association. 

* * * * * 

3. Section 3.4 is amended by revising 

paragraph (a) to read as follows: 

§ 3.4 Registration in one capacity not 

included in registration in any other 

capacity. 

(a) Except as may be otherwise 

provided in the Act or in any rule, 

regulation, or order of the Commission, 

each futures commission merchant, 

retail foreign exchange dealer, swap 

dealer, major swap participant, floor 

broker, floor trader, associated person 

(other than an associated person of a 

swap dealer or major swap participant), 

commodity trading advisor, commodity 

pool operator, introducing broker, and 

leverage transaction merchant must 

register as such under the Act. 

Registration in one capacity under the 

Act shall not include registration in any 

other capacity; Provided, however, That 

a registered floor broker need not also 

register as a floor trader in order to 

engage in activity as a floor trader. 

* * * * * 

4. Section 3.10 is amended by: 

a. Revising the heading; 

b. Revising paragraph (a)(1); 

c. Adding paragraph (a)(1)(v); and 

d. Revising paragraphs (b) and (d) to 

read as follows: 

§ 3.10 Registration of futures commission 

merchants, retail foreign exchange dealers, 

introducing brokers, commodity trading 

advisors, commodity pool operators, swap 

dealers, major swap participants and 

leverage transaction merchants. 

(a) * * * 

(1)(i) Except as provided in paragraph 

(a)(3) of this section, application for 

registration as a futures commission 

merchant, retail foreign exchange 

dealers, introducing broker, commodity 

trading advisor, commodity pool 

operator, swap dealer, major swap 

participant or leverage transaction 

merchant must be on Form 7–R, 

completed and filed with the National 

Futures Association in accordance with 

the instructions thereto. 

(ii) Applicants for registration as a 

futures commission merchant or 


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introducing broker must accompany 

their Form 7–R with a Form 1–FR–FCM 

or Form 1–FR–IB, respectively, in 

accordance with the provisions of § 1.10 

of this chapter: Provided, however, That 

an applicant for registration as a futures 

commission merchant or introducing 

broker which is registered with the 

Securities and Exchange Commission as 

a securities broker or dealer may 

accompany its Form 7–R with a copy of 

its Financial and Operational Combined 

Uniform Single Report under the 

Securities Exchange Act of 1934, Part II 

or Part II A, in accordance with the 

provisions of § 1.10(h) of this chapter. 

(iii) Applicants for registration as a 

commodity pool operator must 

accompany their Form 7–R with the 

financial statements described in 

§ 4.13(c) of this chapter. 

(iv) Applicants for registration as a 

leverage transaction merchant must 

accompany their Form 7–R with a Form 

2–FR in accordance with the provisions 

of § 2–FR of this chapter. 

(v)(A) Applicants for registration as a 

swap dealer or major swap participant 

must demonstrate, concurrently with or 

subsequent to the filing of their Form 

7–R with the National Futures 

Association, compliance with 

regulations adopted by the Commission 

pursuant to sections 4s(e), 4s(f), 4s(g), 

4s(h), 4s(i), 4s(j) and 4s(k) of the Act, 

and, as applicable, section 4s(l) of the 

Act; Provided, however, that for the 

purposes of this paragraph (a)(1)(v) the 

term ‘‘compliance’’ includes the term 

‘‘the ability to comply,’’ to the extent that 

a particular regulation may require 

demonstration of the ability to comply 

with a requirement. 

(B) The filing of the Form 7–R by the 

applicant swap dealer or major swap 

participant authorizes the Commission 

to conduct on-site inspection of the 

applicant to determine compliance with 

the regulations referred to in paragraph 

(a)(1)(v)(A) of this section. 

(C)(1) Any person may apply to be 

registered as a swap dealer or major 

swap participant by filing a form 7–R at 

any time from April 15, 2011 until such 

time as regulations adopted by the 

Commission further defining the terms 

‘‘swap dealer’’ and ‘‘major swap 

participant’’ become effective. 

(2) From and after such time as 

regulations adopted by the Commission 

further defining the terms ‘‘swap dealer’’ 

and ‘‘major swap participant’’ become 

effective, each swap dealer or major 

swap participant must apply to be 

registered as a swap dealer or major 

swap participant by filing a form 7–R. 

(3) Any person who applies to be 

registered as a swap dealer or major 

swap participant before such time as all 

of the regulations specified in paragraph 

(a)(1)(v)(A) of this section have become 

effective will be granted provisional 

registration as a swap dealer or major 

swap participant, as the case may be, 

upon filing a Form 7–R and such 

documentation as may be required to 

demonstrate compliance with such of 

the regulations specified in paragraph 

(a)(1)(v)(A) of this section as are 

effective as of the date of such filing; 

Provided, however, that: Where the 

applicant has been granted provisional 

registration as a swap dealer or major 

swap participant, it must provide such 

documentation as may be required to 

demonstrate compliance with the 

remaining regulations specified in 

paragraph (a)(1)(v)(A) of this section by 

no later than the respective effective 

date of each such regulation. 

(D)(1) Where an applicant for 

registration as a swap dealer or major 

swap participant that has been granted 

provisional registration has timely 

demonstrated compliance with the 

regulations specified in paragraph 

(a)(1)(v)(A) of this section in accordance 

with paragraph (a)(1)(v)(C) of this 

section, the applicant will be notified 

that its provisional registration has 

ceased to be provisional and it has 

become fully registered as a swap dealer 

or major swap participant. 

(2) Where an applicant for registration 

as a swap dealer or major swap 

participant that has been granted 

provisional registration has failed to 

timely demonstrate compliance with 

any of the regulations specified in 

paragraph (a)(1)(v)(A) of this section in 

accordance with paragraph (a)(1)(v)(C) 

of this section the applicant will be 

notified that its application is deficient, 

whereupon it must withdraw its 

registration application, it must not 

engage in any new activity described in 

the definition of ‘‘swap dealer’’ in 

section 1a(49) of the Act or the 

definition of ‘‘major swap participant’’ in 

section 1a(33) of the Act as such terms 

may be further defined by Commission 

regulations, and its provisional 

registration shall cease; Provided, 

however, that in the event the applicant 

fails to withdraw its registration 

application or cure the deficiency 

within 30 days following receipt of 

notice that its application is deficient, 

its application will be deemed 

withdrawn and thereupon its 

registration shall cease; Provided 

further, however, that upon written 

request by the applicant submitted to 

the Director of the Division of Clearing 

and Intermediary Oversight, the 

Commission may in its discretion 

extend the time within which the 

deficiency may be cured. 

(3) Unless specifically reserved in the 

applicable swap, no withdrawal, 

deemed withdrawal, cessation or 

revocation of registration as a swap 

dealer or major swap participant 

pursuant to paragraph (a)(1)(v)(D)(2) of 

this section or paragraph (b) of this 

section shall constitute a termination 

event, force majeure, an illegality, 

increased costs, a regulatory change, or 

a similar event under a swap (including 

any related credit support arrangement) 

that would permit a party to terminate, 

renegotiate, modify, amend or 

supplement one or more transactions 

under the swap. 

* * * * * 

(b) Duration of registration. (1) A 

person registered as a futures 

commission merchant, retail foreign 

exchange dealer, introducing broker, 

commodity trading advisor, commodity 

pool operator, swap dealer, major swap 

participant or leverage transaction 

merchant in accordance with paragraph 

(a) of this section will continue to be so 

registered until the effective date of any 

revocation or withdrawal of such 

registration. Such person will 

immediately be prohibited from 

engaging in new activities requiring 

registration under the Act or from 

representing himself to be a registrant 

under the Act or the representative or 

agent of any registrant during the 

pendency of any suspension of such 

registration. 

* * * * * 

(d) On a date to be established by the 

National Futures Association, and in 

accordance with procedures established 

by the National Futures Association, 

each registrant as a futures commission 

merchant, retail foreign exchange 

dealer, introducing broker, commodity 

trading advisor, commodity pool 

operator, swap dealer, major swap 

participant or leverage transaction 

merchant shall, on an annual basis, 

review and update registration 

information maintained with the 

National Futures Association and 

additionally, in the case of a swap 

dealer or major swap participant, with 

the Commission. The failure to 

complete the review and update within 

thirty days following the date 

established by the National Futures 

Association shall be deemed to be a 

request for withdrawal from registration, 

which shall be processed in accordance 

with the provisions of § 3.33(f). 

5. Section 3.21 is amended by: 

a. Revising paragraph (c) introductory 

text; and paragraph (c)(1)(iv); 

b. Adding paragraph (c)(1)(v); 

c. Revising paragraph (c)(2)(i); and 


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d. Revising paragraph (c)(4)(i) to read 

as follows: 

§ 3.21 Exemption from fingerprinting 

requirement in certain cases. 

* * * * * 

(c) Outside directors. Any futures 

commission merchant, retail foreign 

exchange dealer, introducing broker, 

commodity trading advisor, commodity 

pool operator, swap dealer, major swap 

participant or leverage transaction 

merchant that has a principal who is a 

director but is not also an officer or 

employee of the firm may, in lieu of 

submitting a fingerprint card in 

accordance with the provisions of 

§§ 3.10(a)(2) and 3.31(a)(2), file a 

‘‘Notice Pursuant to § 3.12(c) of the 

Commission’s Regulations’’ with the 

National Futures Association. Such 

notice shall state, if true, that such 

outside director: 

(1) * * * 

(iv) The solicitation of leverage 

customers’ orders for leverage 

transactions, 

(v) The solicitation of a swap 

agreement; 

(2) * * * 

(i) Commodity interest or swap 

transactions; 

* * * * * 

(4) * * * 

(i) The name of the futures 

commission merchant, retail foreign 

exchange dealer, swap dealer, major 

swap participant, introducing broker, 

commodity trading advisor, commodity 

pool operator, leverage transaction 

merchant, or applicant for registration 

in any of these capacities of which the 

person is an outside director; 

* * * * * 

6. Section 3.30 is amended by revising 

paragraph (a) to read as follows: 

§ 3.30 Current address for purpose of 

delivery of communications from the 

Commission or the National Futures 

Association. 

(a) The address of each registrant, 

applicant for registration, and principal, 

as submitted on the application for 

registration (Form 7–R or Form 8–R) or 

as submitted on the biographical 

supplement (Form 8–R) shall be deemed 

to be the address for delivery to the 

registrant, applicant or principal for any 

communications from the Commission 

or the National Futures Association, 

including any summons, complaint, 

reparation claim, order, subpoena, 

special call, request for information, 

notice, and other written documents or 

correspondence, unless the registrant, 

applicant or principal specifies another 

address for this purpose: Provided, that 

the Commission or the National Futures 

Association may address any 

correspondence relating to a 

biographical supplement submitted for 

or on behalf of a principal to the futures 

commission merchant, retail foreign 

exchange dealer, commodity trading 

advisor, commodity pool operator, swap 

dealer, major swap participant, 

introducing broker, or leverage 

transaction merchant with which the 

principal is affiliated and may address 

any correspondence relating to an 

associated person to the futures 

commission merchant, retail foreign 

exchange dealer, commodity trading 

advisor, commodity pool operator, swap 

dealer, major swap participant, 

introducing broker, or leverage 

transaction merchant with which the 

associated person or the applicant for 

registration is or will be associated as an 

associated person. 

* * * * * 

7. Section 3.31 is amended by revising 

paragraphs (a)(1), (b) and (c)(2) to read 

as follows: 

§ 3.31 Deficiencies, inaccuracies, and 

changes, to be reported. 

(a)(1) Each applicant or registrant as a 

futures commission merchant, retail 

foreign exchange dealer, swap dealer, 

major swap participant, commodity 

trading advisor, commodity pool 

operator, introducing broker, or leverage 

transaction merchant shall, in 

accordance with the instructions 

thereto, promptly correct any deficiency 

or inaccuracy in Form 7–R or Form 8– 

R which no longer renders accurate and 

current the information contained 

therein. Each such correction shall be 

made on Form 3–R and shall be 

prepared and filed in accordance with 

the instructions thereto. Provided, 

however, that where a registrant is 

reporting a change in the form of 

organization from or to a sole 

proprietorship, the registrant must file a 

Form 7–W regarding the pre-existing 

organization and a Form 7–R regarding 

the newly formed organization. 

* * * * * 

(b)(1) Each applicant for registration 

or registrant as a floor broker, floor 

trader or associated person, and each 

principal of a futures commission 

merchant, retail foreign exchange 

dealer, commodity trading advisor, 

commodity pool operator, introducing 

broker, or leverage transaction merchant 

must, in accordance with the 

instructions thereto, promptly correct 

any deficiency or inaccuracy in the 

Form 8–R or supplemental statement 

thereto which renders no longer 

accurate and current the information 

contained in the Form 8–R or 

supplemental statement. Each such 

correction must be made on Form 3–R 

and must be prepared and filed in 

accordance with the instructions 

thereto. 

(2) Each applicant for registration or 

registrant as a swap dealer or major 

swap participant and each principal of 

a swap dealer or major swap participant, 

must, in accordance with the 

instructions thereto, promptly correct 

any deficiency or inaccuracy in the 

Form 8–R or supplemental statement 

thereto which renders no longer 

accurate and current the information 

contained in the Form 8–R or 

supplemental statement. Each such 

correction must be made on Form 3–R 

and must be prepared and filed in 

accordance with the instructions 

thereto. 

(c) * * * 

(2) Each person registered as, or 

applying for registration as, a futures 

commission merchant, retail foreign 

exchange dealer, commodity trading 

advisor, commodity pool operator, swap 

dealer, major swap participant, 

introducing broker or leverage 

transaction merchant must, within 

thirty days after the termination of the 

affiliation of a principal with the 

registrant or applicant, file a notice 

thereof with the National Futures 

Association. 

* * * * * 

8. Section 3.33 is amended by: 

a. Revising paragraph (a) introductory 

text; 

b. Revising paragraph (b) introductory 

text and paragraphs (b)(6)(vi) through 

(b)(6)(vii); 

c. Adding paragraphs (b)(6)(viii) and 

(b)(6)(ix); and 

d. Revising paragraph (e) to read as 

follows: 

§ 3.33 Withdrawal from registration. 

(a) A futures commission merchant, 

retail foreign exchange dealer, 

introducing broker, commodity trading 

advisor, commodity pool operator, swap 

dealer, major swap participant, leverage 

transaction merchant, floor broker or 

floor trader may request that its 

registration be withdrawn in accordance 

with the requirements of this section if: 

* * * * * 

(b) A request for withdrawal from 

registration as a futures commission 

merchant, retail foreign exchange 

dealer, introducing broker, commodity 

trading advisor, commodity pool 

operator, swap dealer, major swap 

participant, or leverage transaction 

merchant must be made on Form 7–W, 

and a request for withdrawal from 

registration as a floor broker or floor 

trader must be made on Form 8–W, 


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completed and filed with National 

Futures Association in accordance with 

the instructions thereto. The request for 

withdrawal must be made by a person 

duly authorized by the registrant and 

must specify: 

(6) * * * 

(vi) The nature and extent of any 

pending customer, retail forex customer, 

option customer, leverage customer, 

swap counterparty or commodity pool 

participant claims against the registrant, 

and, to the best of the registrant’s 

knowledge and belief, the nature and 

extent of any anticipated or threatened 

customer, option customer, leverage 

customer, swap counterparty or 

commodity pool participant claims 

against the registrant; 

(vii) In the case of a futures 

commission merchant or a retail foreign 

exchange dealer which is a party to a 

guarantee agreement, that all such 

agreements have been or will be 

terminated in accordance with the 

provisions of § 1.10(j) of this chapter not 

more than thirty days after the filing of 

the request for withdrawal from 

registration; 

(viii) In the case of a swap dealer, that 

the person will not engage in any new 

activity described in the definition of 

the term ‘‘swap dealer’’ in section 1a(49) 

of the Act, as such term may be further 

defined by Commission regulations; and 

(ix) In the case of a major swap 

participant, that the person will not 

engage in any new activity described in 

the definition of the term ‘‘major swap 

participant’’ in section 1a(33) of the Act, 

as such term may be further defined by 

Commission regulations. 

* * * * * 

(e) A request for withdrawal from 

registration as a futures commission 

merchant, retail foreign exchange 

dealer, introducing broker, commodity 

trading advisor, commodity pool 

operator, swap dealer, major swap 

participant or leverage transaction 

merchant on Form 7–W, and a request 

for withdrawal from registration as a 

floor broker or floor trader on Form 

8–W, must be filed with the National 

Futures Association and a copy of such 

request must be sent by the National 

Futures Association within three 

business days of the receipt of such 

withdrawal request to the Commodity 

Futures Trading Commission, Division 

of Clearing and Intermediary Oversight, 

Three Lafayette Centre, 1155 21st Street, 

NW., Washington, DC 20581. In 

addition, any floor broker or floor trader 

requesting withdrawal from registration 

must file a copy of his Form 8–W with 

each contract market that has granted 

him trading privileges. Within three 

business days of any determination by 

the National Futures Association under 

§ 3.10(d) to treat the failure by a 

registrant to file an annual Form 7–R as 

a request for withdrawal, the National 

Futures Association shall send the 

Commission notice of that 

determination. 

* * * * * 

9. Part 23 is added to read as follows: 

PART 23—SWAP DEALERS AND 

MAJOR SWAP PARTICIPANTS 

Subpart A—[Reserved] 

Sec. 

23.1–23.20 [Reserved] 

Subpart B—Registration 

23.21 Registration of swap dealers and 

major swap participants. 

23.22 Prohibition against statutory 

disqualification in the case of an 

associated person of a swap dealer or 

major swap participant. 

23.23–23.40 [Reserved] 

Authority: 7 U.S.C. 1a, 2, 6, 6a, 6b, 6c, 6p, 

6s, 9, 9a, 13b, 13c, 16a, 18, 19, 21 as amended 

by Title VII of the Dodd-Frank Wall Street 

Reform and Consumer Protection Act, Pub. L. 

No. 111–203, 124 Stat. 1376 (Jul. 21, 2010). 

Subpart A—[Reserved] 

§§ 23.1–23.20 [Reserved] 

Subpart B—Registration 

§ 23.21 Registration of swap dealers and 

major swap participants. 

(a) Each person who comes within the 

definition of the term ‘‘swap dealer’’ in 

section 1a(49) of the Act, as such term 

may be further defined by Commission 

regulations, is subject to the registration 

provisions under the Act and to part 3 

of this chapter. 

(b) Each person who comes within the 

definition of the term ‘‘major swap 

participant’’ in section 1a(33) of the Act, 

as such term may be further defined by 

Commission regulations, is subject to 

the registration provisions under the Act 

and to part 3 of this chapter. 

(c) Each affiliate of an insured 

depository institution described in 

section 716(c) of the Dodd-Frank Wall 

Street Reform and Consumer Protection 

Act (Pub. L. 111–203 § 716(c), 124 Stat. 

1376 (2010)) is required to be registered 

as a swap dealer if the affiliate is a swap 

dealer, or as a major swap participant if 

the affiliate is a major swap participant. 

§ 23.22 Prohibition against statutory 

disqualification in the case of an associated 

person of a swap dealer or major swap 

participant. 

(a) Definition. For purposes of this 

section, the term ‘‘person’’ means an 

‘‘associated person of a swap dealer or 

major swap participant’’ as defined in 

section 1a(4) of the Act. 

(b) Fitness. No swap dealer or major 

swap participant may permit a person 

who is subject to a statutory 

disqualification under section 8a(2) or 

8a(3) of the Act to effect or be involved 

in effecting swaps on behalf of the swap 

dealer or major swap participant, if the 

swap dealer or major swap participant 

knows, or in the exercise of reasonable 

care should know, of the statutory 

disqualification. 

§§ 23.23–23.40 [Reserved] 

PART 170—REGISTERED FUTURES 

ASSOCIATIONS 

1. The authority citation for part 170 

is revised to read as follows: 

Authority: 7 U.S.C. 6p, 12a and 21. 

2. Section 170.16 is added to read as 

follows: 

§ 170.16 Swap dealers and major swap 

participants. 

Each person registered as a swap 

dealer or a major swap participant must 

become and remain a member of at least 

one futures association that is registered 

under section 17 of the Act and that 

provides for the membership therein of 

such swap dealer or major swap 

participant, as the case may be, unless 

no such futures association is so 

registered. 

Issued in Washington, DC, on November 

10, 2010, by the Commission. 

David A. Stawick, 

Secretary of the Commission. 

Statement of Chairman Gary Gensler 

Registration of Swap Dealers and Major 

Swap Participants 

I support the proposed rulemaking to 

establish a process for the registration of 

swap dealers and major swap participants. 

This proposal would implement Congress’s 

mandate that these entities be subject to 

registration and regulation for their swaps 

business. Registration will enable the 

Commission to monitor swap dealers and 

major swap participants for compliance with 

the Dodd-Frank Act and Commission 

rulemakings. Through regulation of the 

dealers, the Commission will be able to 

protect market participants and the public 

and promote sound risk management 

practices. The proposal includes a 

requirement that swaps dealers and major 

swap participants register with a registered 

futures association, such as the National 

Futures Association. This would provide the 

Commission with flexibility with regard to its 

oversight of swap dealers and major swap 

participants for compliance with the DoddFrank Act. 

[FR Doc. 2010–29024 Filed 11–22–10; 8:45 am] 

BILLING CODE 6351–01–P 


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