Federal Register / Vol. 75, No. 225 / Tuesday, November 23, 2010 / Proposed Rules 71397 

third-party research report’’ shall mean 

a research report, in respect of which 

the person or entity producing the 

report: 

(1) Has no affiliation or business or 

contractual relationship with the 

distributing swap dealer or major swap 

participant, or that swap dealer’s or 

major swap participant’s affiliates, that 

is reasonably likely to inform the 

content of its research reports; and 

(2) makes content determinations 

without any input from the distributing 

swap dealer or major swap participant 

or that swap dealer’s or major swap 

participant’s affiliates. 

(B) Subject to paragraph (c)(5)(iv)(C) 

of this section, if a swap dealer or major 

swap participant distributes or makes 

available any independent third-party 

research report, the swap dealer or 

major swap participant must accompany 

the research report with, or provide a 

Web address that directs the recipient 

to, the current applicable disclosures, as 

they pertain to the swap dealer or major 

swap participant, required by this 

section. Each swap dealer and major 

swap participant must establish written 

policies and procedures reasonably 

designed to ensure the completeness 

and accuracy of all applicable 

disclosures. 

(C) The requirements of paragraph 

(c)(5)(iv)(B) of this section shall not 

apply to independent third-party 

research reports made available by a 

swap dealer or major swap participant 

to its customers: 

(1) Upon request; or 

(2) through a Web site maintained by 

the swap dealer or major swap 

participant. 

(6) Prohibition of Retaliation Against 

Research Analysts. No swap dealer or 

major swap participant, and no 

employee of a swap dealer or major 

swap participant who is involved with 

the swap dealer’s or major swap 

participant’s pricing, trading or clearing 

activities, may, directly or indirectly, 

retaliate against or threaten to retaliate 

against any research analyst employed 

by the swap dealer or major swap 

participant or its affiliates as a result of 

an adverse, negative, or otherwise 

unfavorable research report or public 

appearance written or made, in good 

faith, by the research analyst that may 

adversely affect the swap dealer’s or 

major swap participant’s present or 

prospective pricing, trading or clearing 

activities. 

(d) Clearing activities. (1) No swap 

dealer or major swap participant shall 

directly or indirectly interfere with or 

attempt to influence the decision of any 

affiliated clearing member of a 

derivatives clearing organization with 

regard to the provision of clearing 

services and activities, including but not 

limited to: 

(i) Whether to offer clearing services 

and activities to customers; 

(ii) Whether to accept a particular 

customer for the purposes of clearing 

derivatives; 

(iii) Whether to submit a transaction 

to a particular derivatives clearing 

organization; 

(iv) Setting risk tolerance levels for 

particular customers; 

(v) Determining acceptable forms of 

collateral from particular customers; or 

(vi) Setting fees for clearing services. 

(2) Each swap dealer and major swap 

participant shall create and maintain an 

appropriate informational partition, as 

specified in section 4s(j)(5)(A) of the 

Act, between business trading units of 

the swap dealer or major swap 

participant and clearing member 

personnel of any affiliated clearing 

member of a derivatives clearing 

organization. At a minimum, such 

informational partitions shall require 

that no employee of a business trading 

unit of a swap dealer or major swap 

participant shall supervise, control, or 

influence any employee of a clearing 

member of a derivatives clearing 

organization. 

(e) Undue Influence on 

Counterparties. Each swap dealer and 

major swap participant must adopt and 

implement written policies and 

procedures that mandate the disclosure 

to its counterparties of any material 

incentives and any material conflicts of 

interest regarding the decision of a 

counterparty: 

(1) Whether to execute a derivative on 

a swap execution facility or designated 

contract market, or 

(2) Whether to clear a derivative 

through a derivatives clearing 

organization. 

(f) All records that a swap dealer or 

major swap participant is required to 

maintain pursuant to this regulation 

shall be maintained in accordance with 

17 CFR 1.31 and shall be made available 

promptly upon request to 

representatives of the Commission and 

to representatives of the applicable 

prudential regulator, as defined in 

7 U.S.C. 1a(39). 

Issued in Washington, DC, on November 

10, 2010, by the Commission. 

David A. Stawick, 

Secretary of the Commission. 

Statement of Chairman Gary Gensler 

Implementation of Conflicts of Interest 

Policies and Procedures by Swap Dealers 

and Major Swap Participants 

I support the proposed rulemakings that 

establish firewalls to ensure a separation 

between the research arm, the trading arm 

and the clearing activities of swap dealers, 

major swap participants, futures commission 

merchants and introducing brokers. This rule 

proposal relates to the conflicts-of-interest 

provisions of the Dodd-Frank Act that direct 

swap dealers and major swap participants to 

have appropriate informational partitions. 

The proposal builds upon similar protections 

in the securities markets as mandated in the 

Sarbanes-Oxley Act. The proposed rules will 

protect market participants and the public 

while also promoting the financial integrity 

of the marketplace. 

[FR Doc. 2010–29006 Filed 11–22–10; 8:45 am] 

BILLING CODE 6351–01–P 

COMMODITY FUTURES TRADING 

COMMISSION 

17 CFR Part 23 

RIN 3038–AC96 

Regulations Establishing and 

Governing the Duties of Swap Dealers 

and Major Swap Participants 

AGENCY: Commodity Futures Trading 

Commission. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: The Commodity Futures 

Trading Commission is proposing 

regulations to implement new statutory 

provisions enacted by Title VII of the 

Dodd-Frank Wall Street Reform and 

Consumer Protection Act. The proposed 

regulations set forth certain duties 

imposed upon swap dealers and major 

swap participants registered with the 

Commission with regard to: Risk 

management procedures; monitoring of 

trading to prevent violations of 

applicable position limits; diligent 

supervision; business continuity and 

disaster recovery; disclosure and the 

ability of regulators to obtain general 

information; and antitrust 

considerations. The proposed 

regulations would implement the new 

statutory framework of section 4s(j) of 

the Commodity Exchange Act, added by 

section 731 of the Dodd-Frank Act, 

excepting regulations related to conflicts 

of interest pursuant to section 4s(j)(5), 

which will be addressed in a separate 

rulemaking. These regulations set forth 

certain duties with which swap dealers 

and major swap participants must 

comply to maintain registration as a 

swap dealer or major swap participant. 

DATES: Submit comments on or before 

January 24, 2011. 

ADDRESSES: You may submit comments, 

identified by RIN number 3038–AC96 

and Duties of Swap Dealers and Major 

Swap Participants, by any of the 

following methods: 


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71398 Federal Register / Vol. 75, No. 225 / Tuesday, November 23, 2010 / Proposed Rules 

1See 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. 

2Pursuant to Section 701 of the Dodd-Frank Act, 

Title VII may be cited as the ‘‘Wall Street 

Transparency and Accountability Act of 2010.’’ 

3 7 U.S.C. 1 et seq. 

4This term is defined for the purposes of this 

rulemaking and generally has the same meaning as 

section 1(a)(39) of the Commodity Exchange Act, 

which includes the Board of Governors of the 

Federal Reserve System, the Office of the 

Comptroller of the Currency, the Federal Deposit 

Insurance Corporation, the Farm Credit Association, 

and the Federal Housing Finance Agency. 

5Conflicts of interest under section 4s(j)(5) of the 

CEA will be addressed in a separate rulemaking and 

the rules pertaining to conflicts of interest are not 

included in the following proposed rules. 

6Section 8a(5) of the CEA authorizes the 

Commission, to promulgate such regulations as, in 

the judgement of the Commission, are reasonably 

necessary to effectuate any of the provisions or to 

accomplish any of the purposes of the CEA. 

• Agency Web site, via its Comments 

Online process at http:// 

comments.cftc.gov. Follow the 

instructions for submitting comments 

through the Web site. 

• Mail: David Stawick, Secretary of 

the Commission, Commodity Futures 

Trading Commission, Three Lafayette 

Centre, 1155 21st Street, NW., 

Washington, DC 20581. 

• Hand Delivery/Courier: Same as 

mail above. 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

Please submit your comments using 

only one method. 

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 may be exempt from disclosure 

under the Freedom of Information Act, 

a petition for confidential treatment of 

the exempt information may be 

submitted according to the procedures 

established in CFTC Regulation 145.9, 

17 CFR 145.9. 

The Commission reserves the right, 

but shall have no obligation, to review, 

pre-screen, 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: 

Sarah E. Josephson, Associate Director, 

202–418–5684, sjosephson@cftc.gov; 

Frank N. Fisanich, Special Counsel, 

202–418–5949, ffisanich@cftc.gov; or 

Jocelyn Partridge, Special Counsel, 202– 

418–5926, jpartridge@cftc.gov; Division 

of Clearing and Intermediary Oversight, 

Commodity Futures Trading 

Commission, Three Lafayette Centre, 

1155 21st Street, NW., Washington, DC 

20581. 

SUPPLEMENTARY INFORMATION: 

I. Background 

On July 21, 2010, President Obama 

signed the Dodd-Frank Wall Street 

Reform and Consumer Protection Act 

(Dodd-Frank Act).1 Title VII of the 

Dodd-Frank Act 2 amended the 

Commodity Exchange Act (CEA) 3 to 

establish a comprehensive regulatory 

framework 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 swap dealers and major 

swap participants; (2) imposing clearing 

and trade execution requirements on 

standardized derivative products; (3) 

creating rigorous recordkeeping and 

real-time reporting regimes; and (4) 

enhancing the rulemaking and 

enforcement authorities of the 

Commodity Futures Trading 

Commission (Commission or CFTC) 

with respect to all registered entities 

and intermediaries subject to the 

Commission’s oversight. 

Section 731 of the Dodd-Frank Act 

amends the CEA by inserting after 

section 4r a new section 4s that sets 

forth registration and regulatory 

requirements, including a variety of 

business conduct standards and duties, 

with which swap dealers and major 

swap participants must comply to 

maintain registration as a swap dealer or 

major swap participant. 

As part of an overall business conduct 

regime for swap dealers and major swap 

participants, section 4s(j) of the CEA 

sets forth certain duties for swap dealers 

and major swap participants, including 

the duty to: (1) Monitor trading to 

prevent violations of applicable position 

limits; (2) establish risk management 

procedures adequate for managing the 

day-to-day business of the swap dealer 

or major swap participant; (3) disclose 

to the Commission and to applicable 

prudential regulators 4 general 

information relating to swaps trading, 

practices, and financial integrity; (4) 

establish and enforce internal systems 

and procedures to obtain information 

needed to perform all of the duties 

prescribed by Commission regulations; 

(5) implement conflict-of-interest 

systems and procedures; 5 and (6) 

refrain from taking any action that 

would result in an unreasonable 

restraint of trade or impose a material 

anticompetitive burden on trading or 

clearing. In this release, the Commission 

is proposing six regulations specifically 

addressing risk management, 

monitoring of positions limits, diligent 

supervision, business continuity and 

disaster recovery, the availability of 

general information, and antitrust 

considerations. The Commission would 

adopt these implementing regulations 

pursuant to authority granted under 

sections 4s(h)(1)(D), 4s(h)(3)(D), 4s(j)(7), 

and 8a(5) of the CEA.6 The Dodd-Frank 

Act requires the Commission to 

promulgate these provisions by July 15, 

2011. 

The proposed regulations reflect 

consultation with staff of the following 

agencies: (i) The Securities and 

Exchange Commission; (ii) the Board of 

Governors of the Federal Reserve 

System; (iii) the Office of the 

Comptroller of the Currency; and 

(iv) the Federal Deposit Insurance 

Corporation. Staff from each of these 

agencies has had the opportunity to 

provide oral and/or written comments 

to the proposal, and the proposed 

regulations incorporate elements of the 

comments provided. 

The Commission requests comment 

on all aspects of the proposed 

regulations, as well as comment on the 

specific provisions and issues 

highlighted in the discussion below. 

The Commission further requests 

comment on an appropriate effective 

date for final regulations, including 

comment on whether it would be 

appropriate to have staggered or delayed 

effective dates for some regulations 

based on the nature or characteristics of 

the activities or entities to which they 

apply. Moreover, the Commission 

recognizes that there will be differences 

in the size and scope of the business of 

particular swap dealers and major swap 

participants. Therefore, comments are 

solicited on whether certain provisions 

of the proposed regulations should be 

modified or adjusted to reflect the 

differences among swap dealers or 

major swap participants. 

II. Proposed Regulations 

A. Structure and Approach 

The proposed regulations set forth 

business conduct standards with which 

swap dealers and major swap 

participants must comply. Such duties 


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Federal Register / Vol. 75, No. 225 / Tuesday, November 23, 2010 / Proposed Rules 71399 

7Market risk includes the risk that prices or rates 

will adversely change due to economic forces. This 

risk includes, among other things, changes in 

correlations between or among products (including 

all types of basis risk), volatility of market prices, 

and the sensitivity of option positions to other 

market factors. 

8Credit risk includes the risk that a counterparty 

will be unable to meet fully its financial obligations 

when due or at any time in the future. 

9Liquidity risk includes the risk that a firm will 

not be able to settle its obligations when due and/ 

or without adverse price changes. 

10Foreign currency risk is the risk arising from 

movements of foreign exchange rates. 

11Legal risk includes risk of loss due to an 

unenforceable contract, an ultra vires act of a 

counterparty, or failure to comply with applicable 

law. 

12Operational risk includes the risk of loss due 

to deficiencies in information systems, internal 

processes and staffing, or disruptions from external 

events that result in the reduction, deterioration, or 

breakdown in services or controls within the firm. 

13Settlement risk includes the risk of loss arising 

when a party meets its payment obligation under 

a contract before its counterparty meets its payment 

obligation. Settlement risk lasts from the time an 

outgoing payment instruction can no longer be 

canceled unilaterally until the time the incoming 

payment is received with finality and reconciled. 

are outlined in section 4s(j) of the CEA 

and include: (1) Monitoring of trading; 

(2) risk management procedures; (3) 

disclosure of general information; (4) 

ability to obtain information; (5) 

conflicts of interest; and (6) antitrust 

considerations. Section 4s(j)(7) requires 

the Commission to prescribe rules 

implementing the enumerated duties. 

The proposed regulations will be 

grouped under a new subpart to part 23, 

chapter I, title 17 of the Code of Federal 

Regulations. The proposed regulations 

generally address monitoring of trading 

and risk management together in a 

single rule requiring each swap dealer 

and major swap participant to establish 

a comprehensive risk management 

program (rule 23.600). Although part of 

a comprehensive risk management 

program, monitoring of trading for 

compliance with applicable position 

limits (rule 23.601); diligent supervision 

of a swap dealer’s or major swap 

participant’s business (rule 23.602); and 

business continuity and disaster 

recovery requirements (rule 23.603) are 

addressed in separate rules for ease of 

reference. The availability for disclosure 

and inspection of general information 

(rule 23.606) and antitrust 

considerations (rule 23.607) also are 

addressed in separate rules. Conflicts of 

interest under section 4s(j)(5) of the CEA 

(rule 23.605) will be addressed in a 

separate notice of proposed rulemaking 

to be released at the same time as this 

proposal. 

B. Risk Management 

1. Overview 

Sections 4s(h)(1)(D), 4s(h)(3)(D), and 

4s(j) of the CEA authorize the 

Commission to adopt those regulations 

regarding business conduct and risk 

management that the Commission 

deems necessary for the public interest 

and in furtherance of the CEA. Pursuant 

to this authority, the Commission is 

proposing regulation 23.600 to require 

swap dealers and major swap 

participants to establish a risk 

management program for monitoring 

and managing the risks associated with 

their business activities. 

The proposed risk management 

regulation contemplates that each legal 

entity that falls within the definition of 

swap dealer or major swap participant 

under the CEA and Commission 

regulations would be required to 

establish a risk management program 

and risk management unit. However, the 

Commission recognizes that the 

business activities engaged in and risks 

faced by one affiliate may increase the 

risk exposure or alter overall risk profile 

of another affiliate or the entity as a 

whole, and that, to be effective, a risk 

management program must protect 

against the risks resulting from the 

activities of interconnected or otherwise 

related entities. Accordingly, the 

proposed regulations would require 

each swap dealer and major swap 

participant to be able to demonstrate 

that, to the extent possible, it is taking 

an integrated approach to risk 

management at the consolidated entity 

level. 

Participants in the swap markets are 

exposed to various risks, including, but 

not limited to: (1) Market risk; 7 (2) 

credit risk; 8 (3) liquidity risk; 9 (4) 

foreign currency risk; 10 (5) legal risk; 11

(6) operational risk; 12 and (7) settlement 

risk.13 Managing all relevant risks 

should be integrated into the swap 

dealer and major swap participant’s 

overall risk management structure. The 

Commission believes this approach is 

particularly warranted given that swap 

dealers and major swap participants 

may hold positions in a variety of 

financial instruments. 

Some of these risks are due, in part, 

to the characteristics of swap products 

and the way swap markets have evolved 

over time. For example, some swaps are 

customized or designed with unique 

characteristics that may present 

previously unforeseen or unpredictable 

risks. Also, for swaps not accepted for 

clearing, market participants face risks 

associated with the financial and legal 

ability of counterparties to perform 

under the terms of specific transactions. 

As part of a risk management program, 

risk managers must carefully review any 

unique product characteristics that may 

pose unusual risks and take steps to 

manage potential risks before trading 

commences. 

In the past, the importance of risk 

management has been highlighted by 

significant losses experienced by several 

large financial firms. Some of these 

losses were caused by unauthorized and 

undisclosed employee trading. In each 

case, these losses went virtually 

undetected by management because of 

the lack of proper internal procedures, 

including the separation of 

responsibility for recording the trades 

on the firms’ books from the personnel 

responsible for trading. Internal risk 

management policies and procedures 

promote the stability, safety, and 

soundness of firms by reducing the risk 

of significant losses, which, in turn, may 

reduce the risk that spreading losses 

would cause defaults by multiple firms, 

thereby undermining markets as a 

whole. 

The Commission recognizes that an 

individual firm must have the flexibility 

to implement specific policies and 

procedures unique to its circumstances. 

The Commission’s rule has been 

designed such that the specific elements 

of a risk management program will vary 

depending on the size and complexity 

of a swap dealer’s or major swap 

participant’s business operations. Risk 

management policies are expected to 

provide for appropriate risk 

measurement methodologies, 

compliance monitoring and reporting, 

and on-going testing and assessment of 

the overall effectiveness of the program. 

Consequently, proposed regulations 

23.600, 23.601, 23.602, and 23.603 

would establish the general parameters 

for the design, implementation, review, 

and testing of a swap dealer’s or major 

swap participant’s risk management 

program, as well as a limited number of 

additional elements that the 

Commission believes are essential to an 

appropriate risk management program. 

The proposed rules would require a 

swap dealer or major swap participant 

to adopt policies and procedures to 

monitor and manage its risks, assess the 

effectiveness of those policies and 

procedures, and modify or update them, 

as necessary, from time to time. In 

addition, the proposed rule would 

require certain elements to be included 

in each swap dealer and major swap 

participant’s risk management program 

to ensure that internal systems protect 

against universal risks. For example, to 

ensure the independence of the risk 

management process, the unit at the 

firm responsible for monitoring risk 

must be independent from the business 

trading unit whose activities create the 

risks. In addition, to ensure that trading 


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71400 Federal Register / Vol. 75, No. 225 / Tuesday, November 23, 2010 / Proposed Rules 

losses cannot be hidden, personnel 

responsible for recording transactions in 

the books of the swap dealer or major 

swap participant cannot be the same as 

those responsible for executing 

transactions. Similarly, all accounts, 

including suspense accounts, must be 

monitored. 

Finally, the swap dealer’s or major 

swap participant’s management must 

periodically review the firm’s business 

activities for consistency with 

established risk management policies. 

This will ensure that personnel are 

operating within the scope of activity 

that management has determined to be 

permissible. 

2. Risk Management Program 

Proposed regulation 23.600(b) 

provides a general requirement that a 

swap dealer or major swap participant 

establish and maintain a risk 

management program reasonably 

designed to monitor and manage the 

risks associated with its business as a 

swap dealer or major swap participant. 

It further provides (1) That such risk 

management program consist of written 

policies and procedures; (2) that such 

policies and procedures be approved by 

the governing body of the swap dealer 

or major swap participant and be 

furnished to the Commission; and (3) 

that a risk management unit that is 

independent from the business trading 

unit be established to administer the 

risk management program. 

The proposed regulations would 

require swap dealers and major swap 

participants to provide copies of the risk 

management policies and procedures to 

the Commission in order to allow the 

Commission to monitor the status of risk 

management practices among swap 

dealers and major swap participants. 

Submission of such policies and 

procedures to the Commission without 

further comment or action by the 

Commission or Commission staff should 

not be construed as an endorsement of 

the completeness or effectiveness of the 

risk management policies and 

procedures and no swap dealer or major 

swap participant should make a 

representation to the contrary. The 

Commission invites comments on the 

submission of risk management policies 

and procedures and, more generally, on 

whether the provisions of 23.600 have 

achieved a sufficient level of detail for 

the purposes of designing a 

comprehensive risk management 

program. 

Proposed regulation 23.600(c) would 

provide a non-exclusive list of the 

elements that must be a part of the risk 

management program of a swap dealer 

or major swap participant. Such policies 

and procedures should include: (1) 

Identifying risks and setting of risk 

tolerance limits; (2) providing periodic 

risk exposure reports to senior 

management and the governing body; 

(3) establishing a new product policy; 

and (4) establishing a risk management 

program that takes into account market 

risk, credit risk, liquidity risk, foreign 

currency risk, legal risk, operational 

risk, and settlement risk, including a 

process for evaluating and addressing 

risks associated with the use of models 

to derive market valuations or otherwise 

calculate or evaluate risk exposures. The 

regulation also would establish 

requirements for supervision of the 

business unit of a swap dealer or major 

swap participant, including monitoring 

of limits on individual traders and 

establishing procedures governing the 

use, supervision, and testing of any 

algorithmic trading program. The 

objective is to ensure that those capable 

of committing the capital of the swap 

dealer or major swap participant are 

properly supervised and subject to 

approved limits. Additionally, the risk 

management program should set forth 

requirements for compliance with 

Commission regulations related to 

capital and margin and for monitoring 

overall compliance with the risk 

management program. The rule also 

would require that swap dealers and 

major swap participants establish 

policies and procedures (1) to require 

the use of central counterparties for 

clearing where clearing is required 

pursuant to Commission regulation or 

order, and (2) to use central clearing as 

a means of mitigating counterparty 

credit risk. 

To ensure the continued effectiveness 

of a risk management program, 

proposed regulation 23.600(e) would 

require quarterly review and testing of 

the adequacy of each swap dealer and 

major swap participant’s risk 

management program by internal audit 

staff or a qualified external, third party 

service. The Commission requests 

comment on these proposed audit and 

review requirements. 

C. Monitoring of Position Limits 

Proposed regulation 23.601 would 

require swap dealers and major swap 

participants to establish policies and 

procedures to monitor, detect, and 

prevent violations of applicable position 

limits established by the Commission, a 

designated contract market, or a swap 

execution facility. This rule implements 

section 4s(j)(1) of the CEA, which 

requires each swap dealer and major 

swap participant to monitor its trading 

in swaps to prevent violations of 

applicable position limits. In order to 

prevent violations, each swap dealer 

and major swap participant would be 

required to provide training to all 

relevant employees on applicable 

position limits, actively monitor trading, 

implement an early warning system, test 

the effectiveness of its policies and 

procedures, and report quarterly to its 

senior management and governing body 

on compliance with applicable position 

limits. The Commission requests 

comment on how much time would be 

needed for swap dealers and major swap 

participants to come into compliance 

with new position limits that may be 

imposed. 

D. Diligent Supervision 

Proposed regulation 23.602 

implements section 4s(h)(1)(B) of the 

CEA, which requires each swap dealer 

and major swap participant to conform 

with Commission regulations related to 

diligent supervision of the business of 

the swap dealer and major swap 

participant. The proposed regulation 

provides (1) a requirement for diligent 

supervision reasonably designed to 

achieve compliance with the CEA and 

Commission regulations, and (2) 

requirements for qualification of 

supervisors and grants of appropriate 

supervisory authority. 

E. Business Continuity and Disaster 

Recovery 

Given the observed 

interconnectedness of the current swap 

market, and as part of a comprehensive 

risk management program, the 

Commission believes that each swap 

dealer and major swap participant 

should be required to establish and 

maintain a business continuity and 

disaster recovery plan that is reasonably 

designed to minimize any disruption to 

the financial markets in the event of an 

emergency or a disruption of a swap 

dealer’s or major swap participant’s 

business operations. Proposed 

regulation 23.603 would require swap 

dealers and major swap participants to 

establish and maintain a business 

continuity and disaster recovery plan 

designed to enable the swap dealer or 

major swap participant to resume 

normal operations within one business 

day of an emergency or other 

disruption. 

To accomplish this task, swap dealers 

and major swap participants would be 

required to provide the Commission 

with emergency contacts; identify 

essential documents, data, facilities, 

infrastructure, and personnel, and 

maintain sufficient back-up facilities in 

a reasonably separate geographic 

location; design a plan for 

communicating with persons essential 


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Federal Register / Vol. 75, No. 225 / Tuesday, November 23, 2010 / Proposed Rules 71401 

14The oversight, supervision, and examination 

regimes for swap dealers and major swap 

participants remain under consideration by the 

Commission. The Commission is considering 

whether it will directly handle oversight, whether 

it may delegate authority to perform oversight to 

one or more self-regulatory organizations (SROs), or 

whether a combination of Commission and SRO 

oversight would be the optimal approach. 

15 5 U.S.C. 601 et seq. 

16 47 FR 18618, Apr. 30, 1982. 

17 Id. at 18619. 

18 Id. 

19 Id. at 18620. 

20 44 U.S.C. 3501 et seq. 

for recovery; and annually test the 

business continuity and disaster 

recovery plan’s effectiveness. 

The Commission invites comments 

regarding whether a comprehensive 

business continuity and disaster 

recovery plan is necessary for all 

entities that may register with the 

Commission as swap dealers or major 

swap participants and whether one 

business day is sufficient time for 

recovery of essential business 

operations. The Commission also invites 

comments regarding an appropriate 

effective date for this regulation given 

the amount of time and cost that may be 

necessary for implementation of a 

comprehensive business continuity and 

disaster recovery plan. 

F. Disclosure and Ability To Obtain 

Information 

In order to carry out its oversight and 

examination responsibilities, the 

Commission would require access to 

certain information of swap dealers and 

major swap participants.14 Sections 

4s(j)(3) and 4s(j)(4) of the CEA require 

a swap dealer or major swap participant 

to (1) disclose to the Commission and to 

the swap dealer’s or major swap 

participant’s prudential regulator 

information regarding the terms and 

conditions of its swaps, its swap trading 

operations, mechanisms, and practices; 

its financial integrity protections 

relating to swaps, and other information 

relevant to its trading in swaps; and (2) 

establish internal systems to obtain 

necessary information to perform any of 

the functions described in section 4s 

and for disclosure of information to the 

Commission or prudential regulator 

upon request. Proposed regulation 

23.606 would implement these 

requirements. 

Proposed regulation 23.606(a) 

requires that swap dealers and major 

swap participants make available for 

disclosure and inspection all 

information required by the 

Commission, including those items 

listed in section 4s(j)(3). This 

information would be required to be 

disclosed promptly to the Commission 

or applicable prudential regulator in the 

manner and frequency as set forth in the 

relevant regulation. Proposed regulation 

23.606(b) would require a swap dealer 

or major swap participant to establish 

and maintain adequate internal systems 

that will permit it to obtain any 

information required to satisfy its duties 

under section 4s(j) of the CEA. 

G. Antitrust Considerations 

Section 4s(j)(6) of the CEA prohibits a 

swap dealer or major swap participant 

from adopting any process or taking any 

action that results in any unreasonable 

restraint of trade or imposes any 

material anticompetitive burden on 

trading or clearing, unless necessary or 

appropriate to achieve the purposes of 

the CEA. Proposed regulation 23.607 

would implement these prohibitions by 

requiring that the swap dealer or major 

swap participant adopt policies and 

procedures that would prevent 

unreasonable restraint of trade or the 

imposition of a material anticompetitive 

burden on trading or clearing. 

III. Related Matters 

A. Regulatory Flexibility Act 

The Regulatory Flexibility Act (RFA) 

requires that agencies consider whether 

the rules they propose will have a 

significant economic impact on a 

substantial number of small entities.15

The Commission previously has 

established certain definitions of ‘‘small 

entities’’ to be used by the Commission 

in evaluating the impact of its 

regulations on small entities in 

accordance with the RFA.16 The 

proposed rules would affect swap 

dealers and major swap participants. 

Swap dealers and major swap 

participants are new categories of 

registrants. Accordingly, the 

Commission has not previously 

addressed the question of whether such 

persons are, in fact, small entities for 

purposes of the RFA. However, the 

Commission previously has determined 

that futures commission merchants 

should not be considered to be small 

entities for purposes of the RFA.17 The 

Commission’s determination was based, 

in part, upon the obligation of futures 

commission merchants to meet the 

minimum financial requirements 

established by the Commission to 

enhance the protection of customers’ 

segregated funds and protect the 

financial condition of futures 

commission merchants generally.18 Like 

futures commission merchants, swap 

dealers 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 swap dealer 

designation any entities that engage in 

a de minimis level of swaps dealing in 

connection with transactions with or on 

behalf of customers. The Commission 

anticipates that this exemption would 

tend to exclude small entities from 

registration. Accordingly, for purposes 

of the RFA for this rulemaking, the 

Commission is hereby proposing that 

swap dealers not be considered ‘‘small 

entities’’ for essentially the same reasons 

that futures commission merchants have 

previously been determined not to be 

small entities and in light of the 

exemption from the definition of swap 

dealer for those engaging in a de 

minimis level of swap dealing. 

The Commission has also previously 

determined that large traders are not 

‘‘small entities’’ for RFA purposes.19 In 

that determination, the Commission 

considered that a large trading position 

was indicative of the size of the 

business. Major swap participants, by 

statutory definition, maintain 

substantial positions in swaps or 

maintain outstanding swap positions 

that create 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 

rulemaking, the Commission is hereby 

proposing that major swap participants 

not be considered ‘‘small entities’’ for 

essentially the same reasons that large 

traders have previously been 

determined not to be small entities. 

Moreover, the Commission is carrying 

out Congressional mandates by 

proposing this regulation. Specifically, 

the Commission is proposing these 

regulations to comply with the DoddFrank Act, the aim of which is to reduce 

systemic risks presented by swap 

dealers and swap market participants 

through comprehensive regulation. The 

Commission does not believe that there 

are regulatory alternatives to those being 

proposed that would be consistent with 

the statutory mandate. 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 

(PRA) 20 imposes certain requirements 

on Federal agencies 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 


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71402 Federal Register / Vol. 75, No. 225 / Tuesday, November 23, 2010 / Proposed Rules 

21 44 U.S.C. 3502(2). 

22http://www.bls.gov/oes/current/oes113031.htm. 

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 in accordance with 44 

U.S.C. 3507(d) and 5 CFR 1320.11. The 

title for this collection of information is 

‘‘Regulations Establishing and 

Governing the Duties of Swap Dealers 

and Major Swap Participants.’’ The OMB 

has not yet assigned this collection a 

control number. 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. 

The collection of information under 

these proposed rules is necessary to 

implement certain provisions of the 

CEA, as amended by the Dodd-Frank 

Act. Specifically, it is essential to 

ensuring that swap dealers and major 

swap participants maintain risk 

management programs, business 

continuity and disaster recovery plans, 

procedures to ensure compliance with 

position limits, and antitrust 

procedures. Commission staff would use 

the information when conducting the 

Commission’s examination and 

oversight program to evaluate the 

completeness and effectiveness of the 

procedures adopted by the registrants. 

If the proposed regulations are 

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, 5 

U.S.C. 552a. 

1. Information Provided by Reporting 

Entities/Persons 

The proposed regulation would 

require each swap dealer and major 

swap participant to establish a risk 

management program (including 

specific policies for compliance with 

position limits and to ensure business 

continuity and disaster recovery); 

establish policies to prevent 

unreasonable restraints of trade and 

anticompetitive burdens; establish 

systems to diligently supervise the 

activities relating to its business; and 

make certain information available for 

disclosure and inspection by the 

Commission. These requirements may 

impose PRA burdens. The burden 

associated with the proposed regulation 

per registrant is estimated to be 204.5 

hours per year, at an annual cost of 

$20,450. For purposes of the PRA, the 

term ‘‘burden’’ means the ‘‘time, effort, or 

financial resources expended by persons 

to generate, maintain, or provide 

information to or for a Federal 

Agency.’’ 21 This burden will result from 

the development of the required policies 

and procedures, satisfaction of various 

reporting obligations and the 

documentation of required testing. 

It is not currently known how many 

swap dealers and major swap 

participants will become subject to 

these rules, and this will not be known 

to the Commission until the registration 

requirements for these entities become 

effective after July 16, 2011, the date on 

which the Dodd-Frank Act becomes 

effective. While the Commission 

believes that there may likely be 

approximately 200 swap dealers and 50 

major swap participants, it has taken a 

conservative approach, for PRA 

purposes, in estimating that there will 

be a combined number of 300 swap 

dealers and major swap participants 

who will be required to establish and 

implement risk management policies 

and procedures under the proposed 

rules. The Commission estimated the 

number of affected entities based on 

industry data. 

According to recent Bureau of Labor 

Statistics, the mean hourly wage of an 

employee under occupation code 11– 

3031, ‘‘Financial Managers,’’ (which 

includes financial risk managers) that is 

employed by the ‘‘Securities and 

Commodity Contracts Intermediation 

and Brokerage’’ industry is $74.41.22

Because swap dealers and major swap 

participants include large financial 

institutions whose risk management 

employees’ salaries may exceed the 

mean wage, the Commission has 

estimated the cost burden of these 

proposed regulations based upon an 

average salary of $100 per hour. 

Accordingly, the estimated burden was 

calculated as follows: 

Drafting, Filing, Updating and 

Distributing Risk Management Program 

(Including Position Limit Procedures 

and Business Continuity and Disaster 

Recovery Plan) 

Number of registrants: 300. 

Estimated number of responses: 300. 

Estimated total annual burden per 

registrant: 160 hours. 

Frequency of collection: One-time 

filing with the Commission, annual 

distribution, updating as needed. 

Total annual burden: 48,000 burden 

hours [300 registrants × 160 hours]. 

Quarterly Risk Exposure Reports 

Number of registrants: 300. 

Estimated number of responses: 1,200 

[300 registrants × 4 reports]. 

Estimated total annual burden per 

registrant: 32 hours. 

Frequency of collection: Quarterly. 

Total annual burden: 9,600 burden 

hours [300 registrants × 32 hours]. 

Quarterly Documentation of Risk 

Management Testing 

Number of registrants: 300. 

Estimated number of responses: 1,200 

[300 registrants × 4 tests]. 

Estimated total annual burden per 

registrant: 4 hours. 

Frequency of collection: Quarterly. 

Total annual burden: 1,200 hours 

[300 registrants × 4 hours]. 

Documentation of Annual Position 

Limit Compliance Training and Audit 

Number of registrants: 300. 

Estimated number of responses: 300. 

Estimated total annual burden per 

registrant: 2 hours. 

Frequency of collection: Annually. 

Total annual burden: 600 hours [300 

registrants × 2 hours]. 

Quarterly Documentation of Position 

Limit Compliance 

Number of registrants: 300. 

Estimated number of responses: 1,200 

[300 registrants × 4 reports]. 

Estimated total annual burden per 

registrant: 2 hours. 

Frequency of collection: Quarterly. 

Total annual burden: 600 hours [300 

registrants × 2 hours]. 

Documentation of Position Limit 

Violations 

Number of registrants: 300. 

Estimated number of responses: 600 

[300 registrants × 2 documents]. 

Estimated total annual burden per 

registrant: .5. 

Frequency of collection: As needed. 

Total annual burden: 150 hours [300 

registrants × .5 hours]. 

Filing Emergency Contact Information 

and Annual Documentation of Business 

Continuity Testing 

Number of registrants: 300. 

Estimated number of responses: 300. 

Estimated total annual burden per 

registrant: 1 hour. 

Frequency of collection: Annual. 

Total annual burden: 300 hours. 


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23 7 U.S.C. 19(a). 

Documentation of Risk Assessment of 

New Products 

Number of registrants: 300. 

Estimated number of responses: 1,500 

[300 registrants × 5 documents]. 

Estimated total annual burden per 

registrant: 3 hours. 

Frequency of collection: As needed. 

Total annual burden: 900 hours [300 

registrants × 3 hours]. 

Based upon the above, the aggregate 

cost for all registrants is 61,350 burden 

hours and $6,135,000 [61,350 × $100 per 

hour]. 

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: (i) 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; (ii) evaluate the 

accuracy of the Commission’s estimate 

of the burden of the proposed collection 

of information; (iii) determine whether 

there are ways to enhance the quality, 

utility, and clarity of the information to 

be collected; and (iv) 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 http:// 

www.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 (and the 

Commission) receives it within 30 days 

of publication. 

C. Cost-Benefit Analysis 

Section 15(a) of the CEA 23 requires 

the Commission to consider the costs 

and benefits of its actions 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 new regulation or to 

determine whether the benefits of the 

rule outweigh its costs; rather, it 

requires that the Commission ‘‘consider’’ 

the costs and benefits of its actions. 

Section 15(a) further specifies that 

costs and benefits of a proposed 

rulemaking 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 considerations and could, 

in its discretion, determine that, 

notwithstanding its costs, a particular 

regulation was necessary or appropriate 

to protect the public interest or to 

effectuate any of the provisions or to 

accomplish any of the purposes of the 

CEA. 

Summary of proposed requirements. 

The proposed regulations would 

implement certain provisions of section 

731 of the Dodd-Frank Act, which adds 

a new section 4s(j) to the Commodity 

Exchange Act. The proposed regulations 

would set forth certain duties imposed 

upon swap dealers and major swap 

participants registered with the 

Commission with regard to: (1) Risk 

management procedures; (2) monitoring 

of trading to prevent violations of 

applicable position limits; (3) diligent 

supervision; (4) business continuity and 

disaster recovery; (5) disclosure and the 

ability of regulators to obtain general 

information; and (6) antitrust 

considerations. 

Costs. With respect to costs, the 

Commission has determined that for 

swap dealers and major swap 

participants, costs to institute risk 

management systems and personnel in 

order to satisfy the new regulatory 

requirements are far outweighed by the 

benefits to the financial system as a 

whole. The proposed rules would 

require a swap dealer or major swap 

participant to consider a number of 

issues affecting its business 

environment when creating its risk 

management system. For example, a 

swap dealer or major swap participant 

would need to consider, among other 

things, the experience and qualifications 

of relevant risk management personnel, 

as well as the separation of duties 

among personnel in the business unit, 

when designing and implementing its 

risk management policies and 

procedures. These considerations would 

help facilitate the development of a risk 

management program that appropriately 

addresses the risks posed by the swap 

dealer’s or major swap participant’s 

business and the environment in which 

such business is being conducted. In 

addition, these considerations would 

guide a swap dealer or major swap 

participant in the implementation of 

specific policies and procedures unique 

to its circumstances. 

It is estimated that the average 

amount of time a swap dealer or major 

swap participant would spend annually 

implementing its comprehensive risk 

management program would be 204.5 

hours. Based on an hourly wage rate of 

$100, Commission staff estimates that 

each registrant could expend up to 

$20,450 annually to comply with the 

proposed rules. This would result in an 

aggregated cost of $6,135,000 annually 

(300 registrants × $20,450). 

Most swap dealers and major swap 

participants have adequate resources 

and existing risk management structures 

that are capable of adjusting to the new 

regulatory framework without material 

diversion of resources away from 

commercial operations. 

Benefits. With respect to benefits, the 

proposed regulations would require 

swap dealers and major swap 

participants to assess and monitor the 

adequacy of their risk management 

under standards established by the 

Commission. This would further the 

goal of avoiding market disruptions and 

financial losses to market participants 

and the general public. The proposed 

regulations also would promote prudent 

risk management, oversight and 

stability, thereby fostering efficiency 

and a greater ability to compete in the 

broader financial markets. The proposed 

regulations would reward efficiency 

insofar as swap dealers and major swap 

participants that operate efficiently 

would have lower operating costs and 

thus would require fewer resources to 

comply with the regulations. Finally, 

the proposed regulations are designed to 

ensure that swap dealers and major 

swap participants can sustain their 

market operations and meet their 

financial obligations to market 

participants, thus contributing to the 

integrity of the financial markets. 

Therefore, the Commission believes it is 

prudent to require risk management 


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71404 Federal Register / Vol. 75, No. 225 / Tuesday, November 23, 2010 / Proposed Rules 

requirements for swap dealers and 

major swap participants. 

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 proposed rules with their 

comment letters. 

List of Subjects in 17 CFR Part 23 

Antitrust, Commodity futures, 

Conduct standards, Conflict of interests, 

Major swap participants, Reporting and 

recordkeeping, Swap dealers, Swaps. 

For the reasons stated in this release, 

the Commission proposes to amend 17 

CFR part 23 (as proposed in a separate 

proposed rule published elsewhere in 

this issue of the Federal Register) as 

follows: 

PART 23—SWAP DEALERS AND 

MAJOR SWAP PARTICIPANTS 

Authority and Issuance 

1. The authority citation for part 23 

continues to read as follows: 

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

6c, 6p, 6r, 6s, 6t, 9, 9a, 12, 12a, 13b, 13c, 16a, 

18, 19, 21. 

2. Subpart J is added to read as 

follows: 

Subpart J—Duties of Swap Dealers and 

Major Swap Participants 

Sec. 

23.600 Risk Management Program for swap 

dealers and major swap participants. 

23.601 Monitoring of position limits. 

23.602 Diligent supervision. 

23.603 Business continuity and disaster 

recovery. 

23.604 [Reserved] 

23.605 [Reserved] 

23.606 General information: Availability for 

disclosure and inspection. 

23.607 Antitrust considerations. 

Subpart J—Duties of Swap Dealers 

and Major Swap Participants 

§ 23.600 Risk Management Program for 

swap dealers and major swap participants. 

(a) Definitions. For purposes of this 

subpart J, the following terms shall be 

defined as provided. 

(1) Affiliate. This term means, with 

respect to any person, a person 

controlling, controlled by, or under 

common control with, such person. 

(2) Business trading unit. This term 

means any department, division, group, 

or personnel of a swap dealer or major 

swap participant or any of its affiliates, 

whether or not identified as such, that 

performs or is involved in any pricing, 

trading, sales, marketing, advertising, 

solicitation, structuring, or brokerage 

activities on behalf of a registrant. 

(3) Clearing unit. This term means any 

department, division, group, or 

personnel of a registrant or any of its 

affiliates, whether or not identified as 

such, that performs any proprietary or 

customer clearing activities on behalf of 

a registrant. 

(4) Governing body. This term 

typically means, with respect to: 

(i) A sole proprietorship, the 

proprietor; 

(ii) A corporation, its board of 

directors; 

(iii) A partnership, any general 

partner; 

(iv) A limited liability company or 

limited liability partnership, the 

manager, managing member or those 

members vested with management 

authority; or 

(v) Any other person, the body or 

person with ultimate decision-making 

authority over the activities of such 

person. 

(5) Prudential regulator. This term has 

the same meaning as section 1a(39) of 

the Commodity Exchange Act and 

includes the Board of Governors of the 

Federal Reserve System, the Office of 

the Comptroller of the Currency, the 

Federal Deposit Insurance Corporation, 

the Farm Credit Association, and the 

Federal Housing Finance Agency, as 

applicable to the swap dealer or major 

swap participant. The term also 

includes the Federal Deposit Insurance 

Corporation, with respect to any 

financial company as defined in section 

201 of under the Dodd-Frank Wall 

Street Reform and Consumer Protection 

Act or any insured depository 

institution under the Federal Deposit 

Insurance Act, and with respect to each 

affiliate of any such company or 

institution. 

(6) Senior management. This term 

means, with respect to a registrant, such 

registrant’s chief executive officer and 

any officer with supervisory duties who 

reports directly to the chief executive 

officer. 

(b) Risk management program. 

(1) Purpose. Each swap dealer and major 

swap participant shall establish, 

document, maintain, and enforce a 

system of risk management policies and 

procedures designed to monitor and 

manage the risks associated with the 

business of the swap dealer or major 

swap participant. For purposes of this 

regulation, such policies and procedures 

shall be referred to collectively as a 

‘‘Risk Management Program.’’ 

(2) Written policies and procedures. 

Each swap dealer and major swap 

participant shall maintain written 

policies and procedures that describe 

the Risk Management Program of the 

swap dealer or major swap participant. 

(3) Approval by governing body. The 

Risk Management Program and the 

written risk management policies and 

procedures shall be approved, in 

writing, by the governing body of the 

swap dealer or major swap participant. 

(4) Furnishing to the Commission. 

Each swap dealer and major swap 

participant shall furnish a copy of its 

written risk management policies and 

procedures to the Commission upon 

application for registration. Where there 

is a material change in the risk 

management policies and procedures, 

updated risk management policies and 

procedures reflecting that change shall 

be furnished to the Commission within 

sixty (60) calendar days after the end of 

the fiscal quarter in which the change 

occurred. 

(5) Risk management unit. As part of 

its Risk Management Program, each 

swap dealer and major swap participant 

shall establish and maintain a risk 

management unit with sufficient 

authority; qualified personnel; and 

financial, operational, and other 

resources to carry out the risk 

management program established 

pursuant to this regulation. The risk 

management unit shall report directly to 

senior management and shall be 

independent from the business trading 

unit. 

(c) Elements of the Risk Management 

Program. The Risk Management 

Program of each swap dealer and major 

swap participant shall include, at a 

minimum, the following elements: 

(1) Identification of risks and risk 

tolerance limits. (i) The Risk 

Management Program should take into 

account market, credit, liquidity, foreign 

currency, legal, operational, settlement, 

and any other applicable risks together 

with a description of the risk tolerance 

limits set by the swap dealer or major 

swap participant and the underlying 

methodology. The risk tolerance limits 

shall be reviewed and approved 

quarterly by senior management and 

annually by the governing body. 

Exceptions to risk tolerance limits shall 

require prior approval of, at a minimum, 

a supervisor in the risk management 

unit. 

(ii) The Risk Management Program 

shall take into account risks posed by 

affiliates and take an integrated 

approach to risk management at the 

consolidated entity level. 

(iii) The Risk Management Program 

shall include policies and procedures 

for detecting breaches of risk tolerance 

limits set by the swap dealer or major 

swap participant, and alerting 

supervisors within the risk management 

unit and senior management, as 

appropriate. 


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(2) Periodic Risk Exposure Reports. 

(i) The risk management unit of each 

swap dealer and major swap participant 

shall provide to senior management and 

to its governing body quarterly written 

reports setting forth the market, credit, 

liquidity, foreign currency, legal, 

operational, settlement, and any other 

applicable risk exposures of the swap 

dealer or major swap participant; any 

recommended changes to the Risk 

Management Program; the 

recommended time frame for 

implementing those changes; and the 

status of any incomplete 

implementation of previously 

recommended changes to the Risk 

Management Program. For purposes of 

this regulation, such reports shall be 

referred to as ‘‘Risk Exposure Reports.’’ 

The Risk Exposure Reports also shall be 

provided to the senior management and 

the governing body immediately upon 

detection of any material change in the 

risk exposure of the swap dealer or 

major swap participant. 

(ii) Furnishing to the Commission. 

Each swap dealer and major swap 

participant shall furnish copies of its 

Risk Exposure Reports to the 

Commission within five (5) business 

days of providing such reports to its 

senior management. 

(3) New product policy. The Risk 

Management Program of each swap 

dealer and major swap participant shall 

include a new product policy that is 

designed to identify and take into 

account the risks of any new product 

prior to engaging in transactions 

involving the new product. The new 

product policy should include the 

following elements: 

(i) Consideration of the type of 

counterparty with which the new 

product will be transacted; the product’s 

characteristics and economic function; 

and whether the product requires a 

novel pricing methodology or presents 

novel legal and regulatory issues. 

(ii) Identification and analysis of the 

relevant risks of the new product and 

how they will be managed. The risk 

analysis should include an assessment 

of any product, market, credit, liquidity, 

foreign currency, legal, operational, 

settlement, and any other risks 

associated with the new product. 

Product risk characteristics may 

include, but are not limited to, 

volatility, non-linear price 

characteristics, jump-to-default risk, and 

any correlation between the value of the 

product and the counterparty’s 

creditworthiness. 

(iii) An assessment, signed by a 

supervisor in the risk management unit, 

as to whether the new product would 

materially alter the overall entity-wide 

risk profile of the swap dealer or major 

swap participant. If the new product 

would materially alter the overall risk 

profile of the swap dealer or major swap 

participant, the new product must be 

pre-approved by the governing body 

before any transactions are effectuated. 

(iv) A requirement that the risk 

management unit review the risk 

analysis to identify any necessary 

modifications to the Risk Management 

Program and implement such 

modifications prior to engaging in 

transactions involving the new product. 

(4) Specific risk management 

considerations. The Risk Management 

Program of each swap dealer and major 

swap participant shall include, but not 

be limited to, policies and procedures 

necessary to monitor and manage the 

following risks: 

(i) Market risk. Market risk policies 

and procedures shall take into account, 

among other things: 

(A) Daily measurement of market 

exposure, including exposure due to 

unique product characteristics, 

volatility of prices, basis and correlation 

risks, leverage, sensitivity of option 

positions, and position concentration, to 

comply with market risk tolerance 

limits; 

(B) Timely and reliable valuation data 

derived from, or verified by, sources 

that are independent of the business 

trading unit, and if derived from pricing 

models, that the models have been 

independently validated by qualified, 

independent persons; and 

(C) Reconciliation of profits and 

losses resulting from valuations with the 

general ledger at least once each 

business day. 

(ii) Credit risk. Credit risk policies and 

procedures shall take into account, 

among other things: 

(A) Daily measurement of overall 

credit exposure to comply with 

counterparty credit limits; 

(B) Monitoring and reporting of 

violations of counterparty credit limits 

performed by personnel that are 

independent of the business trading 

unit; and 

(C) Regular valuation of collateral 

used to cover credit exposures and 

safeguarding of collateral to prevent 

loss, disposal, rehypothecation, or use 

unless appropriately authorized. 

(iii) Liquidity risk. Liquidity risk 

policies and procedures shall take into 

account, among other things: 

(A) Daily measurement of liquidity 

needs; 

(B) Testing of procedures to liquidate 

all non-cash collateral in a timely 

manner and without significant effect 

on price; and 

(C) Application of appropriate 

collateral haircuts that accurately reflect 

market and credit risk. 

(iv) Foreign currency risk. Foreign 

currency risk policies and procedures 

shall take into account, among other 

things: 

(A) Daily measurement of the amount 

of capital exposed to fluctuations in the 

value of foreign currency to comply 

with applicable limits; and 

(B) Establishment of safeguards 

against adverse currency fluctuations. 

(v) Legal risk. Legal risk policies and 

procedures shall take into account, 

among other things: 

(A) Determinations that transactions 

and netting arrangements entered into 

have a sound legal basis; and 

(B) Establishment of documentation 

tracking procedures designed to ensure 

the completeness of relevant 

documentation and to resolve any 

documentation exceptions on a timely 

basis. 

(vi) Operational risk. Operational risk 

policies and procedures shall take into 

account, among other things: 

(A) Secure and reliable operating and 

information systems with adequate, 

scalable capacity, and independence 

from the business trading unit; 

(B) Safeguards to detect, identify, and 

promptly correct deficiencies in 

operating and information systems; and 

(C) Reconciliation of all operating and 

information systems. 

(vii) Settlement risk. Settlement risk 

policies and procedures shall take into 

account, among other things: 

(A) Establishment of standard 

settlement instructions with each 

counterparty; 

(B) Procedures to track outstanding 

settlement items and aging information 

in all accounts, including nostro and 

suspense accounts; and 

(C) Procedures to ensure timely 

payments to counterparties and to 

resolve any late payments. 

(5) Use of central counterparties. Each 

swap dealer and major swap participant 

shall establish policies and procedures 

relating to its use of central 

counterparties. Such policies and 

procedures shall: 

(i) Require the use of central 

counterparties where clearing is 

required pursuant to Commission 

regulation or order, unless the 

counterparty has properly invoked a 

clearing exemption under Commission 

regulations; 

(ii) Set forth the conditions for use of 

central counterparties for clearing when 

available as a means of mitigating 

counterparty credit risk; and 

(iii) Require diligent investigation into 

the adequacy of the financial resources 


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and risk management procedures of any 

central counterparty through which the 

swap dealer or major swap participant 

clears. 

(6) Compliance with margin and 

capital requirements. Each swap dealer 

and major swap participant shall satisfy 

all capital and margin requirements 

established by the Commission or 

prudential regulator, as applicable. 

(7) Monitoring of compliance with 

Risk Management Program. Each swap 

dealer and major swap participant shall 

establish policies and procedures to 

detect violations of the Risk 

Management Program; to encourage 

employees to report such violations to 

senior management, without fear of 

retaliation; and to take specified 

disciplinary action against employees 

who violate the Risk Management 

Program. 

(d) Business trading unit. Each swap 

dealer and major swap participant shall 

establish policies and procedures that, 

at a minimum: 

(1) Require all trading policies be 

approved by the governing body of the 

swap dealer or major swap participant; 

(2) Require that traders execute 

transactions only with counterparties 

for whom credit limits have been 

established; 

(3) Provide specific quantitative or 

qualitative limits for traders and 

personnel able to commit the capital of 

the swap dealer or major swap 

participant; 

(4) Monitor each trader throughout 

the trading day to prevent the trader 

from exceeding any limit to which the 

trader is subject, or from otherwise 

incurring undue risk; 

(5) Require each trader to follow 

established policies and procedures for 

executing and confirming all 

transactions; 

(6) Establish means to detect 

unauthorized trading activities or any 

other violation of policies and 

procedures; 

(7) Ensure that trade discrepancies are 

brought to the immediate attention of 

management of the business trading unit 

and are documented; 

(8) Ensure that the risk management 

unit reviews brokers’ statements, 

reconciles brokers’ charges to estimates, 

reviews and monitors broker’s 

commissions, and initiates payment to 

brokers; 

(9) Ensure that use of algorithmic 

trading programs is subject to policies 

and procedures governing the use, 

supervision, maintenance, testing, and 

inspection of the program; and 

(10) Require the separation of 

personnel in the business trading unit 

from personnel in the risk management 

unit. 

(e) Review and testing. (1) Risk 

Management Programs shall be 

reviewed and tested on at least a 

quarterly basis, or upon any material 

change in the business of the swap 

dealer or major swap participant that is 

reasonably likely to alter the risk profile 

of the swap dealer or major swap 

participant. 

(2) The quarterly reviews of the Risk 

Management Program shall include an 

analysis of adherence to, and the 

effectiveness of, the risk management 

policies and procedures, and any 

recommendations for modifications to 

the Risk Management Program. The 

quarterly testing shall be performed by 

qualified internal audit staff that are 

independent of the business trading unit 

being audited or by a qualified third 

party audit service reporting to staff that 

are independent of the business trading 

unit. The results of the quarterly 

reviews of the Risk Management 

Program shall be promptly reported to 

and reviewed by, the chief compliance 

officer, senior management, and 

governing body of the swap dealer or 

major swap participant. 

(3) Each swap dealer and major swap 

participant shall document all internal 

and external reviews and testing of its 

Risk Management Program and written 

risk management policies and 

procedures including the date of the 

review or test; the results; any 

deficiencies identified; the corrective 

action taken; and the date that 

corrective action was taken. Such 

documentation shall be provided to 

Commission staff, upon request. 

(f) Distribution of risk management 

policies and procedures. The Risk 

Management Program shall include 

procedures for the timely distribution of 

its written risk management policies 

and procedures to relevant supervisory 

personnel. Each swap dealer and major 

swap participant shall maintain records 

of the persons to whom the risk 

management policies and procedures 

were distributed and when they were 

distributed. 

(g) Recordkeeping. (1) Each swap 

dealer and major swap participant shall 

maintain copies of all written approvals 

required by this section. 

(2) All records or reports that a swap 

dealer or major swap participant is 

required to maintain pursuant to this 

regulation shall be maintained in 

accordance with 17 CFR 1.31 and shall 

be made available promptly upon 

request to representatives of the 

Commission and to representatives of 

applicable prudential regulators. 

§ 23.601 Monitoring of position limits. 

(a) Each swap dealer and major swap 

participant shall establish and enforce 

written policies and procedures that are 

designed to monitor for and prevent 

violations of applicable position limits 

established by the Commission, a 

designated contract market, or a swap 

execution facility, and to monitor for 

and prevent improper reliance upon any 

exemptions or exclusions from such 

position limits. For purposes of this 

regulation, such policies and procedures 

shall be referred to as ‘‘Position Limit 

Procedures.’’ The Position Limit 

Procedures shall be incorporated into 

the Risk Management Program of the 

swap dealer or major swap participant. 

(b) For purposes of the Position Limit 

Procedures, each swap dealer and major 

swap participant shall convert all swap 

positions into equivalent futures 

positions using the methodology set 

forth in Commission regulations. 

(c) Each swap dealer and major swap 

participant shall provide training to all 

relevant personnel on applicable 

position limits on an annual basis and 

promptly upon any change to applicable 

position limits. Each swap dealer and 

major swap participant shall maintain 

records of such training including the 

substance of the training and the 

identity of those receiving training. 

(d) Each swap dealer and major swap 

participant shall diligently monitor its 

trading activities and diligently 

supervise the actions of its partners, 

officers, employees, and agents to 

ensure compliance with the Position 

Limit Procedures of the swap dealer or 

major swap participant. 

(e) The Position Limit Procedures of 

each swap dealer and major swap 

participant shall implement an early 

warning system designed to detect and 

alert its senior management when 

position limits are in danger of being 

breached (such as when trading has 

reached a percentage threshold of the 

applicable position limit, and when 

position limits have been exceeded). 

Any detected violation of applicable 

position limits shall be reported 

promptly to the firm’s governing body 

and to the Commission. Each swap 

dealer and major swap participant shall 

maintain a record of any early warning 

received, any position limit violation 

detected, any action taken as a result of 

either, and the date action was taken. 

(f) Each swap dealer and major swap 

participant shall test its Position Limit 

Procedures for adequacy and 

effectiveness each month and maintain 

records of such monthly tests; the 

results thereof; any action that is taken 

as a result thereof including, without 

limitation, any recommendations for 


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modifications to the firm’s Position 

Limit Procedures; and the date action 

was taken. 

(g) Each swap dealer and major swap 

participant shall document its 

compliance with applicable position 

limits established by the Commission, a 

designated contract market, or a swap 

execution facility in a written report on 

a quarterly basis. Such report shall be 

promptly reported to and reviewed by 

the chief compliance officer, senior 

management, and governing body of the 

swap dealer or major swap participant, 

and shall include, without limitation, a 

list of all early warnings received, all 

position limit violations, the action 

taken in response, the results of the 

monthly position limit testing required 

by this regulation, any deficiencies in 

the Position Limit Procedures, the status 

of any pending amendments to the 

Position Limit Procedures, and any 

action taken to amend the Position 

Limit Procedures to ensure compliance 

with all applicable position limits. Each 

swap dealer and major swap participant 

shall retain a copy of this report. 

(h) On an annual basis, each swap 

dealer and major swap participant shall 

audit its Position Limit Procedures as 

part of the audit of its Risk Management 

Program required by Commission 

regulations. 

(i) All records required to be 

maintained pursuant to these 

regulations shall be maintained in 

accordance with 17 CFR 1.31 and shall 

be made available promptly upon 

request to representatives of the 

Commission and to representatives of 

applicable prudential regulators. 

§ 23.602 Diligent supervision. 

(a) Supervision. Each swap dealer and 

major swap participant shall establish 

and maintain a system to supervise, and 

shall diligently supervise, all activities 

relating to its business performed by its 

partners, members, officers, employees, 

and agents (or persons occupying a 

similar status or performing a similar 

function). Such system shall be 

reasonably designed to achieve 

compliance with the requirements of the 

Commodity Exchange Act and 

Commission regulations. 

(b) Supervisory System. Such 

supervisory system shall provide, at a 

minimum, for the following: 

(1) The designation, where applicable, 

of a person with authority to carry out 

the supervisory responsibilities of the 

swap dealer or major swap participant 

for all activities relating to its business 

as a swap dealer or major swap 

participant. 

(2) The use of reasonable efforts to 

determine that all supervisors are 

qualified and meet such standards of 

training, experience, competence, and 

such other qualification standards as the 

Commission finds necessary or 

appropriate. 

§ 23.603 Business continuity and disaster 

recovery. 

(a) Business continuity and disaster 

recovery plan required. Each swap 

dealer and major swap participant shall 

establish and maintain a written 

business continuity and disaster 

recovery plan that outlines the 

procedures to be followed in the event 

of an emergency or other disruption of 

its normal business activities. The 

business continuity and disaster 

recovery plan shall be designed to 

enable the swap dealer or major swap 

participant to continue or to resume any 

operations by the next business day 

with minimal disturbance to its 

counterparties and the market, and to 

recover all documentation and data 

required to be maintained by applicable 

law and regulation. 

(b) Essential components. The 

business continuity and disaster 

recovery plan of a swap dealer or major 

swap participant shall include the 

following components: 

(1) Identification of the documents, 

data, facilities, infrastructure, personnel 

and competencies essential to the 

continued operations of the swap dealer 

or major swap participant and to fulfill 

the obligations of the swap dealer or 

major swap participant. 

(2) Identification of the supervisory 

personnel responsible for implementing 

each aspect of the business continuity 

and disaster recovery plan and the 

emergency contacts required to be 

provided pursuant to this regulation. 

(3) A plan to communicate with the 

following persons in the event of an 

emergency or other disruption, to the 

extent applicable to the operations of 

the swap dealer or major swap 

participant: Employees; counterparties; 

swap data repositories; execution 

facilities; trading facilities; clearing 

facilities; regulatory authorities; data, 

communications and infrastructure 

providers and other vendors; disaster 

recovery specialists and other persons 

essential to the recovery of 

documentation and data, the 

resumption of operations, and 

compliance with the Commodity 

Exchange Act and Commission 

regulations. 

(4) Procedures for, and the 

maintenance of, back-up facilities, 

systems, infrastructure, personnel and 

other resources to achieve the timely 

recovery of data and documentation and 

to resume operations as soon as 

reasonably possible and generally 

within the next business day. 

(5) Maintenance of back-up facilities, 

systems, infrastructure and personnel in 

one or more areas that are 

geographically separate from the swap 

dealer’s or major swap participant’s 

primary facilities, systems, 

infrastructure and personnel (which 

may include contractual arrangements 

for the use of facilities, systems and 

infrastructure provided by third parties). 

(6) Back-up or copying, with 

sufficient frequency, of documents and 

data essential to the operations of the 

swap dealer or major swap participant 

or to fulfill the regulatory obligations of 

the swap dealer or major swap 

participant and storing the information 

off-site in either hard-copy or electronic 

format. 

(7) Identification of potential business 

interruptions encountered by third 

parties that are necessary to the 

continued operations of the swap dealer 

or major swap participant and a plan to 

minimize the impact of such 

disruptions. 

(c) Distribution to employees. Each 

swap dealer and major swap participant 

shall distribute a copy of its business 

continuity and disaster recovery plan to 

relevant employees and promptly 

provide any significant revision thereto. 

Each swap dealer and major swap 

participant shall maintain copies of the 

business continuity and disaster 

recovery plan at one or more accessible 

off-site locations. Each swap dealer and 

major swap participant shall train 

relevant employees on applicable 

components of the business continuity 

and disaster recovery plan. 

(d) Commission notification. Each 

swap dealer and major swap participant 

shall promptly notify the Commission of 

any emergency or other disruption that 

may affect the ability of the swap dealer 

or major swap participant to fulfill its 

regulatory obligations or would have a 

significant adverse effect on the swap 

dealer or major swap participant, its 

counterparties, or the market. 

(e) Emergency contacts. Each swap 

dealer and major swap participant shall 

provide to the Commission the name 

and contact information of two 

employees who the Commission can 

contact in the event of an emergency or 

other disruption. The individuals 

identified shall be authorized to make 

key decisions on behalf of the swap 

dealer or major swap participant and 

have knowledge of the firm’s business 

continuity and disaster recovery plan. 

The swap dealer or major swap 

participant shall provide the 

Commission with any updates to this 

information promptly. 


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71408 Federal Register / Vol. 75, No. 225 / Tuesday, November 23, 2010 / Proposed Rules 

(f) Review and modification. A 

member of the senior management of 

each swap dealer and major swap 

participant shall review the business 

continuity and disaster recovery plan 

annually or upon any material change to 

the business. Any deficiencies found or 

corrective action taken shall be 

documented. 

(g) Testing. Each business continuity 

and disaster recovery plan shall be 

tested annually by qualified, 

independent internal audit personnel or 

a qualified third party audit service. The 

date the testing was performed shall be 

documented, together with the nature 

and scope of the testing, any 

deficiencies found, any corrective action 

taken, and the date that corrective 

action was taken. 

(h) Business continuity and disaster 

recovery plans required by other 

regulatory authorities. A swap dealer or 

major swap participant shall comply 

with the requirements of this regulation 

in addition to any business continuity 

and disaster recovery requirements that 

are imposed upon the swap dealer or 

major swap participant by its prudential 

regulator or any other regulatory or selfregulatory authority. 

(i) Recordkeeping. The business 

continuity and disaster recovery plan of 

the swap dealer and major swap 

participant and all other records 

required to be maintained pursuant to 

this section shall be maintained in 

accordance with Commission 

Regulation § 1.31 and shall be made 

available promptly upon request to 

representatives of the Commission and 

to representatives of applicable 

prudential regulators. 

§ 23.604 [Reserved] 

§ 23.605 [Reserved] 

§ 23.606 General information: Availability 

for disclosure and inspection. 

(a) Disclosure of information. (1) Each 

swap dealer and major swap participant 

shall make available for disclosure to 

and inspection by the Commission and 

its prudential regulator, as applicable, 

all information required by, or related 

to, the Commodity Exchange Act and 

Commission regulations, including: 

(i) The terms and condition of its 

swaps; 

(ii) Its swaps trading operations, 

mechanisms, and practices; 

(iii) Financial integrity and risk 

management protections relating to 

swaps; and 

(iv) Any other information relevant to 

its trading in swaps. 

(2) Such information shall be made 

available promptly, upon request, to 

Commission staff and the staff of the 

applicable prudential regulator, at such 

frequency and in such manner as is set 

forth in the Commodity Exchange Act, 

Commission regulations, or the 

regulations of the applicable prudential 

regulator. 

(b) Ability to provide information. 

(1) Each swap dealer and major swap 

participant shall establish and maintain 

reliable internal data capture, 

processing, storage, and other 

operational systems sufficient to 

capture, process, record, store, and 

produce all information necessary to 

satisfy its duties under the Commodity 

Exchange Act and Commission 

regulations. Such systems shall be 

designed to produce the information 

within the time frames set forth in the 

Commodity Exchange Act and 

Commission regulations or upon 

request, as applicable. 

(2) Each swap dealer and major swap 

participant shall establish, implement, 

maintain, and enforce written 

procedures for the capture, processing, 

recording, storage, and production of all 

information necessary to satisfy its 

duties under the Commodity Exchange 

Act and Commission regulations. 

(c) Record retention. All records or 

reports that a swap dealer or major swap 

participant is required to maintain 

pursuant to this regulation shall be 

maintained in accordance with 17 CFR 

1.31 and shall be made available 

promptly upon request to 

representatives of the Commission and 

to representatives of applicable 

prudential regulators. 

§ 23.607 Antitrust considerations. 

(a) No swap dealer or major swap 

participant shall adopt any process or 

take any action that results in any 

unreasonable restraint of trade, or 

impose any material anticompetitive 

burden on trading or clearing, unless 

necessary or appropriate to achieve the 

purposes of the Commodity Exchange 

Act. 

(b) Consistent with its obligations 

under paragraph (a) of this section, each 

swap dealer and major swap participant 

shall adopt policies and procedures to 

prevent actions that result in 

unreasonable restraint of trade, or 

impose any material anticompetitive 

burden on trading or clearing. 

Issued in Washington, DC, on November 

10, 2010, by the Commission. 

David A. Stawick, 

Secretary of the Commission. 

Statement of Chairman Gary Gensler 

Regulations Establishing and Governing the 

Duties of Swap Dealers and Major Swap 

Participants 

I support the proposed business conduct 

standards rulemaking that establishes risk 

management policies for swap dealers and 

major swap participants. One of the primary 

goals of the Dodd-Frank Act was to bring 

swap dealers and major swap participants 

under comprehensive regulation to reduce 

risk to the financial system and to the 

economy as a whole. The proposed rules are 

consistent with the Congressional 

requirement that swap dealers and major 

swap participants: (1) Monitor trading to 

prevent violations of position limits; (2) 

establish risk management procedures for 

managing their day-to-day business; (3) 

disclose to the Commission and to applicable 

prudential regulators general information 

relating to trading practices and financial 

integrity of swaps; (4) establish and enforce 

internal systems and procedures to obtain 

information needed to perform all of the 

duties prescribed; (5) implement conflicts of 

interest systems and procedures; and (6) 

refrain from unreasonably restraining trade or 

imposing an anticompetitive burden on 

trading or clearing. 

[FR Doc. 2010–29009 Filed 11–22–10; 8:45 am] 

BILLING CODE 6351–01–P 

DEPARTMENT OF HOMELAND 

SECURITY 

Coast Guard 

33 CFR Part 165 

[Docket No. USCG–2010–0997] 

RIN 1625–AA00 

Safety Zones: Fireworks Displays in 

the Captain of the Port Columbia River 

Zone 

AGENCY: Coast Guard, DHS. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: The Coast Guard proposes to 

amend the enforcement period for the 

safety zone established for the Oregon 

Symphony Concert Fireworks Display 

in Portland, Oregon. The amendment is 

necessary because in recent years the 

actual date of the event has differed 

from that listed in the enforcement 

period of the regulation. 

DATES: Comments and related material 

must be received by the Coast Guard on 

or before February 22, 2011. Requests 

for public meetings must be received by 

the Coast Guard on or before January 7, 

2011. The Coast Guard anticipates that 


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