2554 Federal Register / Vol. 89, No. 10 / Tuesday, January 16, 2024 / Proposed Rules 

(e) Warning statements. Each product 

shall address the warning statements 

shown on figure 13 to paragraph (d)(7) 

of this section, at a minimum. 

Note 4 to paragraph (e): ‘‘Address’’ means 

that verbiage other than what is shown can 

be used as long as the meaning is the same 

or information that is product-specific is 

presented. 

§ 1243.7 Instructional literature. 

(a) Instructions shall be provided with 

the product and shall be easy to read 

and understand and shall be in the 

English language at a minimum. These 

instructions shall include information 

on assembly, maintenance, cleaning, 

and use, where applicable. 

(b) The instructions shall address the 

following additional warnings: 

(1) Read all instructions before using 

this product. 

(2) Keep instructions for future use. 

(3) Do not use this this product if it 

is damaged or broken. 

(4) Instructions shall indicate the 

manufacturer’s recommended maximum 

weight, height, age, developmental 

level, or combination thereof, of the 

occupant for which the infant support 

cushion is intended. If this product is 

not intended for use by a child for a 

specific reason, the instructions shall 

state this limitation. 

(c) The cautions and warnings in the 

instructions shall meet the requirements 

specified in § 1243.6(d)(4) though (6), 

except that sections 6.4 and 7.2–7.6.3 of 

ANSI Z535.4—2011 need not be 

applied. However, the signal word and 

safety alert symbol shall contrast with 

the background of the signal word 

panel, and the cautions and warnings 

shall contrast with the background of 

the instructional literature. 

Note 1 to paragraph (c): For example, the 

signal word, safety alert symbol, and the 

warnings may be black letters on a white 

background, white letters on a black 

background, navy blue letters on an off-white 

background, or some other high-contrast 

combination. 

(d) Any instructions provided in 

addition to those required by this 

section shall not contradict or confuse 

the meaning of the required information 

or be otherwise misleading to the 

consumer. 

§ 1243.8 Incorporation by reference. 

Certain material is incorporated by 

reference into this part with the 

approval of the Director of the Federal 

Register under 5 U.S.C. 552(a) and 1 

CFR part 51. All approved incorporation 

by reference (IBR) material is available 

for inspection at the U.S. Consumer 

Product Safety Commission and at the 

National Archives and Records 

Administration (NARA). Contact the 

U.S. Consumer Product Safety 

Commission at: the Office of the 

Secretary, U.S. Consumer Product 

Safety Commission, 4330 East West 

Highway, Bethesda, MD 20814; phone 

(301) 504–7479; email: cpsc-os@

cpsc.gov. For information on the 

availability of this material at NARA, 

visit www.archives.gov/federal-register/ 

cfr/ibr-locations or email fr.inspection@

nara.gov. The material may be obtained 

from the following sources: 

(a) American National Standards 

Institute (ANSI), 25 West 43rd Street, 

4th Floor, New York, NY 10036, USA; 

phone: (212) 642–4900; website: 

www.ansi.org (https://ibr.ansi.org/ 

Standards/nema.aspx). 

(1) ANSI Z535.4–2011, American 

National Standard for Product Safety 

Signs and Labels, approved October 20, 

2017; approved for § 1243.6. 

(2) [Reserved] 

(b) ASTM International, 100 Barr 

Harbor Drive, P.O. Box CB700, West 

Conshohocken, Pennsylvania 19428– 

2959; phone: (800) 262–1373; website: 

www.astm.org. 

(1) ASTM D3359–23, Standard Test 

Methods for Rating Adhesion by Tape 

Test, approved [TBD]; approved for 

§ 1243.5. 

(2) [Reserved] 

Alberta E. Mills, 

Secretary, Consumer Product Safety 

Commission. 

[FR Doc. 2023–27324 Filed 1–12–24; 8:45 am] 

BILLING CODE 6355–01–P 

COMMODITY FUTURES TRADING 

COMMISSION 

17 CFR Part 23 

RIN 3038–AF33 

Capital and Financial Reporting 

Requirements for Swap Dealers and 

Major Swap Participants 

AGENCY: Commodity Futures Trading 

Commission. 

ACTION: Proposed rule. 

SUMMARY: The Commodity Futures 

Trading Commission (‘‘Commission’’ or 


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Federal Register / Vol. 89, No. 10 / Tuesday, January 16, 2024 / Proposed Rules 2555 

1Capital Requirements of Swap Dealers and 

Major Swap Participants, 85 FR 57462 (Sept. 15, 

2020) (the ‘‘Final Rule’’ or the ‘‘Final Rules’’). 

2Section 4s(e) of the Commodity Exchange Act 

(‘‘CEA’’ or the ‘‘Act’’), 7 U.S.C. 6s(e), which is 

contained in section 731 of the Dodd-Frank Act, 

requires the Commission to adopt minimum capital 

and margin requirements for SDs and MSPs that are 

not subject to a prudential regulator. Section 731 of 

the Dodd-Frank Wall Street Reform and Consumer 

Protection Act, Public Law 111–203, 124 Stat. 1376 

(2010) (the ‘‘Dodd-Frank Act’’). The text of the 

Dodd-Frank Act is available at https://www.cftc.

gov/LawRegulation/OTCDERIVATIVES/index.htm. 

3The term ‘‘prudential regulator’’ is defined as 

the Board of Governors of the Federal Reserve 

System (‘‘Federal Reserve Board’’); the Office of the 

Comptroller of the Currency (‘‘OCC’’); the Federal 

Deposit Insurance Corporation (‘‘FDIC’’); the Farm 

Credit Administration; and the Federal Housing 

Finance Agency. Section 1a(39) of the CEA, 7 U.S.C. 

1a(39). 

4To date, the Commission has issued proposals 

for substituted compliance for eligible nonbank SDs 

domiciled in Japan, Mexico, and the European 

Union for public comment. Notice of Proposed 

Order and Request for Comment on an Application 

for a Capital Comparability Determination From the 

Financial Services Agency of Japan, 87 FR 48092 

(Aug. 8, 2022); Notice of Proposed Order and 

Request for Comment on an Application for a 

Capital Comparability Determination Submitted on 

Behalf of Nonbank Swap Dealers Subject to 

Regulation by the Mexican Comision Nacional 

Bancaria y de Valores, 87 FR 76374 (Dec. 13, 2022); 

Notice of Proposed Order and Request for Comment 

on an Application for a Capital Comparability 

Determination Submitted on Behalf of Nonbank 

Swap Dealers Domiciled in the French Republic 

and Federal Republic of Germany and Subject to 

Capital and Financial Reporting Requirements of 

the European Union, 88 FR 41774 (June 27, 2023). 

5Capital Requirements of Swap Dealers and 

Major Swap Participants, 76 FR 27802 (May 12, 

2011). 

6Capital Requirements of Swap Dealers and 

Major Swap Participants, 81 FR 91252 (Dec. 16, 

2016) (the ‘‘2016 Capital Proposal’’). 

7The comment letters for the 2016 Capital 

Proposal are available at https://comments.cftc.gov/ 

PublicComments/CommentList.aspx?id=1769 (the 

public comment file). 

‘‘CFTC’’) proposes to amend certain of 

the Commission’s regulations that 

impose minimum capital requirements 

and financial reporting obligations on 

swap dealers (‘‘SDs’’) and major swap 

participants (‘‘MSPs’’). The Commission 

proposes to do this by codifying parts of 

staff interpretive letter 21–15 to SDs 

addressing the Tangible Net Worth 

Capital Approach for calculating capital 

under the applicable Commission 

regulation and no-action letter 21–18 

(and its successor no-action letter 23– 

11) regarding alternative financial 

reporting by SDs subject to the capital 

requirements of a prudential regulator 

(together, ‘‘CFTC Letters’’). The 

Commission is also proposing to amend 

certain of its regulations applicable to 

SDs, in areas including the required 

timing of certain notifications, the 

process for approval of subordinated 

debt for capital, and the revision of 

financial reporting forms to conform to 

the rules. The proposed amendments 

are intended to make it easier for SDs 

to comply with the Commission’s 

financial reporting obligations and 

demonstrate compliance with minimum 

capital requirements. 

DATES: Comments must be received on 

or before February 13, 2024. 

ADDRESSES: You may submit comments, 

which must be in writing and identified 

by RIN 3038–AF33, by any of the 

following methods: 

• CFTC Comments Portal: https://

comments.cftc.gov. Select the ‘‘Submit 

Comments’’ link for this rulemaking and 

follow the instructions on the Public 

Comment Form. 

• Mail: Send to Christopher 

Kirkpatrick, Secretary of the 

Commission, Commodity Futures 

Trading Commission, Three Lafayette 

Centre, 1155 21st Street NW, 

Washington, DC 20581. 

• Hand Delivery/Courier: Follow the 

same instruction as for Mail, above. 

Please submit your comments using 

only one of these methods. Submissions 

through the CFTC Comments Portal are 

encouraged. 

All comments must be submitted in 

English, or if not, accompanied by an 

English translation. Comments will be 

posted as received to https://comments.

cftc.gov. You should only submit 

information that you wish to make 

available publicly. If you wish the 

Commission to consider information 

that you believe is exempt from 

disclosure under the Freedom of 

Information Act (FOIA), a petition for 

confidential treatment of the exempt 

information may be submitted according 

to the procedures in § 145.9 of the 

Commission’s regulations. 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 https://

comments.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 (APA) 

and other applicable laws and may be 

accessible under the FOIA. 

FOR FURTHER INFORMATION CONTACT: 

Amanda L. Olear, Director, 202–418– 

5283, aolear@cftc.gov; Thomas Smith, 

Deputy Director, 202–418–5495, 

tsmith@cftc.gov; Joshua Beale, Associate 

Director, 202–418–5446, jbeale@

cftc.gov; Jennifer Bauer, Special 

Counsel, 202–418–5472, jbauer@

cftc.gov; Maria Aguilar-Rocha, Attorney 

Advisor, 202–418–5840, maguilarrocha@cftc.gov; Andrew Pai, Attorney 

Advisor, 646–746–9893, apai@cftc.gov; 

Market Participants Division; Lihong 

McPhail, Research Economist, 202–418– 

5722, lmcphail@cftc.gov, Office of the 

Chief Economist; Commodity Futures 

Trading Commission, Three Lafayette 

Centre, 1155 21st Street NW, 

Washington, DC 20581. 

SUPPLEMENTARY INFORMATION: On 

September 15, 2020, the Commission 

published in the Federal Register final 

rules adopting capital and financial 

reporting requirements for SDs and 

MSPs.1 The Final Rules accomplished 

the Congressional mandate 2 directing 

the Commission to adopt rules imposing 

both capital requirements and initial 

and variation margin requirements on 

SDs and MSPs that are not subject to a 

prudential regulator (‘‘nonbank SDs’’ 

and ‘‘nonbank MSPs’’, respectively).3

The Final Rules included amendments 

to existing capital rules for futures 

commission merchants (‘‘FCMs’’) to 

provide explicit additional capital 

requirements for proprietary positions 

in swaps and security-based swaps that 

are not cleared by a clearing 

organization. The Final Rules also 

included a detailed capital model 

application process whereby eligible 

nonbank SDs and nonbank MSPs could 

apply to the Commission or a registered 

futures association (‘‘RFA’’) of which 

they are a member for approval. Further, 

the Final Rules adopted a capital 

comparability determination process for 

certain eligible foreign domiciled 

nonbank SDs and nonbank MSPs to seek 

substituted compliance for the 

Commission’s capital and financial 

reporting requirements.4 Finally, the 

Final Rules adopted detailed financial 

reporting, recordkeeping and 

notification requirements, including 

limited financial reporting requirements 

for SDs and MSPs subject to the capital 

requirements of prudential regulators 

(‘‘bank SDs’’ and ‘‘bank MSPs’’, 

respectively). 

The Commission initially proposed 

capital and financial reporting 

requirements for nonbank SDs and 

nonbank MSPs, and financial reporting 

requirements for bank SDs and bank 

MSPs, in 2011.5 After extensive 

comment, in 2016 the Commission reproposed the rules for comment.6 The 

Commission received numerous 

comments from a broad spectrum of 

market participants in response to the 

re-proposal.7 In addition, following the 

2016 re-proposal, the SEC adopted a 

final set of capital, margin and financial 

reporting requirements for securitybased swap dealers and major securityVerDate Sep<11>2014 16:48 Jan 12, 2024 Jkt 262001 PO 00000 Frm 00041 Fmt 4702 Sfmt 4702 E:\FR\FM\16JAP1.SGM 16JAP1

ddrumheller on DSK120RN23PROD with PROPOSALS1
2556 Federal Register / Vol. 89, No. 10 / Tuesday, January 16, 2024 / Proposed Rules 

8Capital, Margin and Segregation Requirements 

for Security-Based Swap Dealers and Major 

Security-Based Swap Participants and Capital and 

Segregation Requirements for Broker-Dealers, 84 FR 

43872 (Aug. 22, 2019) (the ‘‘SEC Final Capital 

Rule’’). 

9Capital Requirements of Swap Dealers and 

Major Swap Participants, 84 FR 69664 (Dec. 19, 

2019). 

10Final Rules, 85 FR at 57462. 

11 Id. at 57525. 

12 Id. 

13See generally id. at 57467. The three methods 

discussed in detail in the Final Rules include the 

Bank-Based Capital Approach, the Tangible Net 

Worth Capital Approach, and the Net Liquid Assets 

Capital Approach. 

14See generally id. at 57480–57502. 

15See generally id. at 57491–57498. This 

approach is consistent with other Commission rules 

that permit the acceptance of certain filings under 

the SEC adopted final rules in lieu of the 

Commission’s own rules. See e.g., 17 CFR 

1.10(b)(1), 23.105(d)(3), and (e)(5). 16See generally Performance of Registration 

Functions by National Futures Association with 

Respect to Swap Dealers and Major Swap 

Participants, 77 FR 2708 (Jan. 19, 2012). 

17Final Rules, 85 FR 57507–57510. 

18 Id. at 57515. 

19 Id. at 57518. 

20CFTC Letter No. 21–03, Jan. 12, 2021, available 

at https://www.cftc.gov/csl/21-03/download. 

21NFA submitted these rules for Commission 

review under section 17(j) of the CEA, 7 U.S.C. 

21(j), on November 22, 2021, and the rules became 

effective on December 21, 2021. NFA Notice to 

Members I–21–45, available at https://www.nfa.

futures.org/news/newsNotice.asp?ArticleID=5437. 

22CFTC Letter No. 21–15, June 29, 2021, available 

at https://www.cftc.gov/csl/21-15/download; CFTC 

Letter No. 21–18, Aug. 31, 2021, available at https:// 

www.cftc.gov/csl/21-18/download; CFTC Letter No. 

21–20, Sept. 30, 2021, available at https://

www.cftc.gov/csl/21-20/download; CFTC Letter No. 

21–21, Sept. 30, 2021, available at https://

www.cftc.gov/csl/21-21/download; CFTC Letter No. 

21–22, Sept. 30, 2021, available at https://

www.cftc.gov/csl/21-22/download; CFTC Letter No. 

21–23, Sept. 30, 2021, available at https://

www.cftc.gov/csl/21-23/download; CFTC Letter No. 

22–01, Jan. 5, 2022, available at https://

www.cftc.gov/csl/22-01/download; CFTC Letter No. 

22–02, Jan. 5, 2022, available at https://

www.cftc.gov/csl/22-02/download. 

23CFTC Letter No. 21–18 was time-limited and 

set to expire on October 23, 2023. To permit time 

for the Commission to issue a proposed rulemaking 

and address any comments received, the Market 

Participants Division extended the expiration of the 

letter to the earlier of October 6, 2025, or the 

adoption of any revised financial reporting 

requirements for bank SDs under regulation 

§ 23.105(p). CFTC Letter No. 23–11, July 10, 2023, 

available at https://www.cftc.gov/csl/23-11/ 

download. 

24 17 CFR 23.100. 

25CFTC Letter No. 21–15. 

based swap participants (‘‘SBSDs’’ and 

‘‘MSBSPs,’’ respectively).8 In December 

2019, the Commission re-opened the 

proposed rules for comment in light of 

the SEC’s final rules, and requested 

commenters to provide detailed data 

and information regarding several 

critical areas of the Commission’s 

proposed approach.9

The Final Rules became effective 

November 16, 2020.10 To address 

concerns from commenters that a 

sufficient period of time would be 

necessary to develop policies, 

procedures and systems to implement 

the new financial reporting 

requirements and to develop and obtain 

approval to use capital models, the 

Commission adopted an extended 

compliance date of October 6, 2021 

(‘‘Extended Compliance Date’’).11 The 

Extended Compliance Date also 

corresponded to the SEC’s compliance 

date for SBSDs and MSBSPs, thus 

permitting better coordination for 

dually-registered entities.12

The Commission’s overall capital 

approach in the Final Rules permits 

nonbank SDs and MSPs to select one of 

three methods to calculate their capital 

requirements.13 Each method is 

discussed in detail in the Final Rule and 

determines the frequency and type of 

financial reporting information to be 

provided to the Commission by each 

nonbank SD and nonbank MSP.14 Bank 

SDs, which are not subject to the capital 

requirements of the Commission, are 

required to provide the Commission and 

National Futures Association (‘‘NFA’’) 

with limited financial information 

regarding the capital and swap positions 

of the firms. Bank SDs are required to 

file the limited financial information 

using CFTC forms that were intended to 

be comparable with forms required by 

the prudential regulators and consistent 

with forms adopted by the SEC for 

SBSDs subject to the capital rules of a 

prudential regulator.15 Together, the 

financial reporting and notice 

requirements included in the Final 

Rules serve as the mechanism for the 

Commission to monitor capital 

compliance by nonbank SDs. 

In the Final Rule, the Commission 

also recognized the role of NFA as the 

only RFA under the CEA. NFA is an 

integral component of the Commission’s 

registration and oversight program. 

Specifically, the Commission has 

authorized NFA to administer the 

registration process for SDs and MSPs,16

and to approve the use of capital and 

initial margin models. NFA also 

conducts examinations of nonbank SDs 

and nonbank MSPs to assess 

compliance with Commission and NFA 

rules.17 As such, the Final Rules 

required that financial reports and 

notices be filed with both the 

Commission and the NFA,18 and 

explicitly recognized NFA’s ability to 

adopt standardized forms and processes 

to carry out the Commission’s financial 

reporting and notification requirements 

for SDs.19

During the period leading up to the 

Extended Compliance Date, 

Commission, NFA, and SEC staff 

collaborated to develop a process for the 

collection of financial reports and to 

respond to inquiries from industry 

participants regarding compliance with 

financial reporting and notice 

obligations. On January 12, 2021, 

Commission staff approved NFA’s 

capital model application process.20 On 

December 21, 2021, NFA adopted new 

Financial Requirements Section 18 of its 

rules, which in addition to including 

capital rules largely modeled after those 

adopted by the Commission in the Final 

Rules, published newly developed 

standardized financial reporting forms 

FR–CSE–NLA and FR–CSE–BHC for use 

by nonbank SDs that are not also 

registered with the SEC.21

Prior to the Extended Compliance 

Date, Commission staff also received 

inquiries from market participants 

regarding compliance with various 

capital and financial reporting 

obligations under the Final Rule. In 

response, Commission staff issued eight 

no-action and interpretative letters.22

Two letters, CFTC Letters No. 21–15 and 

21–18,23 are discussed below in detail 

and inform this proposed rulemaking. In 

addition, the Commission is proposing 

several other amendments that are the 

result of Commission staff’s experience 

implementing the Final Rule. These 

amendments are intended to provide 

technical and other clarifying changes 

necessary to effectuate the Final Rule’s 

purpose. 

II. Proposed Amendments to 

Commission Regulations 

A. Codification of the CFTC Letters and 

Other Amendments 

1. Amendments to Tangible Net Worth 

Capital Approach—CFTC Letter No. 21– 

15 

The Commission is proposing 

amendments to definitions in 

Commission regulation § 23.100 24 to 

ensure that the Tangible Net Worth 

Capital Approach may be utilized by 

eligible nonbank SDs as intended in the 

Final Rule. Prior to the Final Rules’ 

implementation date, several nonbank 

SDs intending to elect the Tangible Net 

Worth Capital Approach raised 

concerns regarding the application of 

the eligibility test to different corporate 

structures. In response to concerns 

raised, the Market Participants Division 

(the ‘‘Division’’) issued interpretive 

CFTC Letter No. 21–15 on June 29, 

2021.25 In CFTC Letter No. 21–15, the 

Division stated that the asset and 

revenue tests for ‘‘predominantly 

engaged in non-financial activities’’ 

could be assessed at the nonbank SD’s 


ddrumheller on DSK120RN23PROD with PROPOSALS1
Federal Register / Vol. 89, No. 10 / Tuesday, January 16, 2024 / Proposed Rules 2557 

26 Id. at 3–6. 

27 Id. Compare 17 CFR 23.105(d) with 17 CFR 

23.105(l), as the former includes monthly or 

quarterly periodicity as opposed to the latter only 

referring to monthly. 

28See 17 CFR 23.100 for the definition of the term 

‘‘predominantly engaged in non-financial 

activities.’’ 

29See 17 CFR 23.100 for the definition of the term 

‘‘tangible net worth.’’ 

30 84 FR 69664 at 69668. 

31Final Rules, 85 FR 57480. 

32 Id. at 57499. 

33See 17 CFR 23.100 for the definition of the term 

‘‘tangible net worth.’’ 

34 17 CFR 23.105(d) and (e). 

35 Id. 

36 17 CFR 23.105. 

37Final Rules, 85 FR 57514. 

38 17 CFR 23.105(l). 

39Appendix B to subpart E of part 23. 

40 17 CFR 23.105(d). 

41Final Rules, 85 FR 57514–57515. 

42SEC Form X–17A–5 FOCUS Report Part IIC, 

available at https://www.sec.gov/manage-filings/ 

forms-index/form-x-17a-5-2c. 

entity level or ultimate parent level and, 

further, such tests could be computed 

under International Financial Reporting 

Standards issued by the International 

Accounting Standards Board (‘‘IFRS’’) 

in lieu of generally accepted accounting 

principles (‘‘GAAP’’) as adopted in the 

United States if the entity was permitted 

to use IFRS for financial reporting.26

The Division also confirmed that 

supplemental position reporting for 

nonbank SDs meeting these 

qualifications may be filed on a 

quarterly basis along with the financial 

reports, as opposed to monthly.27 In the 

Commission’s experience over the past 

two years, the interpretation in CFTC 

Letter No. 21–15 helped eligible 

nonbank SDs better understand their 

compliance obligations under the 

Commission’s capital and financial 

reporting requirements at the 

implementation date of the Final Rules 

by pointing out an obvious but 

inadvertent mistake in the Final Rules. 

Therefore, the Commission is now 

proposing to modify the relevant 

Commission regulations to more fully 

align the Tangible Net Worth Capital 

Approach with the Commission’s 

intention as expressed in the preamble 

to the Final Rules and consistent with 

the terms of CFTC Letter No. 21–15. 

The Commission is proposing to 

amend the definition in Commission 

regulation 23.100 of ‘‘predominantly 

engaged in non-financial activities.’’ 28

This definition is one of the key 

components, along with the definition 

of ‘‘tangible net worth,’’ 29 in 

determining the eligibility for electing 

and the application of the Tangible Net 

Worth Capital Approach.30 Eligibility 

for this approach is conditioned upon a 

nonbank SD meeting both a revenue and 

asset-based test to determine if the 

nonbank SD is predominantly engaged 

in non-financial activities. The 

proposed amendment would modify the 

definition of ‘‘predominantly engaged in 

non-financial activities’’ in Commission 

regulation § 23.100 to explicitly permit 

the satisfaction of both the revenue and 

asset-based tests at the consolidated 

parent level of the nonbank SD as 

discussed in the preamble to the Final 

Rules. That is, the proposed 

amendments would clarify that the tests 

may be satisfied either at the level of the 

nonbank SD or at the level of the 

nonbank SD’s consolidated parent 31

rather than seeming to exclude the 

consolidated parent of the nonbank SD 

as questioned by some commenters.32

The Commission is also proposing to 

amend the definition of ‘‘tangible net 

worth’’ in Commission regulation 

§ 23.100.33 Nonbank SDs electing the 

Tangible Net Worth Capital Approach 

are currently permitted to use IFRS for 

their financial reporting obligations 

under Commission regulation 

§ 23.105.34 IFRS is permitted as an 

acceptable reporting standard for all 

nonbank SDs provided that they 

otherwise do not prepare financial 

statements in accordance with U.S. 

GAAP.35 The definition of ‘‘tangible net 

worth’’ in Commission regulation 

§ 23.100, however, only references U.S. 

GAAP, despite the permissive use of 

IFRS as part of financial reporting 

obligations under Commission 

regulation § 23.105.36 The proposed 

amendments to the definition of 

‘‘tangible net worth’’ in Commission 

regulation § 23.100 would clarify that 

‘‘tangible net worth’’ may be determined 

under either applicable accounting 

standard, U.S. GAAP or IFRS. This 

amendment would align and correct the 

permitted use of IFRS in determining 

eligibility for the approach with the 

standard permitted and utilized by the 

nonbank SD in preparation of its 

financial statements. As discussed in 

the Final Rule, the Commission is 

generally comfortable with both U.S. 

GAAP and IFRS accounting standards in 

this context, especially as both 

standards continue to move towards 

greater convergence.37 The Commission 

has preliminarily determined that 

nonbank SDs utilizing the same 

standard as is permitted for their 

financial reporting comports with the 

purpose of the eligibility test to 

determine if a SD is predominantly 

engaged in non-financial activities. 

The Commission is also proposing to 

amend Commission regulation 

§ 23.105(l) 38 to require that each 

nonbank SD and nonbank MSP file 

Appendix B to Subpart E of Part 23 

(‘‘Appendix B’’),39 which contains 

aggregate securities, commodities, and 

swap position information and certain 

credit exposure information, with the 

Commission and NFA on a quarterly 

rather than a monthly basis. This 

proposed amendment would align that 

filing with the periodicity permitted as 

part of the nonbank SD’s or nonbank 

MSP’s routine financial report filings 

required by Commission regulation 

§ 23.105(d) and would clarify that the 

information provided should be 

consistent with those financial report 

filings. Currently, Commission 

regulation § 23.105(d) permits nonbank 

SDs electing the Tangible Net Worth 

Capital Approach to file required 

financial reports quarterly, whereas 

nonbank SDs electing either the Bank 

Based Capital Approach or the Net 

Liquid Asset Capital Approach are 

required to file such information on a 

monthly basis.40 The amendment would 

make clear that all swap position and 

credit information required in 

Commission regulation § 23.105(l) and 

Appendix B must be filed at the same 

periodicity as routine financial 

reporting required of the respective 

nonbank SDs set forth within 

Commission regulation § 23.105(d), 

which could be either monthly or 

quarterly depending on the approach 

elected by the SD. 

The Commission has already 

determined that nonbank SDs electing 

the Tangible Net Worth Capital 

Approach may engage in a wide variety 

of businesses and not be otherwise 

subject to any financial reporting. Thus, 

the Commission determined in the Final 

Rule that such SDs need only file 

financial reports quarterly and not 

monthly and may take a longer period 

of time to file audited financial 

reports.41 Moreover, the Commission 

intended the swap position and credit 

information in Commission regulation 

§ 23.105(l) and Appendix B to be filed 

together with other financial 

information required by Commission 

regulation § 23.105(d) as this 

information is supplementary to the 

financial statements as a whole and 

completes the routine financial 

reporting package. This approach is also 

consistent with how dually-registered 

SDs with the SEC complete the SEC’s 

Form X–17A–5 (‘‘FOCUS Report’’) Part 

II.42 Thus, the proposed amendment is 

consistent with previous Commission 

determinations and harmonizes the 

approach across different nonbank SDs. 


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43 17 CFR 23.105(p). 

44Final Rules, 85 FR 57463–57465. 

45 17 CFR 23.105(p). 

46Commission regulation § 23.105(p) requires 

bank SDs to report financial information within 30 

calendar days of quarter-end. 17 CFR 23.105(p)(2). 

The Instructions for Preparation of Consolidated 

Reports of Condition and Income, Schedule RC–D, 

available at https://www.ffiec.gov/pdf/FFIEC_forms/ 

FFIEC031_FFIEC041_202303_i.pdf, however, 

permit a bank with more than one foreign office to 

submit its FFIEC 031 forms within 35 calendar days 

following quarter-end. Additionally, the SEC 

extended the filing deadline of FOCUS Report Part 

IIC for non-U.S. SBSDs subject to a prudential 

regulator from 30 to 35 days following quarter end, 

noting that ‘‘U.S. prudential regulators permit 

certain U.S. banks to file their financial reports 35 

days after the quarter end.’’ Order Specifying the 

Manner and Format of Filing Unaudited Financial 

and Operational Information by Security-Based 

Swap Dealers and Major Security-Based Swap 

Participants That Are Not U.S. Persons and Are 

Relying on Substituted Compliance Determinations 

With Respect to Rule 18a–7, 86 FR 59208 (October 

26, 2021) at 59210. 

47 ISDA–SIFMA Joint Letter, Aug. 20, 2021, 

available at https://www.cftc.gov/LawRegulation/ 

CFTCStaffLetters/index.htm/. 

48 Id. at 3–4. 49Appendix C to subpart E of part 23. 50Federal Financial Institutions Examination 

Council, Consolidated Reports of Condition and 

Income for a Bank with Domestic and Foreign 

Offices—FFIEC 031, available at https://

www.ffiec.gov/pdf/FFIEC_forms/FFIEC031_202203_

f.pdf. 51 ISDA–SIFMA Joint Letter at 3–4. 52See generally CFTC Letter No. 21–18. 53CFTC Letter No. 23–11. 54See supra note 23. 55CFTC Letter No. 21–18 at 4–5. 56 Id. at 4–5, Condition 1. 

57 Id. at 5, Conditions 2–4. 

58 Id., Condition 5. In comparison to the SEC’s 

approach to similarly situated bank SBSDs, the 

Commission’s capital comparability process 

adopted in Commission regulation § 23.106 does 

not extend to bank SDs. See 17 CFR 23.106. 

59Letter No. 21–18 is limited to eligible Non-U.S. 

bank SDs subject to home country capital standards 

in a G–20 jurisdiction or to capital standards 

consistent with the Capital Accord of the Basel 

Committee on Banking Supervision. CFTC Letter 

No. 21–18 at 3–5. 

Request for Comment 

Question 1. Do the proposed 

amendments to Commission regulations 

§§ 23.100 and 23.105(l) address the 

compliance matters for entities electing 

the Tangible Net Worth Capital 

Approach? 

2. Amendments to Bank SD Financial 

Reporting Requirements—CFTC Letter 

No. 21–18 

The Commission is also proposing to 

amend the financial reporting 

requirements for bank SDs and bank 

MSPs set forth in Commission 

regulation § 23.105(p).43 The 

Commission intended the bank SD and 

bank MSP reporting requirements 

contained in the Final Rules to be 

consistent with the SEC requirements 

for bank SBSDs and bank MSBSPs, to 

maintain equivalent financial reporting 

requirements for dually-registered 

firms.44 Several bank SDs, however, did 

not register as SBSDs, and therefore are 

subject only to limited financial 

reporting under the Commission’s 

rules.45 In certain instances, the 

financial reporting required by the 

prudential regulators for these bank SDs 

permit a longer period of time and 

utilize a different format than that 

adopted by the Commission.46 In 

addition, some of these bank SDs are not 

required to file financial reports with a 

prudential regulator if the bank SDs are 

domiciled outside the United States, 

and may instead be subject only to 

financial reporting of a home country 

supervisor. 

Following the adoption of 

Commission regulation 23.105(p), bank 

SDs requested relief from this 

provision’s requirements.47 Bank SDs 

indicated that the financial reporting 

filing deadline adopted by the 

Commission preceded the financial 

reporting filing deadline imposed by 

prudential regulators.48 In addition, 

although Appendix C to Subpart E of 

Part 23 (‘‘Appendix C’’) 49 was intended 

to capture line items on existing Federal 

Financial Institutions Examination 

Council (‘‘FFEIC’’) 50 Form 031 (‘‘Call 

Report’’) provided to prudential 

regulators, line items on the Call Report 

had either been removed, added or 

otherwise changed since the 

Commission adopted Appendix C.51 As 

a result, on August 31, 2021, the 

Division issued a time-limited no-action 

letter to bank SDs regarding compliance 

with financial reporting requirements 

under Commission regulation 

§ 23.105(p).52 On July 11, 2023, the 

Division extended the expiration date to 

the earlier of October 6, 2025 or the 

adoption of any revised financial 

reporting and notification requirements 

applicable to bank SDs.53

CFTC Letter No. 21–18, as extended 

under CFTC Letter No. 23–11,54

articulates a position by the Division 

that it would not recommend that the 

Commission engage in an enforcement 

action against bank SDs providing the 

Commission with copies of financial 

reports that are required by, and filed 

with, their respective prudential or 

home country regulators, in lieu of 

complying with the substantive 

requirements of Appendix C, subject to 

certain conditions.55 CFTC Letter No. 

21–18 also contains a no-action position 

with respect to bank SDs filing 

comparable Call Report schedules with 

the Commission in lieu of Appendix C 

in accordance with and within the 

timeframe permitted by the prudential 

regulators.56 CFTC Letter No. 21–18 

further provides that the Division would 

not recommend enforcement action 

against certain foreign-domiciled bank 

SDs (‘‘Non-U.S. bank SDs’’) that do not 

provide financial reports to a prudential 

regulator if they file with the 

Commission balance sheet and 

statement of regulatory capital 

information in accordance with 

applicable home country requirements, 

so long as the financial information is in 

English, with balances converted to U.S. 

dollars, and the financial information is 

filed within 15 days of the earlier of the 

date such financial information is filed 

or required to be filed with the Non-U.S. 

bank SDs’ applicable home country 

regulator.57 Finally, the Division stated 

that it would not recommend 

enforcement action against duallyregistered foreign bank SDs filing 

comparable SEC-required financial 

reports and schedules with the 

Commission.58

The Commission is proposing to 

amend Commission regulation 

§ 23.105(p) to add an exception to the 

financial reporting requirements for 

Non-U.S. bank SDs that do not submit 

financial reports to a prudential 

regulator. These Non-U.S. bank SDs 

would be permitted to file with the 

Commission financial reports that are 

submitted to their respective home 

country regulator, provided the 

financial reports submitted to the 

Commission are translated into English 

with balances converted to U.S. dollars. 

These Non-U.S. bank SDs, however, 

would continue to be required to file 

specific swap position information set 

forth in Schedule 1 to Appendix C. 

Finally, these Non-U.S. bank SDs would 

be required to file with the Commission 

such reports no later than 90 calendar 

days following quarter-end. 

The Commission is not proposing to 

include the restriction in CFTC Letter 

No. 21–18 that Non-U.S. bank SDs be 

subject to home country capital 

standards in a G–20 jurisdiction.59 The 

Commission preliminarily believes that 

such a requirement is moot at this time, 

as to date, all registered Non-U.S. bank 

SDs have met this criterion. Moreover, 

this approach will provide greater 

regulatory flexibility and permit 

Commission staff the ability to evaluate 

on a case-by-case basis each bank SD. 

The Commission preliminary believes 

that the required information in the 

manner proposed will permit it to assess 

the Non-U.S. bank SDs’ financial 

position. Extending the time period to 

90 days should permit these Non-U.S. 

bank SDs to file financial reports with 

the Commission no earlier than such 

Non-U.S. bank SDs are required to 


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60Section 4s(f) of the CEA requires SDs and 

MPSs, including those for which there is a 

prudential regulator, to make any reports regarding 

transactions and positions, as well as any reports 

regarding financial condition, that the Commission 

adopts by rule or regulation. 7 U.S.C. 6s(f). 

61As adopted, Appendix C contains three 

schedules: 1. Statement of Financial Condition 

(balance sheet); 2. Statement of Regulatory Capital; 

and 3. Schedule 1. Both the Statement of Financial 

Condition and Statement of Regulatory Capital 

schedules within Appendix C are modeled off the 

FOCUS Report Part IIC as adopted by the SEC for 

bank SBSDs and contain specific line item 

references corresponding to the Call Report. See 

Final Rules, 85 FR at 57566–57569. Following 

adoption of these schedules, changes were made to 

the underlying Call Reports making the schedules 

obsolete. The SEC has since proposed changes to 

the FOCUS Report Part IIC to reflect these changes. 

See generally Electronic Submission of Certain 

Materials Under the Securities Exchange Act of 

1934; Amendments Regarding the FOCUS Report, 

88 FR 23920 (Apr. 18, 2023). 

62 17 CFR 23.105(k). 

63Appendix B is comprised of 4 individual 

schedules: SCHEDULE 1—AGGREGATE 

SECURITIES, COMMODITIES AND SWAPS 

POSITIONS; SCHEDULE 2—CREDIT 

CONCENTRATION REPORT FOR FIFTEEN 

LARGEST EXPOSURES IN DERIVATIVES; 

SCHEDULE 3—PORTFOLIO SUMMARY OF 

DERIVATIVES EXPOSURES BY INTERNAL 

CREDIT RATING; and SCHEDULE 4— 

GEOGRAPHIC DISTRIBUTION OF DERIVATIVES 

EXPOSURES FOR TEN LARGEST COUNTRIES. 

64To further complicate matters, the heading and 

first paragraph to Commission regulation 

§ 23.105(k) both indicate that this provision only 

applies to SDs approved to use internal models to 

calculate market risk and credit risk for calculating 

capital under Commission regulation § 23.102(d). 

65See SEC Form X–17A–5 FOCUS Report Part 

IIC, available at https://www.sec.gov/managefilings/forms-index/form-x-17a-5-2c. 66See Final Rules, 85 FR 57519. 67See 2016 Capital Proposal, 81 FR 91278. 68As indicated in the Final Rule, the Commission 

has a long history of permitting SEC registrants to 

meet their financial statement filing obligations 

with the Commission by submitting required SEC 

forms in lieu of the CFTC’s forms, which reduces 

the burden on dually-registered firms by not 

requiring two separate financial reporting 

requirements. See Final Rules, 85 FR 57515. 69NFA section 18. 

70NFA section 18(e). 

71For example, Commission regulation 

§ 23.105(k)(1)(v)(B) requires that all modelContinued 

prepare such reports under home 

country requirements. The Commission 

proposes to adopt this approach because 

the Commission is collecting such 

reports in order to maintain the ability 

to monitor the capital condition across 

all SDs, although the Commission does 

not establish the capital or margin 

requirements of bank SDs.60

The Commission is further proposing 

to amend Commission regulation 

§ 23.105(p) to permit bank SDs to file 

the relevant schedules under the Call 

Report (Schedule RC and Schedule RC– 

R), rather than replicating various line 

items from within those reports on a 

separately constructed balance sheet 

and statement of regulatory capital 

currently maintained in Appendix C.61

Schedule 1 of Appendix C, which 

contains relevant swap, mixed swap and 

security-based swaps position 

information, would remain a required 

schedule to be provided by all bank 

SDs. This approach would permit the 

Commission to collect necessary 

financial information prepared in 

accordance with prudential regulators’ 

guidance, while eliminating the 

necessity that bank SDs familiarize 

themselves with a new reporting form 

and prevent the Commission from 

having to routinely monitor and update 

its form when prudential regulators 

amend their schedules. These proposed 

changes are consistent with the terms of 

CFTC Letter No. 21–18, which have 

resulted in the Commission and its staff 

receiving the requisite information to 

meaningfully oversee its population of 

bank SDs since 2021. In addition, and 

as mentioned above, the Commission 

proposes to adopt this approach because 

the Commission is collecting such 

reports in order to maintain the ability 

to monitor the capital condition across 

all SDs. 

Request for Comment 

Question 2. Do the proposed 

amendments to Commission regulations 

in § 23.105(p) address compliance 

matters identified in CFTC Letter No. 

21–18 for bank SDs? 

Question 3. Do the financial reporting 

requirements as proposed to be 

amended for Non-U.S. bank SDs permit 

the Commission to monitor these 

entities at timely intervals? 

3. Amendments Regarding Financial 

Reporting and Computation 

Requirements of Swap Dealers 

a. Amendments to Schedules in 

Financial Reporting and Frequency of 

Filings 

The Commission is proposing to 

amend the scope of Commission 

regulation § 23.105(k) 62 and the heading 

and scope of Commission regulation 

§ 23.105(l), as well as the titles of certain 

schedules included in Appendix B,63 to 

further clarify that these reporting 

obligations are applicable to all nonbank 

SDs and nonbank MSPs. Commission 

regulation § 23.105(k) lists both modelspecific information that nonbank SDs 

must report as well as a description of 

the same type of exposure information 

as reflected in the schedules to 

Appendix B. Commission regulation 

§ 23.105(l), however, requires all 

nonbank SDs, including those not 

approved to use models, to complete the 

Appendix B schedules on a monthly 

basis. As a result, several nonbank SDs 

have filed each of the schedules to 

Appendix B without having received 

capital model approval. Thus, in current 

form, Commission regulations 

§ 23.105(k) and (l), as well as, the titles 

of Schedules 2–4 of Appendix B, could 

more explicitly indicate that all of the 

information within the schedules 

included in Appendix B is required of 

all nonbank SDs, including those not 

authorized to use models.64 In addition, 

as proposed to be amended, nonbank 

SDs electing the Tangible Net Worth 

Capital Approach and all MSPs must 

submit quarterly rather than monthly 

financial reporting as Commission 

regulation § 23.105(l) currently requires. 

Each of the schedules included in 

Appendix B is identical to 

corresponding schedules found in SEC’s 

FOCUS Report required to be completed 

by both SBSDs and certain broker 

dealers (‘‘BDs’’).65 To the extent 

practicable, the Commission intends to 

align financial reporting requirements, 

including those listed in textual form in 

Commission regulation § 23.105(k) and 

in the finalized schedules part of 

Appendix B, with the reporting 

requirements finalized by the SEC 

pertaining to SBSDs, MSBSPs, and 

BDs.66 The information required under 

Appendix B is nearly identical in all 

material respects to corresponding 

forms found in the SEC Form FOCUS 

Report Part II and was intended to 

ensure harmonization of the reporting 

schedules across several registrants, 

including those that are duallyregistered.67 This is also consistent with 

the Commission’s general approach 

permitting dually-registered BDs and 

SBSDs to file SEC Form FOCUS Report 

Part II in lieu of their requirements 

under Commission regulations 

§ 23.105(d) and (e), and for those duallyregistered SBSDs subject to the capital 

rules of a prudential regulator under 

Commission regulation § 23.105(p).68

In addition, NFA has adopted nearly 

identical capital and financial reporting 

requirements for its member nonbank 

SDs and nonbank MSPs.69 The finalized 

NFA rules also mandate the use of 

comprehensive standardized forms for 

financial reporting by member nonbank 

SDs and nonbank MSPs that are not 

otherwise able to file an SEC Form 

FOCUS Report Part II.70 These new NFA 

forms, FR–CSE–NLA and FR–CSE–BHC, 

include each of the required schedules 

found in Appendix B. Moreover, all the 

information listed in textual form in 

paragraph (k)(1)(v) of Commission 

regulation § 23.105 can be found in 

specific schedules found in Appendix 

B.71 As such, the Commission has 


ddrumheller on DSK120RN23PROD with PROPOSALS1
2560 Federal Register / Vol. 89, No. 10 / Tuesday, January 16, 2024 / Proposed Rules 

approved SDs file the current exposure (including 

commitments) listed by counterparty for the 15 

largest exposures, which is also found in Schedule 

2 to Appendix B. Similarly, the information listed 

in textual form in Commission regulations 

§ 23.105(k)(1)(i)–(v) corresponds verbatim to the 

textual requirements found in SEC rule 18a–7(a)(3). 

See 17 CFR 240.18a–7(a)(3). 

72As discussed in the Final Rule, the Commission 

may (and subsequently has) approved additional 

procedures developed by an RFA, which could 

include standard forms or procedures necessary to 

carry out the Commission’s filing requirements. See 

Final Rules, 85 FR 57518. 

73Final Rules, 85 FR 57517. 

74 17 CFR 23.105(i). 

75 17 CFR 23.101. 

76 17 CFR 23.105(i)(1)(ii) and (i)(2)(ii). 

77 17 CFR 23.105(i)(1)(i). 

78See 17 CFR 240.18a–7(b). 

79 17 CFR 1.17(a)(1)(i)(B)(2). 

80 17 CFR 1.10. 

81CFTC Form 1–FR–FCM at 6–8. 

preliminarily determined that the 

specific schedules found in Appendix 

B, which is now part of NFA’s adopted 

forms, should be the mechanism for 

firms to provide the required 

information listed in Commission 

regulation § 23.105(k).72 In this 

proposal, the Commission hopes to 

eliminate any ambiguity that the Final 

Rule may have caused. As discussed in 

the Final Rule, the information in 

Appendix B, which includes credit 

exposure to swap transactions, is vital to 

the Commission’s regulatory oversight 

of SDs and the financial system.73 This 

information provides valuable insight 

into the risk exposures of nonbank SDs, 

which is essential to performing 

regulatory oversight of SDs. The 

Commission proposes to make clear that 

all nonbank SDs must complete all 

schedules in Appendix B. 

The Commission is therefore 

proposing to amend Commission 

regulation § 23.105(k) to require that the 

information listed in Appendix B is 

completed by all nonbank SDs and 

nonbank MSPs as was intended, and is 

consistent with that required by the SEC 

and NFA. The Commission is further 

proposing to amend Commission 

regulation § 23.105(l) and the headings 

of certain schedules in Appendix B to 

further clarify that these schedules must 

be reported at the same periodicity as 

the financial reporting of each 

respective nonbank SD, either monthly 

or quarterly as applicable, and that all 

of the schedules are required for all 

nonbank SDs, not just those authorized 

to use models. 

Request for Comment 

Question 4. Will the proposed 

amendments to Commission regulations 

in § 23.105(k) and (l) and the related 

changes to the headings of the schedules 

contained in Appendix B facilitate 

consistent and comprehensive swaps 

positions and counterparty reporting for 

all nonbank SDs under the Final Rules 

and align with the same reporting 

requirements of the SEC for dual 

registrants? 

b. Changes to Public Disclosure 

Requirements 

The Commission is proposing to 

amend Commission regulation 

§ 23.105(i) 74 to align the public 

disclosure of unaudited financial 

information with the periodicity 

permitted by routine financial filings in 

Commission regulation § 23.105(d), and 

to remove reference to a statement in 

both the unaudited and audited 

information disclosing the amounts of 

minimum regulatory capital and the 

amount of its minimum regulatory 

capital requirement computed in 

accordance with Commission regulation 

§ 23.101.75

Paragraphs (i)(l)(ii) and (i)(2)(ii) of 

Commission regulation § 23.105 

currently require a nonbank SD or 

nonbank MSP to publicly disclose on its 

website a statement of the amount of the 

nonbank SD’s or nonbank MSP’s 

regulatory capital and its minimum 

capital requirement.76 This information 

is required to be disclosed as of the 

nonbank SD’s or nonbank MSP’s fiscal 

year end, and as of six months after the 

firm’s fiscal year end. Following 

adoption of the Final Rule, nonbank 

SD’s requested clarification as to 

whether the regulatory capital 

information required by Commission 

regulations § 23.105(i)(1)(ii) and (i)(2)(ii) 

must be a schedule or, if the information 

may be reported in a narrative format, 

in the footnotes to the financial 

statements. 

The Commission is proposing to 

revise Commission regulation 

§ 23.105(i)(1)(i) 77 to include the 

footnotes to the unaudited Statement of 

Financial Condition in the required 

disclosures. The Commission is also 

proposing to revise Commission 

regulations § 23.105(i)(1)(ii) and (i)(2)(ii) 

to replace the word ‘‘statement’’ with 

‘‘amounts’’ to indicate that required 

capital information does not need to 

exist in a standalone statement or form. 

This is consistent with the 

Commission’s intent, to the extent 

practicable, to align its requirements 

with those required of BDs and SBSDs 

by the SEC.78 The Commission has 

preliminarily determined that the 

information contained in the footnotes 

accompanying the financial statements 

should ordinarily satisfy the 

requirements for disclosing minimum 

regulatory capital. However, the 

Commission recognizes that not all 

accounting standards permit, nor do the 

respective reporting formats utilized by 

firms always provide for, such 

disclosure in footnote form. Some 

disclosures may be presented in either 

narrative or graphical formats. The 

Commission’s sole intention is to ensure 

that the public has the requisite 

information, not to prescribe the format 

of such disclosures made by the firm on 

its website. Therefore, the Commission 

is proposing to permit nonbank SDs and 

their auditors to determine the format 

for disclosure of this information. 

Request for Comment 

Question 5. The Commission requests 

comment on whether nonbank SDs and 

their auditors should be able to 

determine the reporting format of the 

requisite information in their public 

disclosure? Should the Commission 

instead specify a particular format? If 

yes, which format and why? 

c. Changes to Form 1–FR–FCM 

The Commission is proposing to 

amend Form 1–FR–FCM to add new 

lines to the form to include the 2 

percent of uncleared swap margin 

capital requirement under Commission 

regulation § 1.17(a)(1)(i)(B)(2).79 The 

proposed capital requirement based on 

2 percent of the uncleared swaps margin 

would be added as new lines 22.A.vi 

through vii. of the Statement of the 

Computation of the Minimum Capital 

Requirements (‘‘CFTC Minimum Net 

Capital Requirements’’) on the Form 1– 

FR–FCM. 

The Commission is also proposing to 

amend the Form 1–FR–FCM to add 

swaps and security-based swaps 

haircuts to the computation of net 

capital. The specific market risk charges 

for swaps and security-based swaps 

would appear as new lines 16.D. of the 

CFTC Minimum Net Capital 

Requirements. 

Under Commission regulation § 1.10, 

all FCMs must submit a Form 1–FR– 

FCM when they file for registration as 

an FCM and periodically following 

registration.80 The Form 1–FR–FCM 

includes, among other things, the 

computation of CFTC Minimum Net 

Capital Requirements supplementary 

schedule.81 In the Final Rule, the 

Commission added a 2 percent of 

uncleared swap margin capital 

requirement to the risk-based net capital 

requirement for FCMs which are also 

registered as SDs (‘‘FCM–SDs’’), and 

adopted specific market risk charges for 

uncleared swaps in the FCM net capital 

requirements in Commission regulation 


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82 17 CFR 1.17(a)(1)(i)(B)(2) and (c)(5)(iii). See 

generally Final Rules, 85 FR 57473–57476 and 

57562. 

83 17 CFR 1.10(h). 

84See generally Electronic Filing of Certain Forms 

and Other Filings Under the Securities Exchange 

Act of 1934; Technical Amendments Regarding the 

FOCUS Report, SEC Proposed Rule (Undated), 

available at https://www.sec.gov/news/pressrelease/2023-58. 

85 17 CFR 23.103(a)(1) and (c)(1). 

86 17 CFR 23.103. 

87 17 CFR 23.103(b). 

88 17 CFR 240.18a–1. 

89 17 CFR 23.103(c). 

90SDs electing to use the Tangible Net Worth 

Capital Approach are required to meet a minimum 

capital requirement which includes, among other 

things, $20 million plus the amount of the SD’s 

market risk exposure requirement and its credit risk 

exposure requirement associated with the SD’s 

swap and related hedge positions that are part of 

the SD’s swap dealing activities. 17 CFR 

23.101(a)(2)(ii)(A). 

91 17 CFR 23.102(d). 

92 17 CFR 23.102(c). 

93Appendix A to subpart E of part 23. 

94Final Rules, 85 FR 57506. 

95 17 CFR 23.103(c)(3). 

96 17 CFR 23.105(c)(4). 

97 17 CFR 1.12(g)(1). 

98 17 CFR 1.17(h). 

99 17 CFR 23.101(a)(1). 

§ 1.17.82 In addition, FCMs duallyregistered as BDs are permitted to file 

the SEC’s FOCUS Report Part II in lieu 

of the Commission’s Form 1–FR–FCM 

in reporting net capital.83 The SEC has 

recently proposed to amend its FOCUS 

Report Part II to include the 

Commission’s net capital changes 

adopted for FCM–SDs, including the 

addition of the 2 percent uncleared 

swap margin to the risk-based net 

capital requirement of FCM–SDs.84 The 

Commission is proposing to amend its 

form to more explicitly require 

disclosure of the 2 percent amount and 

to conform with the SEC’s proposal. 

This information is important to the 

Commission in monitoring the Final 

Rules, as reporting the 2 percent amount 

enables the Commission to confirm that 

the FCM–SD is complying with its 

capital requirement. 

Request for Comment 

Question 6. Do the proposed changes 

to the Form 1–FR–FCM address the net 

capital changes applicable to FCMs that 

are also registered as SDs as were 

adopted in the Final Rules? 

d. Additional Cross References To 

Clarify Applicable Market and Credit 

Risk Charges 

The Commission is proposing to add 

new language to Commission 

regulations § 23.103(a)(1) and (c)(1) 85 to 

clarify that the same standardized 

market and credit risk charges are 

applicable to nonbank SDs electing the 

Tangible Net Worth Capital Approach as 

are applicable to all other nonbank SDs 

not approved to use models. Nonbank 

SDs electing the Tangible Net Worth 

Capital Approach and who have chosen 

not to apply for approval to use models, 

have questioned what the applicable 

standardized credit risk charges are 

under Commission regulation 

§ 23.103.86 Commission regulation 

§ 23.103(b) 87 provides that nonbank 

SDs electing the Tangible Net Worth 

Capital Approach or Net Liquid Assets 

Capital Approach are required to 

compute standardized market risk 

charges contained in SEC Rule 18a–1 88

and Commission regulation § 1.17, as 

applicable. Commission regulation 

§ 23.103(c) 89 also provides that a 

nonbank SD electing the Net Liquid 

Assets Capital Approach must compute 

its standardized credit risk charge in 

accordance with SEC Rule 18a–1 or 

Commission regulation § 1.17, as 

applicable, but fails to provide a 

reference for nonbank SDs electing the 

Tangible Net Worth Capital Approach.90

Because standardized credit risk charges 

were intended to be the same for 

nonbank SDs using the Tangible Net 

Worth Capital Approach or the Net 

Liquid Assets Capital Approach, the 

Commission is proposing to amend 

Commission regulations § 23.103(a)(1) 

and (c)(1) to correct this omission. Thus, 

the Commission proposes to amend 

Commission regulations § 23.103(a)(1) 

and (c)(1) to direct nonbank SDs 

electing the Tangible Net Worth Capital 

Approach to compute standardized 

credit risk charges in accordance with 

SEC Rule 18a–1 or Commission 

regulation § 1.17, as applicable. 

Similarly, nonbank SDs electing the 

Bank-Based Capital Approach indicated 

after the adoption of the Final Rules that 

a cross reference in Commission 

regulation § 23.102(d) 91 to the 

calculation of market risk exposure and 

credit risk exposure using internal 

models, seems to be intended to reflect 

the requirements applicable to such 

nonbank SDs in the application to use 

models in Commission regulation 

§ 23.102(c).92 The Commission agrees 

that this was the intention, and thus is 

proposing to amend Commission 

regulation § 23.102(d) to correct the 

applicable cross reference in order to 

make it clearer that either 12 CFR part 

217 or Appendix A to Subpart E of Part 

23 (‘‘Appendix A’’) 93 should be utilized 

as applicable by the nonbank SD 

depending on the respective capital 

approach elected.94

Request for Comment 

Question 7. Do the proposed 

amendments to Commission regulations 

§ 23.103(a)(1) and (c)(1) clarify the 

applicable standardized credit risk 

charge to be added to the $20 million 

minimum requirement under 

Commission regulation § 23.103(c)(3)? 95

Question 8. Does the proposed 

amendment to Commission regulation 

§ 23.102(d) clarify the applicable modelbased market and credit risk charges 

applicable to nonbank SDs which have 

applied to use such models under the 

Bank-Based Capital Approach? 

B. Other Amendments 

1. Notice of Substantial Reduction in 

Capital 

The Commission adopted specific 

notice requirements for nonbank SDs 

and MSPs related to capital compliance 

in the Final Rules. However, one of the 

notice requirements contained in 

Commission regulation § 23.105(c)(4), 

which requires notice of a substantial 

reduction in capital as compared to the 

last reported in a financial report, did 

not specify a timeframe for the notice 

filing.96 The Commission has 

preliminarily determined that 

registrants should be able to file such a 

notice within two business days after 

the date of occurrence. Further, such an 

approach is also consistent with that 

applied to FCMs, which must notify the 

Commission within two business days 

following a substantial reduction in 

capital.97 The Commission is proposing 

to amend Commission regulation 

§ 23.105(c)(4) to add a two-business day 

reporting timeframe to the requirement 

for a nonbank SD to file notice of a 

substantial reduction in capital. The 

Commission has preliminarily 

determined that adding a reporting 

timeframe to the notice requirement will 

enhance compliance by providing 

regulatory certainty to nonbank SDs 

regarding when such a filing is due. 

2. Subordinated Debt Approval 

The nonbank SD capital requirements 

for both the Bank-Based Capital 

Approach and the Net Liquid Assets 

Capital Approach permit the use of 

subordinated debt as capital in order to 

align with the permitted use of 

subordinated debt under the FCM net 

capital requirements.98 The 

requirements for qualifying 

subordinated debt were adopted by the 

SEC in its capital rule for SBSDs and 

were included by reference by the 

Commission for other nonbank SDs in 

the Bank-Based Capital Approach.99

Commission staff received questions 

regarding the process for approving 

subordinated debt for nonbank SDs not 


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100See generally NFA Interpretative Notice 9078 

(Feb. 18, 2021), available at https://www.nfa.

futures.org/rulebooksql/rules.aspx?Section

=9&RuleID=9078#:∼:text=In%20order%20to%20

permit%20these%20non-SEC%20registered%

20SD,NFA%27s%20pre-approval

%20of%20the%20subordinated%20debt%

20loan%20agreement. 

101Nonbanks SDs that are duly-registered as 

SBSDs typically elect under Commission regulation 

§ 23.101(a)(1)(ii) to maintain net capital by 

complying with § 240.18a–1d, and are 

independently subject to such requirements, 

including the subordinated-debt approval process, 

by their registration as a SBSD with the SEC. 17 

CFR 240.18a–1d. 

102Final Rules, 85 FR 57495. 

103See Miscellaneous Rule Deletions, 

Amendments or Clarifications, 57 FR 20633, 20634 

(May 14, 1992). The subordinated debt approval 

program for FCMs administered by NFA has been 

in place for over 30 years. In addition, the NFA, as 

the only registered futures association under the 

CEA, is specifically required to adopt capital 

requirements on its members, including SDs, and to 

implement a program to audit and enforce the 

compliance with such requirements in accordance 

with section 17(p)(2) of the CEA, 7 U.S.C. 21(p)(2). 

104NFA section 18(d). 

105 17 CFR 23.101(a)(1)(i)(B) and (a)(1)(ii)(C). 

106 17 CFR 23.105(e)(4)(v). 

107 17 CFR 23.105(e). 

108 17 CFR 23.105(e)(4)(v). 

109 17 CFR 1.10(d)(2)(vi). 

110 5 U.S.C. 601 et seq. 

111 5 U.S.C. 553. The Administrative Procedure 

Act is found at 5 U.S.C. 500 et seq. 

112See 5 U.S.C. 601(2), 603, 604 and 605. 

113Policy Statement and Establishment of 

Definitions of ‘‘Small Entities’’ for Purposes of the 

Regulatory Flexibility Act, 47 FR 18618 (Apr. 30, 

1982) (FCMs) and Registration of Swap Dealers and 

Major Swap Participants, 77 FR 2613, 2620 (Jan. 19, 

2012) (SDs and MSPs). 

114 44 U.S.C. 3501 et seq. 

also registered with the SEC because the 

Final Rule did not articulate a process. 

To address this omission, NFA adopted 

Financial Requirements Rule Section 

18(d).100 Under the existing framework, 

NFA already approves subordinated 

loan agreements for net capital 

agreements for nonbank SDs that are not 

dually-registered with the SEC. 

Similarly, although nonbank SDs that 

are dually-registered with the SEC are 

able to obtain SEC approval on 

subordinated debt,101 nonbank SDs that 

elect either the Bank-Based Capital 

Approach or the Net Liquid Assets 

Capital Approach but are not registered 

with the SEC, do not have an approval 

process for the use of subordinated debt 

under the Commission’s rules. As 

discussed in the Final Rule,102 when 

adopting the permissive use of 

subordinated debt in establishing 

minimum regulatory capital, the 

Commission has long approved a 

process for FCMs to obtain subordinated 

debt approval from their Designated 

Self-Regulatory Organizations 

(‘‘DSROs’’), including the NFA.103

The Commission has preliminarily 

determined to permit NFA to administer 

the approval process for nonbank SDs 

because of the NFA’s extensive history 

and experience as a DSRO 

administering a subordinated debt 

approval program for FCMs. This would 

also make the subordinated debt 

approval process for nonbank SDs 

consistent with the subordinated debt 

approval process for FCMs. In addition, 

NFA has already devoted substantial 

efforts to obtain the personnel and other 

resources necessary to perform the 

review, approval and ongoing 

assessment of nonbank SDs’ permitted 

use of subordinated debt following the 

adoption by NFA of Financial 

Requirements Rule Section 18(d).104

Codifying that subordinated debt will be 

approved for net capital requirements 

either through the Commission or by an 

RFA should remedy this omission from 

the Final Rules and will sanction a 

process that is consistent with the 

current practice. The Commission 

proposes to amend Commission 

regulations § 23.101(a)(1)(i)(B) and 

(a)(1)(ii)(C) 105 to establish that using 

subordinated debt as regulatory capital 

is subject to the approval of either an 

RFA of which the nonbank SD is a 

member or the Commission. 

3. Statement of No Material Difference 

The Commission proposes to amend 

Commission regulation 

§ 23.105(e)(4)(v) 106 for nonbank SDs 

and nonbank MSPs to explicitly require 

a statement, if applicable, that there are 

no material differences between the 

audited annual report and the 

unaudited annual report of the same 

date. Commission regulation § 23.105(e) 

requires nonbank SDs and nonbank 

MSPs to submit an annual audited 

financial report with the Commission 

and with NFA.107 Included with the 

financial report is, among other things, 

a reconciliation of any material 

differences from the unaudited financial 

reports prepared as of the nonbank SD’s 

or nonbank MSP’s year-end date.108

For instances in which no material 

differences exist between the unaudited 

and audited year-end financial 

statements, however, Commission 

regulation § 1.10(d)(2)(vi) 109 requires 

FCMs to include a statement indicating 

that no such differences exist. 

Commission regulation § 23.105(e) does 

not currently provide for such a 

statement in this parallel provision for 

audits of nonbank SDs or nonbank 

MSPs. The Commission is proposing to 

amend Commission regulation 

§ 23.105(e)(4)(v) so that when nonbank 

SDs and nonbank MSPs file their 

audited annual report, a statement that 

there are no material differences 

between the audited annual report and 

the unaudited annual report is included, 

if no such differences exist. This will 

align the filing approach for auditors of 

nonbank SDs and nonbank MSPs with 

that of FCMs. Requiring an affirmative 

statement that no material differences 

exist when none are otherwise reported 

should enhance the reliability of the 

annual reports filed by nonbank SDs 

and nonbank MSPs and should 

encourage auditors to more rigorously 

assess the materiality of reporting any 

discovered audit findings. 

Request for Comment 

Question 9. Are the regulations as 

proposed to be amended fit for purpose? 

If not, what changes would be necessary 

to achieve the Commission’s objective 

in obtaining timely financial reporting 

of the capital position of nonbank SDs 

and MSPs? 

III. Related Matters 

A. Regulatory Flexibility Act 

The Regulatory Flexibility Act (‘‘RF 

Act’’) requires that Federal agencies 

consider whether the regulations 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.110 Whenever an 

agency publishes a general notice of 

proposed rulemaking for any rule, 

pursuant to the notice-and-comment 

provisions of the Administrative 

Procedure Act,111 a regulatory flexibility 

analysis or certification typically is 

required.112 This proposed rulemaking 

would affect the obligations of SDs, 

MSPs, and FCMs. The Commission has 

previously determined that SDs, MSPs, 

and FCMs are not small entities for 

purposes of the RF Act.113 Therefore, 

the requirements of the RF Act do not 

apply to those entities. 

Accordingly, for the reasons stated 

above, the Commission has 

preliminarily determined that this 

proposed rulemaking will not have a 

significant economic impact on a 

substantial number of small entities. 

Therefore, the Chairman, on behalf of 

the Commission, hereby certifies, 

pursuant to 5 U.S.C. 605(b), that the 

proposed Commission regulations being 

published today by this Federal 

Register release will not have a 

significant economic impact on a 

substantial number of small entities. 

B. Paperwork Reduction Act 

1. Background 

The Paperwork Reduction Act of 1995 

(‘‘PRA’’) 114 imposes certain 


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115OMB Control No. 3038–0024, available at 

http://www.reginfo.gov/public/do/PRAOMBHistory?

ombControlNumber=3038-0024. 

116This discussion does not include information 

collection requirements that are included under 

other Commission regulations and related OMB 

control numbers. 117 17 CFR 23.105(a) through (n). 

118 7 U.S.C. 19(b). 

119 7 U.S.C. 19(a). 

120The Commission notes that the costs and 

benefits considered in this proposed rulemaking, 

and highlighted below, have informed the policy 

choices described throughout this release. 

requirements on Federal agencies 

(including the Commission) in 

connection with their conducting or 

sponsoring any collection of 

information as defined by the PRA. 

These proposed rule amendments 

would result in an amendment to 

existing collection of information 

‘‘Regulations and Forms Pertaining to 

Financial Integrity of the Market Place; 

Margin Requirements for SDs/MSPs’’ 115

as discussed below. The Commission, 

therefore, is submitting this proposed 

amendment to the Office of 

Management and Budget (‘‘OMB’’) for 

review and approval in accordance with 

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

The responses to this collection of 

information are mandatory. 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 issued by OMB. 

The Commission has preliminarily 

determined that the rule amendments as 

proposed do not impose any other new 

collections of information that require 

approval of OMB under the PRA. 

2. Amended Information Collection 

Requirements and Related Burden 

Estimates 116

Currently, there are approximately 

106 SDs and no MSPs registered with 

the Commission that may be impacted 

by this proposed rulemaking and, in 

particular, the collection of information 

discussed below. 

Commission regulation § 23.105 

requires that each SD and MSP maintain 

certain specified records, report certain 

financial information and notify or 

request permission from the 

Commission under certain specified 

circumstances, in each case, as provided 

in the Commission regulation. For 

example, the Commission regulation 

requires generally that SDs and MSPs 

maintain current books and records, 

provide notice to the Commission of 

regulatory capital deficiencies and 

related documentation, provide notice 

of certain other events specified in the 

rule, and file financial reports and 

related materials with the Commission 

(including the information in 

Appendices B and C, as applicable). 

Commission regulation § 23.105 also 

requires the SD or MSP to furnish 

information about its custodians that 

hold margin for uncleared swap 

transactions and the amounts of margin 

so held, and for SDs approved to use 

models (as discussed above), provide 

additional information regarding such 

models, as further described in 

Commission regulation § 23.105(k). 

The Commission estimates that there 

are 31 SD firms which are required to 

fulfill their financial reporting, 

recordkeeping and notification 

obligations under Commission 

regulations § 23.105(a)–(n) 117 because 

they are not subject to a prudential 

regulator, not already registered as an 

FCM, and not dually-registered as a 

SBSD. The Commission does not 

anticipate that its estimates of burden 

associated with these obligations will 

change as a result of any the 

amendments to Commission regulation 

§ 23.105 proposed herein. 

Commission regulation § 23.105(p) 

and its accompanying Appendix C 

impose quarterly financial reporting and 

notification obligations on SDs subject 

to a prudential regulator. Approximately 

55 of the 106 registered SDs are subject 

to a prudential regulator. The 

Commission has previously estimated 

that these reporting and notification 

requirements impose an on-going 

burden of 33 hours annually. This 

results in a total aggregate burden of 

1,815 hours annually. The Commission 

estimates this burden will remain 

unchanged by the proposed 

amendments to Commission regulation 

§ 23.105(p), as the burden associated 

with requirements to file quarterly 

financial reporting and notifications 

previously were based on these entities 

filing their existing information 

contained in Call Reports along with 

Schedule 1 information, and under the 

proposed amendments those remain the 

obligations for bank SDs, except for 

Non-U.S. bank SDs who will also still 

file existing financial reporting 

information as reported to their home 

country supervisor, along with 

Appendix C Schedule 1 information. 

C. 15(b) Antitrust Laws 

Section 15(b) of the CEA requires the 

Commission to take into consideration 

the public interest to be protected by the 

antitrust laws and endeavor to take the 

least anticompetitive means of 

achieving the purposes of the CEA, in 

issuing any order or adopting any 

Commission rule or regulation 

(including any exemption under section 

4(c) or 4c(b)), or in requiring or 

approving any bylaw, rule, or regulation 

of a contract market or registered futures 

association established pursuant to 

section 17 of the CEA.118

The Commission believes that the 

public interest to be protected by the 

antitrust laws is generally to protect 

competition. The Commission requests 

comment on whether the proposed rule 

implicates any other specific public 

interest to be protected by the antitrust 

laws. 

The Commission has considered the 

proposed rule to determine whether it is 

anticompetitive and has preliminarily 

identified no anticompetitive effects. 

The Commission requests comment on 

whether the proposed rule is 

anticompetitive and, if it is, what the 

anticompetitive effects are. 

Because the Commission has 

preliminarily determined that the 

proposed rule is not anticompetitive 

and has no anticompetitive effects, the 

Commission has not identified any less 

anticompetitive means of achieving the 

purposes of the Act. The Commission 

requests comment on whether there are 

less anticompetitive means of achieving 

the relevant purposes of the Act that 

would otherwise be served by adopting 

the proposed rule. 

IV. Cost Benefit Considerations 

A. Background 

Section 15(a) of the CEA requires the 

Commission to consider the costs and 

benefits of its discretionary actions 

before promulgating a regulation under 

the CEA or issuing certain orders.119

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 

(collectively, the ‘‘Section 15(a) 

Factors’’). In this cost benefit section, 

the Commission discusses the costs and 

benefits resulting from its discretionary 

determinations with respect to the 

Section 15(a) Factors.120

Section 4s(e) of the CEA, added by 

section 731 of the Dodd-Frank Act, 

provides the Commission with 

mandatory and discretionary 

rulemaking authority to adopt capital 

requirements for nonbank SDs and 


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121Section 4s(e)(2)(B) of the CEA, 7 U.S.C. 

6s(e)(2)(B). 

122Section 4s(f) of the CEA, 7 U.S.C. 6s(f). 

123Currently, there are no MSPs registered with 

the Commission and there have not been any MSPs 

registered with the Commission for several years. 

Thus, this section regarding the Commission’s 

consideration of the costs and benefits of this 

proposed rulemaking will only refer to SDs that 

may have relied on CFTC Letters No. 21–15 and 21– 

18 and may benefit from the compliance exceptions 

set forth herein. 

nonbank MSPs,121 as well as financial 

reporting requirements for SDs and 

MSPs.122 Section 4s(e) of the CEA 

requires the Commission to adopt 

minimum capital requirements for 

nonbank SDs and nonbank MSPs that 

are designed to help ensure their safety 

and soundness and are appropriate for 

the risk associated with the uncleared 

swaps held by such nonbank SD or 

nonbank MSP. In addition, section 

4s(e)(2)(C) of the CEA, requires the 

Commission to establish capital 

requirements for nonbank SDs or 

nonbank MSPs that account for the risks 

associated with their entire swaps 

portfolio and all other activities 

conducted. Lastly, section 4s(e)(3)(D) of 

the CEA provides that the Commission, 

the prudential regulators, and the SEC, 

must ‘‘to the maximum extent 

practicable’’ establish and maintain 

comparable capital rules. Accordingly, 

this proposed rulemaking includes 

certain capital and financial reporting 

requirements related to SDs and MSPs. 

The baseline for the Commission’s 

consideration of the costs and benefits 

of this proposed rulemaking is the 

existing statutory and regulatory 

framework applicable to SDs and MSPs, 

including the capital and margin 

requirements for SDs and MSPs under 

subpart E of part 23. The Commission 

recognizes, however, that to the extent 

that SDs 123 have arranged their business 

in reliance on Division interpretations 

and no-action positions in CFTC Letters 

No. 21–15 and 21–18, as extended 

under CFTC Letter No. 23–11, the actual 

costs and benefits of this proposed 

rulemaking may be mitigated. 

The Commission recognizes that the 

proposed amendments may impose 

costs. The Commission has endeavored 

to assess the expected costs and benefits 

of the proposed amendments in 

quantitative terms, including PRArelated costs, where possible. In 

situations where the Commission is 

unable to quantify the costs and 

benefits, the Commission identifies and 

considers the costs and benefits of the 

proposed rules in qualitative terms. The 

lack of data and information to estimate 

those costs and benefits is attributable 

in part to the nature of the proposed 

amendments, which are tailored 

financial reporting requirements based 

on the specific businesses and types of 

SDs registered with the Commission. 

Further, SDs represent a wide diversity 

of business models catering towards 

different swap counterparties, from 

financial end users to commercial 

enterprises. As a result, the Commission 

expects each SD to have developed its 

corporate entity in a unique manner by 

employing different corporate cost 

structures, making it particularly 

difficult to estimate the quantitative 

impacts of both costs and benefits on 

each SD. 

B. Codification of the CFTC Letters and 

Other Amendments 

The Commission is proposing 

technical amendments to its definitions 

in Commission regulation § 23.100 for 

‘‘predominantly engaged in nonfinancial activities’’ and ‘‘tangible net 

worth.’’ Further, the Commission is 

proposing to amend Commission 

regulation § 23.105(p) to add exceptions 

to the financial reporting requirements 

for Non-U.S. bank SDs, and permitting 

bank SDs to file the relevant schedules 

under the Call Report (Schedule RC and 

Schedule RC–R) instead of as required 

by Appendix C. In addition, the 

Commission is making a number of 

clarifying amendments including: (1) 

amending the heading and scope 

provisions of Commission regulation 

§ 23.105(k) and the titles of certain 

schedules included in Appendix B; (2) 

changing public disclosure 

requirements under Commission 

regulation § 23.105(i); (3) amending 

Form 1–FR–FCM to more accurately 

address net capital changes; (4) adding 

language to Commission regulation 

§ 23.103(a) and (c)(1) to clarify that 

standardized charges are the same as 

applicable to all SDs not using the BankBased Capital Approach; and (5) 

amending the cross reference in 

Commission regulation § 23.102(d) to 

make clear that either 12 CFR part 217 

or Appendix A should be utilized as 

applicable by the nonbank SD 

depending on the respective capital 

approach elected. 

1. Benefits 

a. Amendments to Tangible Net Worth 

Capital Approach—CFTC Letter No. 21– 

15 

The amendments to definitions of 

‘‘predominantly engaged in nonfinancial activities’’ and ‘‘tangible net 

worth’’ codifying CFTC Letter No. 21–15 

are intended to ensure that the Tangible 

Net Worth Capital Approach can be 

utilized by certain nonbank SDs as was 

originally intended in the Final Rule. 

These amendments are expected to 

benefit certain nonbank SDs by ensuring 

clear and effective compliance with 

regulatory requirements under the 

Tangible Net Worth Capital Approach as 

amended, ultimately reducing 

operational costs for such nonbank SDs. 

In particular, nonbank SDs would no 

longer be required to calculate asset and 

revenue tests separately between the 

entity and the ultimate parent level or 

compute such tests under U.S. GAAP 

even if such entity was permitted to use 

IFRS. Further, these amendments would 

allow nonbank SDs meeting such 

qualifications to file their supplemental 

position reports at the same time as 

routine financial reporting for all 

nonbank SDs set forth within 

Commission regulation § 23.105(d). 

b. Amendments to Bank SD Financial 

Reporting Requirements—CFTC Letter 

No. 21–18 

Similarly, the amendments to 

Commission regulation § 23.105(p) 

codifying CFTC Letter No. 21–18, as 

extended under CFTC Letter No. 23–11, 

are expected to benefit bank SDs by 

permitting: (1) Non-U.S. bank SDs to file 

reports by their home country regulators 

subject to certain conditions; (2) bank 

SDs to file comparable Call Report 

schedules in accordance with, and 

within the timeframe permitted by, the 

prudential regulators; (3) Non-U.S. bank 

SDs to file balance sheet and statement 

of regulatory capital information in 

accordance with home country 

requirements provided they are in 

English, converted to U.S. dollars and 

filed within 90 calendar days following 

quarter-end; and (4) dually-registered 

Non-U.S. bank SDs to file comparable 

SEC-approved financial reports and 

schedules. The Commission anticipates 

that these amendments will eliminate 

duplicative and superfluous reporting 

and streamline financial reporting for 

both Non-U.S. and dually-registered 

bank SDs. 

c. Amendments Regarding Financial 

Reporting and Computation 

Requirements of Swap Dealers 

Lastly, the amendments regarding 

financial reporting and computation 

include: (1) amendments to the heading 

and scope provision of Commission 

regulation § 23.105(k) and (l); (2) titles 

of certain schedules included in 

Appendix B; (3) alignment of the public 

disclosure of unaudited financial 

information with the periodicity 

permitted by routine financial filings in 

Commission regulation § 23.105(d), and 

to remove reference to a statement 

disclosing the amounts of minimum 

regulatory capital; (4) amending Form 


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1–FR–FCM to add the 2 percent of 

uncleared swap margin capital 

requirement and swaps and securitybased swaps haircuts; and (5) addition 

of clarifying language to Commission 

regulations § 23.103(a)(1) and (c)(1) to 

provide additional clarity to registrants 

that the same standardized market and 

credit risk charges are applicable to 

nonbank SDs utilizing the Tangible Net 

Worth Capital Approach as are 

applicable to all other nonbank SDs if 

not approved to use models. These 

amendments are meant to clarify what 

was originally intended in the Final 

Rule or what is already included within 

the existing Commission regulations, as 

well as align the schedules as currently 

required by the SEC and the NFA. The 

Commission anticipates that these 

amendments will remove uncertainty 

amongst SDs about the type of form and 

the extent of detail that they should be 

reporting. 

2. Costs 

The Commission generally does not 

anticipate any costs associated with the 

above amendments as they are intended 

to streamline and clarify existing 

financial reporting and capital 

requirements. Of the above, only the 

amendments to Commission regulation 

§ 23.105(l) would impose additional 

financial reporting requirements on 

nonbank SDs and nonbank MSPs not 

approved to use models to file 

Schedules 2–4 of Appendix B. 

Currently, there are 8 nonbank SDs 

not approved to use models that are not 

currently filing Schedules 2–4 of 

Appendix B but would be required to do 

so under the amendments to 

Commission regulation § 23.105(l). The 

information required under Appendix B 

is nearly identical in all material 

respects to corresponding forms found 

in the SEC Form FOCUS Report Part II, 

as well as the capital and financial 

reporting requirements by the NFA for 

its member nonbank SDs and nonbank 

MSPs. Thus, the Commission has 

preliminarily determined that these 

nonbank SDs already have developed 

policies, procedures and systems to 

aggregate, monitor, and track their swap 

activities and risks as is required under 

Schedules 2–4 of Appendix B. This 

should mitigate some of the burdens of 

the additional reporting and 

recordkeeping requirements. Finally, 

the amendments to Commission 

regulation § 23.105(k) clarify that 

nonbank SDs and nonbank MSPs 

approved to use models may comply 

with the requirements to provide 

specific financial information required 

by Commission regulation § 23.105(k) 

by filing Appendix B. Such nonbank 

SDs and nonbank MSPs have already 

been filing Appendix B with the 

Commission, and thus the Commission 

has preliminarily determined that the 

amendments to Commission regulation 

§ 23.105(k) would not impose any 

additional burden for such nonbank SDs 

and nonbank MSPs. 

3. Section 15(a) Factors 

The following is a discussion of the 

cost and benefit considerations of this 

proposed rulemaking, as it relates to the 

five broad areas of market and public 

concern identified in section 15(a) of the 

CEA: (1) protection of market 

participants and the public; (2) 

efficiency, competitiveness, and 

financial integrity of swaps markets; (3) 

price discovery; (4) sound risk 

management practices; and (5) other 

public interest considerations. 

a. Protection of Market Participants and 

the Public 

The proposed rules are intended to 

enhance the clarity of financial 

reporting and computation requirements 

by revising the language of the 

regulations with respect to the type of 

forms and the tests that SDs should be 

using as part of their financial reporting 

process. The changes to the 

computation of Tangible Net Worth are 

anticipated to benefit the public by 

allowing investors to monitor tangible 

net worth at the consolidated parent’s 

level, and the financial reporting 

requirements for both bank SDs and 

nonbank SDs set out in this proposed 

rulemaking should help the 

Commission and market participants 

monitor and assess the financial 

condition of such SDs more accurately 

and as was intended in the Final Rule. 

These amendments are also intended to 

harmonize financial reporting 

requirements with those of the 

prudential regulators, and the SEC, 

through which market participants and 

the Commission can gain a clearer and 

more directly comparable 

understanding of the financial reports 

received. Clarifying rules should 

safeguard both market participants and 

the public by improving transparency 

and reducing ambiguity. 

Request for Comment 

Question 10. Do the proposed 

financial reporting and computation 

requirements protect market 

participants and the public? Please 

explain. 

b. Efficiency, Competitiveness, and 

Financial Integrity of Swaps Markets 

In this proposed rulemaking, the 

Commission seeks to promote efficiency 

and financial integrity of the swaps 

market by streamlining many of the 

financial reporting requirements. For 

example, the amendments to 

Commission regulation § 23.105(p) 

permit certain bank SDs to file with the 

Commission comparable Call Report 

schedules in accordance with, and 

within the timeframe permitted by, the 

prudential regulators that they currently 

file with the prudential regulators, or 

comparable SEC-approved financial 

reports and schedules, as applicable. 

The proposed amendments to 

Commission regulation § 23.105(p) 

would also allow certain Non-U.S. bank 

SDs to file with the Commission what 

they currently file with their respective 

home country regulators, subject to 

certain conditions. In addition, the 

amendments to Commission regulation 

§ 23.105(k) are meant to ensure that the 

information listed in Appendix B is 

completed by all nonbank SDs and 

nonbank MSPs as was intended, and is 

consistent with that required by the SEC 

and NFA, and the amendments to Form 

1–FR–FCM are meant to harmonize with 

the SEC’s requirements in its FOCUS 

Report Part II. Harmonizing 

requirements should foster a more level 

playing field, ultimately promoting trust 

and integrity within the market. 

The Commission anticipates that 

these amendments will promote greater 

operational efficiencies for both bank 

and nonbank SDs that are already 

regulated, either prudentially or through 

comparable foreign regulators, as they 

may be able to avoid creating 

duplicative compliance and operational 

infrastructures. The proposed 

amendments should allow the 

Commission to monitor the financial 

integrity of swaps markets more clearly 

and efficiently, including in the case of 

any default or financial contagion. 

Request for Comment 

Question 11. How might this proposal 

affect market integrity? Is market 

integrity adversely affected by the 

proposed rules? If so, how might the 

Commission mitigate any harmful 

impact? 

c. Price Discovery 

The Commission anticipates that the 

proposed amendments may enhance 

price discovery. By clarifying financial 

reporting and computation requirements 

and harmonizing reporting practices, a 

more efficient operating environment 

would be created for SDs, which are 

important intermediaries within the 

swaps markets. This improved data 

quality reported to regulators has the 

potential to enhance supervision, 

leading to improved market quality. 


ddrumheller on DSK120RN23PROD with PROPOSALS1
2566 Federal Register / Vol. 89, No. 10 / Tuesday, January 16, 2024 / Proposed Rules 

Consequently, this could lead to a more 

effective and accurate price discovery 

process. 

Request for Comment 

Question 12. How might this 

proposed rulemaking affect price 

discovery? Please explain. 

d. Sound Risk Management Practices 

The Commission has preliminarily 

determined that, as a result of the 

proposed reporting and recordkeeping 

requirements, SDs may more effectively 

track their trading and risk exposure in 

swaps and other financial activities. To 

the extent that these SDs can better 

monitor and track their risks, the 

Commission anticipates that this should 

help them better manage risk within the 

entity. 

Request for Comment 

Question 13. How might this proposal 

affect SD’s risk management practices? 

Please explain. 

e. Other Public Interest Considerations 

The Commission has not identified 

any additional public interest 

considerations related to the costs and 

benefits of the proposed rule. 

Request for Comment 

Question 14. Are there other public 

interest considerations that the 

Commission should consider? Please 

explain. 

C. Other Amendments 

The Commission is proposing a 

number of clarifying amendments 

intended to align with existing 

Commission regulations, including: (1) 

amending Commission regulation 

§ 23.105(c)(4) to add a two business 

days reporting timeframe to the 

requirement for nonbank SD notice 

filing of a substantial reduction in 

capital; (2) amending Commission 

regulations § 23.101(a)(1)(i)(B) and 

(a)(1)(ii)(C) to establish that the use of 

subordinated debt as regulatory capital 

is subject to the approval of either an 

RFA of which the nonbank SD is a 

member, or the Commission; and (3) 

amending Commission regulation 

§ 23.105(e)(4)(v) for SDs and MSPs to 

include an explicit statement, if 

applicable, that there are no material 

differences between the audited annual 

report and the unaudited annual report 

of the same date. 

1. Benefits 

a. Notice of Substantial Reduction in 

Capital 

The amendments to the notice 

requirements in Commission regulation 

§ 23.105(c)(4) would add a two-business 

days requirement for nonbank SDs for 

notice of substantial reduction in 

capital. The Commission has 

preliminarily determined that adding a 

reporting timeframe to the notice 

requirement will enhance compliance 

by providing regulatory certainty to 

nonbank SDs of when such a filing is 

due. 

b. Subordinated Debt Approval 

The amendments to Commission 

regulation § 23.101(a)(1)(i)(B) would 

establish that the use of subordinated 

debt as regulatory capital is subject to 

the approval of either an RFA of which 

the nonbank SD is a member, or the 

Commission. The amendments should 

further provide regulatory clarity by 

establishing the process for approving 

subordinated debt for nonbank SDs, 

which was not explicitly articulated in 

the Final Rule and had led to 

uncertainty among nonbank SDs. 

c. Statement of No Material Difference 

Lastly, the amendments to 

Commission regulation § 23.105(e)(4)(v) 

would require that the SDs and MSPs 

include an explicit statement, if 

applicable, of no material differences 

between the audited and the unaudited 

annual report of the same date. Doing so 

should not only align the filing 

approach for auditors of SDs with that 

of FCMs, but also enhance the reliability 

of such annual reports by encouraging 

auditors to more rigorously assess the 

materiality of reporting any discovered 

audit findings. 

2. Costs 

The Commission does not anticipate 

that compliance with the above 

amendments will lead to any significant 

costs. The amendments to Commission 

regulations § 23.105(c)(4) and (e)(4)(v) 

are meant to align the financial 

reporting requirements of SDs with that 

of FCMs, and based on the 

Commission’s experience with existing 

filings and discussions with registered 

SDs, the Commission has preliminarily 

determined that the registrants will be 

able to file necessary information within 

the timeframe provided. The 

amendments to Commission regulation 

§ 23.101(a)(1)(i)(B) are meant to 

establish a process of approving 

subordinated debt for nonbank SDs, and 

as such they would not levy any 

additional costs to the nonbank SDs. 

3. Section 15(a) Factors 

The following is a discussion of the 

cost and benefit considerations of the 

proposed rulemaking, as it relates to the 

five broad areas of market and public 

concern identified in section 15(a) of the 

CEA: (1) protection of market 

participants and the public; (2) 

efficiency, competitiveness, and 

financial integrity of swaps markets; (3) 

price discovery; (4) sound risk 

management practices; and (5) other 

public interest considerations. 

a. Protection of Market Participants and 

the Public 

The Commission anticipates that the 

proposed amendment to Commission 

regulation § 23.105(c)(4) should protect 

market participants and the public 

against possible market disruption by 

requiring that all SDs file a notice of a 

substantial reduction in capital within 

two business days after such an incident 

has occurred. Similarly, the 

amendments to Commission regulation 

§ 23.101(a)(1)(i)(B) should provide 

market clarity on how subordinated 

debt is approved for consideration as 

capital, and the amendments to 

Commission regulation § 23.105(e)(4)(v) 

should allow the Commission and the 

public to effectively monitor cases 

where there are no material differences 

between the audited and unaudited 

annual report of the same date filed by 

nonbank SDs and nonbank MSPs. These 

amendments should enable market 

participants to have better insights into 

SD’s capital and financial positions. 

This, in turn, should enhance the 

protection of both market participants 

and the public. 

Request for Comment 

Question 15. Do the proposed 

financial reporting requirements protect 

market participants and the public? 

Please explain. 

b. Efficiency, Competitiveness, and 

Financial Integrity of Swaps Markets 

The proposed amendments should 

improve the accuracy and completeness 

of nonbank SDs’ and nonbank MSPs’ 

financial reporting by imposing a twobusiness day deadline for notice of 

substantial reduction in capital, and an 

affirmative statement of no material 

differences between the audited and 

unaudited annual financial statement, 

as applicable. The establishment of a 

process for approving subordinated debt 

should lead to increased efficiency in 

how such subordinated debt is 

monitored. Further, these amendments 

are also intended to harmonize financial 

reporting requirements with those of the 

prudential regulators, as well as the 

Commission’s existing framework 

regarding FCMs. Harmonizing 

requirements should foster a more level 

playing field, ultimately promoting trust 

and integrity within the market. 


ddrumheller on DSK120RN23PROD with PROPOSALS1
Federal Register / Vol. 89, No. 10 / Tuesday, January 16, 2024 / Proposed Rules 2567 

Request for Comment 

Question 16. Is market integrity 

adversely affected by the proposed 

rules? If so, how might the Commission 

mitigate any harmful impact? 

c. Price Discovery 

The Commission anticipates that the 

proposed amendments may enhance 

price discovery. By improving financial 

reporting requirements for nonbank SDs 

and nonbank MSPs, a more efficient 

operating environment should be 

created for SDs, which are important 

intermediaries within the swaps 

markets. This improved data quality 

reported to regulators has the potential 

to enhance supervision, leading to 

improved market quality. Consequently, 

this could lead to a more effective and 

accurate price discovery process. 

Request for Comment 

Question 17. How might this 

proposed rulemaking affect price 

discovery? Please explain. 

d. Sound Risk Management Practices 

The Commission anticipates that the 

above amendments will lead to better 

risk management practices among SDs 

and MSPs, particularly by requiring 

them to monitor for potential reduction 

in capital and material differences 

between the audited and the unaudited 

annual financial statements. 

Request for Comment 

Question 18. How might this 

proposed rulemaking affect risk 

management practices of nonbank SDs 

and nonbank MSPs? Please explain. 

e. Other Public Interest Considerations 

The Commission has not identified 

any additional public interest 

considerations related to the costs and 

benefits of the proposed rule. 

Request for Comment 

Question 19. Are there other public 

interest considerations that the 

Commission should consider? Please 

explain. 

Note: The following appendix to this 

preamble pertains to a form that does not 

appear in the Code of Federal Regulations. 

BILLING CODE 6351–01–P 


ddrumheller on DSK120RN23PROD with PROPOSALS1
2568 Federal Register / Vol. 89, No. 10 / Tuesday, January 16, 2024 / Proposed Rules 

Appendix to the Preamble—Proposed 

Revisions to Selected Section of Form 

1–FR–FCM: Statement of the 

Computation of the Minimum Capital 

Requirements 


ddrumheller on DSK120RN23PROD with PROPOSALS1EP16JA24.046</GPH>

Appendix to the Preamble-Proposed Revisions to Selected Section of Form 1-FR-FCM: 

Statement of the Computation of the Minimum Capital Requirements<PHOTO> 

CFTC FORM 1.-FR.f'CM 

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Federal Register / Vol. 89, No. 10 / Tuesday, January 16, 2024 / Proposed Rules 2569 


ddrumheller on DSK120RN23PROD with PROPOSALS1EP16JA24.047</GPH>

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16. Charges against open commodity and cleared OTC derivatives positions in proprietary accounts and swaps 

A. Uncovered exchange-traded futures, cleared OTC derivatives positions and granted options contracts 

percentage of margin requirements applicable to such contracts 

Less: equity in proprietary accounts included in liabilities 

8. Ten percent (10%) of the market value of commodities which 

underlie commodity options not traded on a contract market 

carried long by the applicant or registrant which has value 

and such value increased adjusted net capital (this charge 

is limited to the value attributed to such options) 

C. Commodity options which are traded on contract markets and 

carried long in proprietary accounts. Charge is the same as 

would be applied if the applicant or registrant was the grantor 

of the options (this charge is limited to the value attributed 

to such options) 

D. Haircuts on swaps and security-based swaps pursuant to 

1.17(c)(5)(iii), (iv), (xv), and (xvi) (itemize to the subparagraph 

level on separate page) 

17. Five percent (5%) of all unsecured receivables from foreign brokers 

18. Deficiency in collateral for secured demand notes 

19. Adjustment to eliminate benefits of consolidation (explain on separate page) 

20. Total charges (add lines 7 through 19) 

!3350! 

-----13360! !3370! -------

_____ !3380! 

-------!3390! 

---~ 

!3410! -------

!3420! -------

-------!3430! 

!3440! -------
2570 Federal Register / Vol. 89, No. 10 / Tuesday, January 16, 2024 / Proposed Rules 

BILLING CODE 6351–01–C 

List of Subjects in 17 CFR Part 23 

Reporting and recordkeeping 

requirements, Swaps. 

For the reasons stated in the 

preamble, the Commodity Futures 

Trading Commission proposes to amend 

17 CFR part 23 as follows: 

PART 23—SWAP DEALERS AND 

MAJOR SWAP PARTICIPANTS 

■ 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. 

Section 23.160 also issued under 7 U.S.C. 

2(i); Sec. 721(b), Pub. L. 111–203, 124 Stat. 

1641 (2010). 

■ 2. Amend § 23.100 by adding, in 

alphabetical order, a definition of the 

term ‘‘Call Report’’ and revising the 

definitions of the terms ‘‘Predominantly 

engaged in non-financial activities’’ and 

‘‘Tangible net worth’’ to read as follows: 

§ 23.100 Definitions applicable to capital 

requirements. 

* * * * * 

Call Report. This term means the 

Federal Financial Institutions 

Examination Council Form 031 that a 

swap dealer or major swap participant 

for which there is a prudential regulator 

is required to file with its applicable 

prudential regulator. 

* * * * * 

Predominantly engaged in nonfinancial activities. A swap dealer is 

predominantly engaged in non-financial 

activities if: 

(1) The swap dealer’s consolidated 

annual gross financial revenues, or if the 

swap dealer is a wholly owned 

subsidiary, then the swap dealer’s 

consolidated parent’s annual gross 

financial revenues, in either of its two 

most recently completed fiscal years 

represents less than 15 percent of the 

swap dealer’s or the swap dealer’s 


ddrumheller on DSK120RN23PROD with PROPOSALS1EP16JA24.048</GPH>

Adjusted Net Capital Computation 

21. Adjusted net capital (subtract line 20 from line 6) !3500! 

22. Adjusted Net capital required 

A. Risk Based Capital Requirement 

Amount of Customer Risk 

Maintenance Margin !3515! 

ii Enter 8% of line 22.A.i !3525i 

iii Amount of Non-Customer Risk 

Maintenance Margin !3535i 

iv Enter 8% of line 22.A.iii !3545i 

V Enter the sum of 22.A.ii and 22.A.iv !3555i 

vi Total Uncleared Swap Margin, as applicable ~ vii Enter 2% of line 22.A.vi ~ viii Enter the sum of 22.A.v and 22.A.vii ~ 

B. Minimum Dollar Amount Requirement !3565i 

C. Other NFA Requirement !3575i 

D. Adjusted Net Capital Requirement Enter the greater of lines 22.A.viii, 22.B. or 22.C -------!3600i 

23. Excess adjusted net capital (line 21 less line 22.D.) -------!3610i 

Computation of Early Warning Level 

24. If the Minimum Adjusted Net Capital Requirement computed on line 22.D (Box 3600) is: 

• The Risk Based Requirement, enter 110% of line 22.A.viii. (XXXX), or 

• The Minimum Dollar Requirement of $1,000,000, for FCMs, or $20,000,000 for FCMs registered as SDs, enter 150% of line 

22.B. (3565), or 

• The Minimum Dollar Requirement of $20,000,000 for FCMs offering or engaging in retail forex transactions 

or Retail Foreign Exchange Dealers ("RFED"), enter 110% of line 22.B. (3565), or 

• Other NFA Requirement of $20,000,000 plus five percent of the FCM's offering or engaging in retail forex 

transactions or RFED's total retail forex obligations in excess of 

$10,000,000, enter 110% of line 22.C. (3575), or 

• Any other NFA Requirement, enter 150% of line 22.C. (3575) 

This is your early warning capital level. If this amount is greater than the amount on line 21, 

you must immediately notify your DSRO and the Commission pursuant to section 1.12 of the regulations. 

Guaranteed Introducing Brokers 

25. List all lBs with which guarantee agreements have been entered into by the FCM and which are currently in effect. 

See Attached. 
Federal Register / Vol. 89, No. 10 / Tuesday, January 16, 2024 / Proposed Rules 2571 

consolidated parent’s consolidated gross 

revenue in that fiscal year (‘‘15% 

revenue test’’), and 

(2) The consolidated total financial 

assets of the swap dealer, or if the swap 

dealer is wholly owned subsidiary, then 

the consolidated total financial assets of 

the swap dealer’s parent, at the end of 

its two most recently completed fiscal 

years represents less than 15 percent of 

the swap dealer’s or the swap dealer’s 

consolidated parent’s consolidated total 

assets as of the end of the fiscal year 

(‘‘15% asset test’’). 

(3) For purpose of computing the 15% 

revenue test or the 15% asset test, a 

swap dealer’s activities or swap dealer’s 

parent’s activities shall be deemed 

financial activities if such activities are 

defined as financial activities under 12 

CFR 242.3 and Appendix A to 12 CFR 

242, including lending, investing for 

others, safeguarding money or securities 

for others, providing financial or 

investment advisory services, 

underwriting or making markets in 

securities, providing securities 

brokerage services, and engaging as 

principal in investing and trading 

activities; Provided, however, a swap 

dealer or a swap dealer’s consolidated 

parent may exclude from its financial 

activities accounts receivable resulting 

from non-financial activities. 

* * * * * 

Tangible net worth. This term means 

the net worth of a swap dealer or major 

swap participant as determined in 

accordance with U.S. generally accepted 

accounting principles, or International 

Financial Reporting Standards issued by 

the International Accounting Standards 

Board if the swap dealer or major swap 

participant is permitted under 

§ 23.105(b) to prepare and maintain 

books and records in accordance with 

such standards, but in either case, 

excluding goodwill and other intangible 

assets. In determining net worth, all 

long and short positions in swaps, 

security-based swaps and related 

positions must be marked to their 

market value. A swap dealer or major 

swap participant must include in its 

computation of tangible net worth all 

liabilities or obligations of a subsidiary 

or affiliate that the swap dealer or major 

swap participant guarantees, endorses, 

or assumes either directly or indirectly. 

* * * * * 

■ 3. Amend § 23.101 by revising 

paragraphs (a)(1)(i)(B), (a)(1)(ii)(B), and 

(a)(1)(ii)(C), and adding paragraph 

(a)(1)(ii)(D) to read as follows: 

§ 23.101 Minimum financial requirements 

for swap dealers and major swap 

participants. 

(a)(1) * * * 

(i) * * * 

(B) An aggregate of common equity 

tier 1 capital, additional tier 1 capital, 

and tier 2 capital, all as defined under 

the bank holding company regulations 

in 12 CFR 217.20, equal to or greater 

than eight percent of the swap dealer’s 

BHC equivalent risk-weighted assets; 

provided, however, that the swap dealer 

must maintain a minimum of common 

equity tier 1 capital equal to six point 

five percent of its BHC equivalent riskweighted assets; provided further, that 

any capital that is subordinated debt 

under 12 CFR 217.20 and that is 

included in the swap dealer’s capital for 

purposes of this paragraph (a)(1)(i)(B) 

must qualify as subordinated debt under 

§ 240.18a–1d of this title in accordance 

with a qualification determination of the 

Commission or a registered futures 

association of which the swap dealer is 

a member; 

* * * * * 

(ii) * * * 

(B) A swap dealer that uses internal 

models to compute market risk for its 

proprietary positions under § 240.18a– 

1(d) of this title must calculate the total 

market risk as the sum of the VaR 

measure, stressed VaR measure, specific 

risk measure, comprehensive risk 

measure, and incremental risk measure 

of the portfolio of proprietary positions 

in accordance with § 23.102 and 

Appendix A to subpart E of this part; 

(C) A swap dealer may recognize as a 

current asset, receivables from thirdparty custodians that maintain the swap 

dealer’s initial margin deposits 

associated with uncleared swap and 

security-based swap transactions 

pursuant to the margin rules of the 

Commission, the Securities and 

Exchange Commission, a prudential 

regulator, as defined in section 1a(39) of 

the Act, or a foreign jurisdiction that has 

received a margin Comparability 

Determination under § 23.160; and 

(D) The qualification of any 

subordinated debt used to meet any 

capital requirements shall be as 

determined by the Commission or a 

registered futures association of which 

the swap dealer is a member. 

* * * * * 

■ 4. In § 23.102, revise paragraph (d) to 

read as follows: 

§ 23.102 Calculation of market risk 

exposure requirement and credit risk 

exposure requirement using internal 

models. 

* * * * * 

(d) The Commission, or registered 

futures association upon obtaining the 

Commission’s determination that its 

requirements and model approval 

process are comparable to the 

Commission’s requirements and 

process, may approve or deny the 

application, or approve or deny an 

amendment to the application, in whole 

or in part, subject to any conditions or 

limitations the Commission or 

registered futures association may 

require, if the Commission or registered 

futures association finds the approval to 

be appropriate in the public interest, 

after determining, among other things, 

whether the applicant has met the 

requirements of this section. A swap 

dealer that has received Commission or 

registered futures association approval 

to compute market risk exposure 

requirements and credit risk exposure 

requirements pursuant to internal 

models must compute such charges in 

accordance with paragraph (c) of this 

section. 

* * * * * 

■ 5. In § 23.103, revise paragraphs (a)(1) 

and (c)(1) to read as follows: 

§ 23.103 Calculation of market risk 

exposure requirement and credit risk 

requirement when models are not 

approved. 

(a) * * * 

(1) Computes its regulatory capital 

requirements under § 23.101(a)(1)(ii) or 

(a)(2), and 

* * * * * 

(c) * * * 

(1) A swap dealer that computes 

regulatory capital under 

§ 23.101(a)(1)(ii) or (a)(2) shall compute 

counterparty credit risk charges using 

the applicable standardized credit risk 

charges set forth in § 240.18a-1 of this 

title and § 1.17 of this chapter for such 

positions. 

* * * * * 

■ 6. In § 23.105, revise paragraphs (c)(2) 

and (c)(4), (d)(2) through (d)(4), (e)(4)(v), 

(e)(6), (i)(1)(i) and (ii), (i)(2)(ii), the 

introductory text to (k)(1), (l), (p)(2), and 

(p)(7) to read as follows: 

§ 23.105 Financial recordkeeping, 

reporting and notification requirements for 

swap dealers and major swap participants. 

* * * * * 

(c) * * * 

(2) A swap dealer or major swap 

participant who knows or should have 

known that its regulatory capital at any 

time is less than 120 percent of its 

minimum regulatory capital 

requirement as determined under 

§ 23.101, or less than the amounts 

identified in § 1.12(b) of this chapter for 

a swap dealer or major swap participant 

that is also a futures commission 

merchant, must provide written notice 

to the Commission and to the registered 

futures association of which it is a 


ddrumheller on DSK120RN23PROD with PROPOSALS1
2572 Federal Register / Vol. 89, No. 10 / Tuesday, January 16, 2024 / Proposed Rules 

member to that effect within 24 hours of 

such event. 

* * * * * 

(4) A swap dealer or major swap 

participant must provide written notice 

within two business days to the 

Commission and to the registered 

futures association of which it is a 

member of a substantial reduction in 

capital as compared to that last reported 

in a financial report filed with the 

Commission pursuant to this section. 

The notice shall be provided if the swap 

dealer or major swap participant 

experiences a 30 percent or more 

decrease in the amount of capital that 

the swap dealer or major swap 

participant holds in excess of its 

regulatory capital requirement as 

computed under § 23.101. 

* * * * * 

(d) * * * 

(2) The financial reports required by 

this section must be prepared in the 

English language and be denominated in 

United States dollars. The financial 

reports shall include a statement of 

financial condition, a statement of 

income/loss, a statement of changes in 

liabilities subordinated to the claims of 

general creditors, a statement of changes 

in ownership equity, a statement 

demonstrating compliance with and 

calculation of the applicable regulatory 

capital requirement under § 23.101, and 

such further material information as 

may be necessary to make the required 

statements not misleading. The monthly 

or quarterly report and schedules must 

be prepared in accordance with 

generally accepted accounting 

principles as established in the United 

States; Provided, however, that a swap 

dealer or major swap participant that is 

not otherwise required to prepare 

financial statements in accordance with 

U.S. generally accepted accounting 

principles, may prepare the monthly or 

quarterly report and schedules required 

by this section in accordance with 

International Financial Reporting 

Standards issued by the International 

Accounting Standards Board. 

(3) A swap dealer or major swap 

participant that is also registered with 

the Securities and Exchange 

Commission as a broker or dealer, 

security-based swap dealer, or a major 

security-based swap participant and 

files a monthly Form X–17A–5 FOCUS 

Report Part II with the Securities and 

Exchange Commission pursuant to 

§ 240.18a–7 or 240.17a–5 of this title, as 

applicable, must file such Form X–17A– 

5 FOCUS Report Part II with the 

Commission and with the registered 

futures association in lieu of the 

financial reports required under 

paragraphs (d)(1) and (2) of the section. 

The swap dealer or major swap 

participant must file the form with the 

Commission and registered futures 

association when it files the Form X– 

17A–5 FOCUS Report Part II with the 

Securities and Exchange Commission, 

provided, however, that the swap dealer 

or major swap participant must file the 

Form X–17A–5 FOCUS Report Part II 

with the Commission and registered 

futures association no later than 17 

business days after the end of each 

month. 

(4) A swap dealer or major swap 

participant that is also registered with 

the Commission as a futures 

commission merchant must file a Form 

1–FR–FCM or such other form as the 

futures commission merchant is 

permitted to file under § 1.10 of this 

chapter, in lieu of the monthly financial 

reports required under paragraphs (d)(1) 

and (2) of the section. 

(e) * * * 

(4) * * * 

(v) A reconciliation of any material 

differences from the unaudited financial 

report prepared as of the swap dealer’s 

or major swap participant’s year-end 

date under paragraph (d) of this section 

and the swap dealer’s or major swap 

participant’s annual financial report 

prepared under this paragraph (e) or, if 

no material differences exist, a 

statement so indicating; and 

* * * * * 

(6) A swap dealer or major swap 

participant that is also registered with 

the Commission as a futures 

commission merchant must file an 

audited Form 1–FR–FCM or such other 

form as the futures commission 

merchant is permitted to file under 

§ 1.10 of this chapter, and must comply 

with the requirements of § 1.16 of this 

chapter, including filing a supplemental 

accountant’s report on material 

inadequacies concurrently with the 

audited annual report, in lieu of the 

annual financial report required under 

this paragraph (e). 

* * * * * 

(i) * * * 

(1) * * * 

(i) The statement of financial 

condition including applicable 

footnotes; and 

(ii) The amounts of the swap dealer’s 

or major swap participant’s regulatory 

capital and minimum regulatory capital 

requirement, computed in accordance 

with § 23.101. 

(2) * * * 

(ii) The amounts of the swap dealer’s 

or major swap participant’s regulatory 

capital as of the fiscal year end and its 

minimum regulatory capital 

requirement, computed in accordance 

with § 23.101. 

* * * * * 

(k) * * * 

(1) A swap dealer that has received 

approval or filed an application for 

provisional approval under § 23.102(d) 

from the Commission, or from a 

registered futures association of which 

the swap dealer is a member, to use 

internal models to compute its market 

risk exposure requirement and credit 

risk exposure requirement in computing 

its regulatory capital under § 23.101 

must file with the Commission and with 

the registered futures association of 

which the swap dealer is a member the 

specific information contained in 

Appendix B to subpart E of this part and 

the following information within 17 

business days of the end of each month 

or quarter as applicable: 

* * * * * 

(l) Additional position and 

counterparty reporting requirements for 

swap dealers and major swap 

participants not approved to use 

models. A swap dealer or major swap 

participant which is not subject to 

paragraph (k) of this section must 

provide the Commission and the 

registered futures association of which 

the swap dealer or major swap 

participant is a member, the additional 

specific information contained in 

Appendix B to subpart E of this part on 

a monthly or quarterly basis as 

applicable to its required frequency of 

financial reporting under paragraph (d) 

of this section. 

* * * * * 

(p) * * * 

(2) Financial report and position 

information. (i) A swap dealer or major 

swap participant that files a Call Report 

with its applicable prudential regulator 

shall file Schedule RC—Balance Sheet 

and Schedule RC—R Regulatory Capital 

from its Call Report filed with the 

prudential regulator, and Schedule 1 of 

Appendix C to subpart E of this part, 

with the Commission on a quarterly 

basis. The swap dealer or major swap 

participant shall file the schedules with 

the Commission on the date the Call 

Report is due to be filed with the swap 

dealer’s or major swap participant’s 

prudential regulator. 

(ii) A swap dealer or major swap 

participant domiciled in a non-U.S. 

jurisdiction that is not required to file a 

Call Report by its applicable prudential 

regulator shall file a statement of 

financial condition and regulatory 

capital information containing 

comparable financial information as 

required by Schedule RC—Balance 

Sheet and Schedule RC—R Regulatory 


ddrumheller on DSK120RN23PROD with PROPOSALS1
Federal Register / Vol. 89, No. 10 / Tuesday, January 16, 2024 / Proposed Rules 2573 

Capital of the Call Report, and shall file 

Schedule 1 of Appendix C to subpart E 

of this part, with the Commission on a 

quarterly basis. The statement of 

financial condition, regulatory capital 

information, and Schedule 1 of 

Appendix C to subpart E of this part 

shall be prepared and presented in 

accordance with the accounting 

standards approved by the swap dealer’s 

or major swap participant’s home 

country regulatory authorities, provided, 

however, that the schedules and 

information must be in the English 

language with balances converted to 

U.S. dollars. The swap dealer or major 

swap participant shall file the statement 

of financial condition, regulatory capital 

information, and Schedule 1 of 

Appendix C to subpart E of this part 

with the Commission no later than 90 

calendar days after the end of the swap 

dealer’s or major swap participant’s 

fiscal quarter. 

* * * * * 

(7) A swap dealer or major swap 

participant that is subject to the capital 

requirements of a prudential regulator 

and is also registered with the Securities 

and Exchange Commission as a securitybased swap dealer or a major securitybased swap participant and files a 

quarterly Form X–17A–5 FOCUS Report 

Part IIC with the Securities and 

Exchange Commission pursuant to 

§ 240.18a–7 of this title, must file such 

Form X–17A–5 FOCUS Report Part IIC 

with the Commission in lieu of the 

financial reports required under 

paragraphs (p)(2) of this section. The 

swap dealer or major swap participant 

must file the form with the Commission 

when it files the Form X–17A–5 FOCUS 

Report Part IIC with the Securities and 

Exchange Commission, provided, 

however, that the swap dealer or major 

swap participant must file the Form X– 

17A–5 FOCUS Report Part IIC with the 

Commission no later than 30 calendar 

days from the date the report is made. 

■ 7. In Appendix B to subpart E of part 

23, revise the schedule headings of 

Schedules 1, 2, 3, and 4, and republish 

the schedules, to read as follows: 

Appendix B to Subpart E of Part 23— 

Swap Dealer and Major Swap 

Participant Position Information 

BILLING CODE 6351–01–P 


ddrumheller on DSK120RN23PROD with PROPOSALS1
2574 Federal Register / Vol. 89, No. 10 / Tuesday, January 16, 2024 / Proposed Rules 


ddrumheller on DSK120RN23PROD with PROPOSALS1EP16JA24.049</GPH>

Reg. 23.105(k) 

and (I) 

Appendix 

SCHEDULE 1 -AGGREGATE SECURITIES, COMMODITIES, AND SWAPS POSITIONS 

Items on this page to be reported by: Swap Dealers (Authorized and not authorized to use models) 

B Major Swap Participants (Authorized and not authorized to use models) 

Aggregate Securities Commodities and Swa~s Positions LONG/BOUGHT SHORT/SOLD 

1. U.S. treasury securities ... $ ~$ ~ 

2. U.S. government agency and U.S. government-sponsored enterprises ... $ ~$ ~ 

A Mortgage-backed securities issued by U.S. government agency and 

U.S. government-sponsored enterprises .. $ 1180011$ 1180021 

B. Debt securities issued by U.S. government agency and U.S. 

government-sponsored enterprises .. $ 1180031 $ 11800~ 

3. Securities issued by states and political subdivisions in the U.S. $ ~$ ~ 

4. Foreign securities 

A Debt securities .. $ ~$ ~ 

B. Equity securities .. $ ~$ ~ 

5. Money market instruments ... $ ~$ ~ 

6. Private label mortgage backed securities ... $ ~$ ~ 

7. other asset-backed securities .. $ ~$ ~ 

8. Corporate obligations ... $ ~$ ~ 

9. Stocks and warrants (other than arbitrage positions) .. $ ~$ ~ 

10. Arbitrage ... $ ~$ ~ 

11 Spot commodities .. $ ~$ ~ 

12 Other securities and commodities .. $ ~$ ~ 

13. Securities with no ready market 

A Equity .. $ ~$ ~ 

B. Debt .. $ ~$ ~ 

C. Other ... $ ~$ ~ 

D. Total securities with no ready market .. $ 1127771 $ 1127821 

14. Total net securities and spot commodities (sum of Lines 1-12 and 13D) .. $ 1127781 $ 1127831 

15. Security-based swaps 

A Cleared .. $ 1121061$ 11211~ 

B. Non-cleared .. $ 1121071$ 1121151 

16 Mixed swaps 

A Cleared .. $ 1121081$ 1121161 

B. Non-cleared .. $ 1121091$ 1121171 

17. Swaps 

A Cleared .. $ 1121101$ 1121181 

B Non-cleared .. $ 1121111$ 1121191 

18 Other derivatives and options $ ~$ ~ 

19 Counterparty netting .. $ 1127791 $ 11278~ 

20 Cash collateral netting $ 1127801 $ 1127851 

21 Total denvat1ve receivables and payables (sum of Lines 15-20) . $ 1127811$ 1127861 

22 Total net securities, cornrnodities, and swaps positions 

(surn of Lines 14 and 21) .. $ ~$ ~ 

Name of firm: 

As of 
Federal Register / Vol. 89, No. 10 / Tuesday, January 16, 2024 / Proposed Rules 2575 


ddrumheller on DSK120RN23PROD with PROPOSALS1EP16JA24.050</GPH>

NOTE: The information required to be reported within this form is intended to be identical to that required to be reported by Security Based Swap Dealers and 

Major Security Based Swap Participants under SEC FORM X-17a-5 FOCUS Report Part II. Please refer to FOCUS REPORT II INSTRUCTIONS and related 

interpretations published by the SEC in the preparation of this form. 

Reg. 23.105(k) 

and (I) 

Appendix 

B 

SCHEDULE 2-CREDIT CONCENTRATION REPORT FOR FIFTEEN LARGEST EXPOSURES IN DERIVATIVES 

Items on this page to be reported by: Swap Dealers (Authorized and not authorized to use models) 

Major Swap Participants (Authorized and not authorized to use models) 

I. By Current Net Exposure 

Gross Replacement Value 

Receivable Payable 

Counterparty Identifier (Gross Gain) (Gross Loss) 

1. 00 $ 00 $ 

2. 112m $ fi2i3E $ 

3. 00 $ rl213i $ 

4. li2i22 $ l12i3t $ 

5. ~ $ 00 $ 

6. lf2f2E $ fi2i4c $ 

7. li2f2E $ M2W $ 

8. li2i27 $ l12i4; $ 

9. 00 $ li2i4: $ 

10. w $ fi214i $ 

11. IT2f3c $ fi2i4e $ 

12. M2131 $ M214t $ 

13. ~ $ ~ $ 

14. M2132 $ M214t $ 

15. 00 $ ~ $ 

~II other counterparties $ li2i5c $ 

rotals $ [7a"ic $ 

II. By Current Net and Potential Exposure 

Gross Replacement Value 

Receivable Payable 

(Gross Gain) (Gross Loss) 

1. $ 

2 $ 

3. $ 

4 $ 

5. $ 

6 $ 

7 $ 

8. $ 

g $ 

10. $ 

11 $ 

12. $ 

13. $ 

14. $ 

15. $ 

$ 

M2151 

lrn5: 

~ 

~ 

~ 

H215E 

li2'i5t 

li"215E 

IT215l 

lf2'i& 

li2'i6'i 

~ 

lf2ill 

lf2'is,i 

~ 

M216E 

Net Replacement 

Value 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

178n $ 

Net Replacement 

Value 

~ 

112161 

l12'i6i 

11217( 

112m 

w 

fi2i7: 

w 

l12i71 

fi2i7E 

~ 

fi2i7i 

112171 

A2iB1 

lrn81 

fi2is; 

l78TI 

Current Net and 

Current Net Exposure Potential Exposure 

$ l12fB: $ ~ 

$ l12IBi $ 11225c 

$ li2fBE $ W01 

$ li2iBE $ f-i22o. 

$ li2fBj $ ffffi 

$ li2iBE $ l1mi 

$ li2ffil $ !Tm 

$ li2i9C $ fi"m 

$ 112191 $ l1220i 

$ l12f§; $ fi"m 

$ l12fg: $ !Tm 

$ li2fgi $ fi22TI 

$ 112191 $ 112211 

$ l12f§1 $ ffi 

$ l12fgj $ fi"22TI 

$ li219E $ fi221i 

$ l7aTI $ l78i-:i 

Current Net and 

Current Net Exposure Potential Exposure 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

Margin Collected 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

Margin Collected 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

lmTI 

112211 

1122D 

li221E 

11221s 

Rmc 

112221 

~ 

li22Z 

~ 

lm2E 

M222E 

112n 

M222E 

Rms 

M223C 

Rm1 
2576 Federal Register / Vol. 89, No. 10 / Tuesday, January 16, 2024 / Proposed Rules 


ddrumheller on DSK120RN23PROD with PROPOSALS1EP16JA24.051</GPH>

[otals: @s 

Name affirm: ___ _ 

Asof: ____ _ 

NOTE: The information required to be reported within this form is intended to be identical to that required to be reported by Security Based Swap Dealers and 

Major Security Based Swap Participants under SEC FORM X-17a-5 FOCUS Report Part II. Please refer to FOCUS REPORT II INSTRUCTIONS and related 

interpretations published by the SEC in the preparation of this form. 

Reg. 23.105(k) 

and (I) 

Appendix 

B 

SCHEDULE 3-PORTFOLIO SUMMARY OF DERIVATIVES EXPOSURES BY INTERNAL CREDIT RATING 

Items on this page to be reported by: Swap Dealers (Authorized and not authorized to use models) 

Major Swap Participants (Authorized and not authorized to use models) 

ln1emal Credit Rating Gross Replacement Value Net Replacement 

Value 

Current Net Exposure Current Net and 

Potential Exposure 

Margin Collected 

Receivable Payable 

1. ~ $ fi23B6 $ 112423 $ fi24oo $ fi24§7 $ ['i2534 $ 

2. li235C $ fi'23B7 $ fi"2424 $ fi24§'1 $ fi24§B $ li2535$ 

3. 112351 $ fi23B6 $ M2425 $ M$ fi'24§g $ li2536$ 

4. ~ $ fi'23Bg $ M2426 $ fi'2463 $ fi'25oo $ li2537$ 

5. ~ $ fi'23oo $ M2427 $ fi'2464 $ fi'2551 $ li2538$ 

6. li235i $ 11'23§1 $ M2428 $ N$ fi'2552 $ li2539$ 

7. Mm $ fi'23§2 $ M2429 $ N$ fi'25fil $ li2540$ 

8. Mm $ 11'23§3 $ M2430 $ fi'2467 $ fi'2554 $ li2541$ 

9. M235i $ 11'23§4 $ mm $ N$ fi'2555 $ li2542$ 

10. M235E $ 11'23§5 $ M2432 $ N$ fi'25oo $ li2543$ 

11. Mm $ fi'23oo $ M2433 $ W$ fi'25o'1 $ fi2sM $ 

12. !Tm $ fi'23§7 $ 112434 $ fi'w1 $ fi'25oo $ li2545$ 

13. 112361 $ fi'23§a $ M2435 $ fi'w2 $ fi'25oo $ li2546$ 

14. ~ $ fi'23§9 $ M2436 $ fi'w3 $ fi'251o $ li2547$ 

15. ~ $ ro $ mill $ fi'w4 $ fi'251T $ li2548$ 

16. li236i $ fi'2'4o1 $ M2438 $ W$ fi"2512 $ li2549$ 

17. Mm $ ro $ M2439 $ W$ fi"2513 $ li2550$ 

18. M236E $ ro $ ff2«o $ fi'w7 $ fi"2514 $ li2551$ 

19. M236i $ fi'24o4 $ mm $ W$ fi"2515 $ li2552$ 

20. M236E $ ro $ 112«2 $ W$ fi"2516 $ li2553$ 

21. ~ $ fi"24oo $ 112«3 $ fi24Bo $ ~$ IIB54 $ 

22. M237C $ fi"24ii7 $ mm $ fi24Bi" $ fi"251a $ li2555$ 

23. 112371 $ fi"24iia $ 112«5 $ fi24B2 $ fi"251§" $ li2556$ 

24. mm $ fi"2'4oo $ 112«6 $ fi24B3 $ fi'252o $ li2557$ 

25. ~ $ fi"2'4'f6 $ mm $ fi24B4 $ fi"252'f $ li2558$ 

26. lrn7i $ fi"24'ff $ M2448 $ fi24B5 $ 11'2522 $ li2559$ 

27. lm'n $ 112412 $ 112«9 $ fi24B6 $ 11'2523 $ li2560$ 

28. M237E $ 112413 $ M2450 $ fi24s7 $ fi'2524" $ 112561 $ 

29. 1123n $ 112414 $ M2451 $ fi24sB $ fi'2525" $ 112562 $ 

30. M237i $ 112415 $ 112452" $ fi24sg $ fi'2526" $ 112563 $ 

31. ~ $ 112416 $ 112453" $ fi24go $ fi'2527" $ ~$ 

32. li23sc $ M2417 $ 112454 $ fi24gi" $ fi'2528" $ 112565 $ 

33. 112381 $ M2418 $ 112455" $ fi2492 $ fi252g $ 112566 $ 

34. Mm $ M2419 $ M2456 $ fi'2493 $ fi253o $ 112567 $ 

35. Ima: $ M2420 $ M2457 $ fi24g,i $ fi'2531" $ 112568 $ 

1125n 

112573 

112574 

112575 

li2576 

li25Tl 

li2578 

112579 

li2500 

li2581 

li2582 

li2583 

112584 

li2585 

li2586 

li2587 

li258li 

li2589 

li2soo 

li2591 

112592 

112593 

112594 

112595 

112596 

112597 

112598 

li2599 

li2ooo 

R26oi" 

li2002 

li2003 

li2004 

li2005 

li2006 
Federal Register / Vol. 89, No. 10 / Tuesday, January 16, 2024 / Proposed Rules 2577 

■ 8. Amend Appendix C to subpart E of 

part 23 by removing the Balance Sheet 

and Regulatory Capital forms and 

revising the Schedule 1—Aggregate 

Security-Based Swap and Swap 

Positions form to read as follows: 

Appendix C to Subpart E of Part 23— 

Specific Position Information for Swap 

Dealers and Major Swap Participants 

Subject to the Capital Requirements of 

a Prudential Regulator 


ddrumheller on DSK120RN23PROD with PROPOSALS1EP16JA24.052</GPH>

36. 

Unrated 

Totals: 

Name of firm: ___ _ 

Asof: _____ _ 

NOTE: The information required to be reporled within this form is intended to be identical to that required to be reported by Security Based Swap Dealers and 

Major Security Based Swap Participants under SEC FORMX-17a-5 FOCUS Report Part IL Please refer to FOCUS REPORT II INSTRUCTIONS and related 

interprelations published by the SEC in the preparation of this form. 

Reg. 23.105(k) 

and (I) 

Appendix 

B 

By Current Net Exposure 

SCI-EDULE 4- GEOGRAPHIC DISTRIBUTION OF DERIVATIVES EXPOSURES FOR TEN LARGEST COUNTRIES 

Items on this page to be reported by: Swap Dealers (Authorized and not authorized to use models) 

Major Swap Participants (Authorized and not authorized to use models) 

Gross Replacement Value 

Country Receivable Payable Net Replacemenl Value Current Net Exposure 

Current Net and 

Potential Exposure Margin Collected 

1. 

2. 

3. 

4. 

5. 

6. 

7. 

8. 

9. 

10. 

Totals: 

II. By current Net and Potential Exposure 

Gross Replacement Value 

Country Receivable Payable Net Replacement Value Curren! Nel Exposure 

Current Net and 

Polenlial Exposure Margin Collected 

1. 

2. 

3. 

4. 

5. 

6. 

7. 

B. 

9. 

10. 

Totals: 

Name of firm: ___ _ 

Asof: _____ _ 

NOTE: The information required to be reported within this form is intended lo be identical to that required lo be reported by Security Based Swap Dealers and 

Major Security Based Swap Participants under SEC FORMX-17a-5 FOCUS Report Part IL Please refer lo FOCUS REPORT II INSTRUCTIONS and related 

interprelations published by the SEC in the preparation of this form. 
2578 Federal Register / Vol. 89, No. 10 / Tuesday, January 16, 2024 / Proposed Rules 

1Capital Requirements of Swap Dealers and 

Major Swap Participants, 85 FR 57462 (Sept. 15, 

2020). 

2CFTC Letter No. 21–15, Jun. 29, 2021, available 

at https://www.cftc.gov/csl/21-15/download. 

3See 17 CFR 23.101. 

4CFTC Letter No. 21–18, Aug. 31, 2021, available 

at https://www.cftc.gov/csl/21-18/download. 

5 Keynote Address of Chairman Rostin Behnam at 

the ABA Business Law Section Derivatives & 

Futures Law Committee Winter Meeting, (Feb. 3. 

2023), https://www.cftc.gov/PressRoom/Speeches

Testimony/opabehnam31. 

6See, e.g., 17 CFR 140.99. 

BILLING CODE 6351–01–C 

Issued in Washington, DC, on December 

22, 2023, by the Commission. 

Christopher Kirkpatrick, 

Secretary of the Commission. 

Note: The following appendices will not 

appear in the Code of Federal Regulations. 

Appendices to Capital and Financial 

Reporting Requirements for Swap 

Dealers and Major Swap Participants— 

Commission Voting Summary, 

Chairman’s Statement, and 

Commissioners’ Statements 

Appendix 1—Commission Voting 

Summary 

On this matter, Chairman Behnam and 

Commissioners Johnson, Goldsmith Romero, 

Mersinger, and Pham voted in the 

affirmative. No Commissioner voted in the 

negative. 

Appendix 2—Statement of Support of 

Chairman Rostin Behnam 

I support the proposed rule to amend 

certain requirements in part 23 of the 

Commission’s regulations to address specific 

issues identified during the implementation 

of the Commission’s 2020 final rule on 

capital and financial reporting requirements 

for swap dealers (SDs) and major swap 

participants (MSPs).1 The proposed rule 

would codify interpretive CFTC Letter No. 

21–15 2 regarding capital and financial 

reporting requirements for nonbank SDs and 

nonbank MSPs electing the tangible net 

worth capital approach; 3 codify the timelimited no-action position in CFTC Letter No. 

21–18 4 regarding financial reporting 

requirements for bank SDs; clarify technical 

aspects of the reporting requirements; and 

update an FCM reporting form consistent 

with net capital requirements previously 

adopted by the Commission for FCMs. The 

proposed amendments are not intended to 

change the Commission’s capital approach. 

This proposal is a testament to the 

commitment I previously made for the 

Commission to consider the codification of 

various forms of relief previously provided 

by CFTC Division staff through no-action 

position letters.5 As staff letters only bind the 

staff of the issuing Division with respect to 

the specific facts, situations, and persons 

addressed by the respective staff letters,6 it is 

good government for the Commission to 

clean-up its rule set where the Commission 

determines that compliance with certain 

regulations is impossible. Such Commission 

action not only provides regulatory certainty 

and clarity to our registrants with the benefit 

of notice and public comment, but also 

ensures the efficient use of staff resources to 

fix an issue once instead of allocating time 

to a series of no-action positions for the same 

matter. 

I look forward to hearing the public’s 

comments on the proposed amendments to 

the regulations and the relevant appendices 

in part 23 of the Commission’s regulations. 

I thank staff in the Market Participants 

Division, Office of the General Counsel, and 

the Office of the Chief Economist for all of 

their work on the proposal. 


ddrumheller on DSK120RN23PROD with PROPOSALS1EP16JA24.053</GPH>

Reg. 23.105(p) 

Appendix 

C 

SCHEDULE 1 -AGGREGATE SECURITY-BASED SWAP AND SWAP POSITIONS 

Items on this page to be reported by: Bank SDs 

Bank MSPs 

Aggregate Positions LONG/BOUGHT SHORT/SOLD 

1. Security-based swaps 

A. Cleared $ !12801! $ 

B. Non-cleared $ !12802! $ 

2. Mixed swaps 

A. Cleared $ !1280~ $ 

B. Non-cleared $ !12804 $ 

3. Swaps 

A. Cleared $ !1280~ $ 

B. Non-cleared $ !1280~ $ 

4. Other derivatives $ !12807! $ 

5. Total (sum of Lines 1-4) $ !1280@ $ 

Name of firm: 

As of: 

!1280~ 

~ 

!12811! 

!12812! 

[m] 

ll1m 

ll1ill 

~ 

NOTE: The information required to be reported within this form is intended to be identical to that required to be reported by Security Based 

Swap Dealers and Major Security Based Swap Participants under SEC FORM X-1 ?A-5 FOCUS Report Part IIC. Please refer to FOCUS 

REPORT PART IIC INSTRUCTIONS and related interpretations published by the SEC in the preparation of this form. 
Federal Register / Vol. 89, No. 10 / Tuesday, January 16, 2024 / Proposed Rules 2579 

1Since no MSP is currently registered with the 

Commission, in this statement, I will refer to SDs 

only. 

2Capital Requirements of Swap Dealers and 

Major Swap Participants (Capital Requirements), 85 

FR 57462 (Sept. 15, 2020); Dodd-Frank Wall Street 

Reform and Consumer Protection Act, Public Law 

111–203, 124 Stat. 1376 (2010). 

3 7 U.S.C. 6s(e). 

4 7 U.S.C. 6s(f). 

5 7 U.S.C. 6s(e)(1)(A). 

6Section 15F of the Exchange Act addresses 

capital requirements for SBSDs/MSBSPs. 

7Capital Requirements, 85 FR at 57465. 

8A capital requirement that is consistent with the 

SEC’s final capital regulations for SBSDs, as well as 

the existing CFTC’s capital rules for FCMs, and the 

existing SEC’s capital rules for broker-dealers. 

9A capital requirement that is consistent with the 

prudential regulators’ capital requirements for bank 

SDs and that is based on the existing Federal 

Reserve Board capital requirements for bank 

holding companies. 

10A capital requirement that is based on the SD’s 

tangible net worth, if the SD or parent is 

predominantly engaged in non-financial activities. 

Appendix 3—Statement of 

Commissioner Kristin N. Johnson 

The Commodity Futures Trading 

Commission (Commission or CFTC) adopted 

a proposal to amend certain of the 

Commission’s part 23 regulations that impose 

minimum capital requirements and financial 

reporting obligations on swap dealers (SDs) 

and major swap participants (MSPs) 

(Proposed Amendments).1 I support the 

amendments advanced by the Market 

Participants Division (MPD). 

Minimum capital requirements serve as a 

cushion during times of severe market stress 

to ensure our registrants’ safety and 

soundness, protect the financial stability of 

our financial system, and prevent a run on 

our financial institutions. Financial 

condition reporting provides the Commission 

with visibility and insight into the business 

and financial health of our registrants and 

enables us to require corrective action and 

prevent a failure of a single entity or group 

of entities or segment of the derivatives 

market, which could raise system risk 

concerns. 

Dodd-Frank Act Reforms 

The Commission introduced new capital 

and financial reporting requirements for SDs 

in 2020, as mandated by the Dodd-Frank Act 

(2020 Capital Rule).2 Title VII of the DoddFrank Act amended the Commodity 

Exchange Act (CEA) to establish a new 

regulatory framework for swaps, regulated by 

the Commission, and security-based swaps, 

regulated by the Securities and Exchange 

Commission (SEC), to reduce risk, increase 

transparency, and promote market integrity 

within the financial system. Section 4s(e) of 

the CEA introduced minimum capital 

requirements for SDs,3 and section 4s(f) of 

the CEA created financial reporting and 

recordkeeping requirements for all SDs.4

In the United States, the capital framework 

is divided into three parallel regimes. SDs 

subject to regulation by a prudential regulator 

are required to comply with the minimum 

capital requirements adopted by the 

applicable prudential regulator,5 while SDs 

not subject to regulation by a prudential 

regulator are required to meet the minimum 

capital requirements of the Commission, and 

security-based swap dealers (SBSDs) and 

major security-based swap participants 

(MSBSPs) that do not have a prudential 

regulator are required to comply with the 

minimum capital requirements of the SEC.6

The prudential regulators or banking 

agencies and the SEC have adopted capital 

rules for swaps and security-based swaps. 

In the adopting release for the 2020 Capital 

Rule, the Commission indicated that it would 

consult with the prudential regulators and 

the SEC to assess the capital adequacy of 

SDs, MSPs, SBSDs, and MSBSPs, monitor the 

implementation of the rule and data, and 

consider modifications to the capital and 

financial reporting requirements.7

With the Proposed Amendments, the 

Commission seeks to make surgical changes 

to the 2020 Capital Rule, including a number 

of technical corrections, based on 

consultation with the prudential regulators 

and SEC, and based on market feedback on 

the adoption and implementation of the 2020 

Capital Rule. While the Proposed 

Amendments are not adjusting the capital 

components of the 2020 Capital Rule, all 

regulations designed to mitigate known 

systemic risk concerns in the swaps market 

must be subject to careful evaluation. 

I commend the Commission for taking 

formal steps to engage in a rulemaking 

process that invites Commission discussion 

and public notice and comment on these 

regulations, which ensure compliance with 

the Dodd-Frank Act while remaining 

practical and solutions-oriented. I strongly 

encourage the Commission, however, to 

begin a formal rulemaking process to address 

several unresolved issues necessary to ensure 

compliance with the Dodd-Frank Act and 

these requirements. 

Clarifying Capital Requirements for 

Commercials 

The Proposed Amendments codify 

Interpretive Letter 21–15, which applies to 

commercial non-bank SDs—typically entities 

that primarily engage in agricultural and 

energy swaps and provide services that are 

important to the U.S. economy. The 

Commission’s overall capital approach 

permits non-bank SDs to select one of three 

methods to calculate their capital 

requirements, as permitted under the rule: 

the net liquid assets capital approach; 8 the 

bank-based capital requirements; 9 or the 

tangible net worth capital approach.10

The Commission proposes to revise the 

2020 Capital Rule so that the test to 

determine tangible net worth may be applied 

at the entity level or ultimate consolidated 

parent level; so that International Financial 

Reporting Standards (IFRS) accounting 

standards or GAAP may be used; and so that 

position and financial exposure reporting 

occur at the same frequency as financial 

reporting, which for SDs is quarterly. 

The Proposed Rule minimizes disruption, 

and clarifies the interpretation and 

implementation of the tangible net worth test 

for commercial non-bank SDs. 

Refining Financial Reporting Requirements 

The Proposed Amendments address issues 

presented in No-Action Letter (NAL) 21–18, 

which was extended under NAL 23–11 and 

applies to bank SDs, including non-U.S. bank 

SDs. Non-U.S. bank SDs can file the 

applicable financial reporting within 90 days 

of the end of the financial reporting period 

and the same forms (e.g., relating to balance 

sheet and regulatory capital schedules) in the 

same format as provided to home country 

regulators (but in English and U.S. dollars). 

Additionally, U.S. bank SDs can file the same 

forms (e.g., relating to balance sheet and 

regulatory capital schedules) under bank 

regulators’ Call Report and within the same 

timeframe as when filing with their 

prudential regulator. 

The Proposed Amendments allow the 

Commission to collect information from bank 

SDs as a comparative tool. Also, all SDs must 

use Schedule 1 for position information, 

which is similar to the SEC’s FOCUS report— 

duplicative forms are eliminated. 

MPD has demonstrated collaboration 

working with the prudential regulators and 

SEC in developing and harmonizing 

processes, procedures, and forms for 

financial reports and notifications—some of 

which are adopted the Proposed 

Amendments. Further, the 2020 Capital Rule 

was an important initiative that 

demonstrated the Commission’s recognition 

of the complexity and interconnectedness of 

the derivatives markets. 

Technical Corrections 

SD Exposure Reporting 

The Proposed Amendments amend 

Commission regulation to clarify that certain 

supplemental schedules used to report SD 

exposure are intended to be provided by all 

non-bank SDs. These amendments are 

necessary to align the reporting of similar 

information collected by the SEC from SBSDs 

and to provide the Commission and National 

Futures Association with important 

information regarding SD exposure across 

several geographical locations and 

counterparties. This information provides 

valuable insight into the risk exposure of 

non-bank SDs, which is essential to 

performing the regulatory oversight of SDs. 

Notice Requirements for Substantial 

Reduction in Capital 

The Commission should begin to review 

notice requirements comprehensively in light 

of greater, faster capabilities to comply, 

notwithstanding the potential existence of 

challenges for non-U.S. SDs in light of time 

zone differences. The Proposed Amendments 

require notification of a substantial reduction 

of capital within two business days. The 

2020 Capital Rule did not specify a 

timeframe, and the Proposed Amendments 

are consistent with the timeframe applicable 

to FCMs. 

Conclusion 

In order to prevent the market instability 

witnessed during the period when swaps 

traded in bespoke, bilateral markets, the 

Commission imposes capital requirements on 

non-bank SDs, and imposes financial 

reporting requirements on bank SDs as well 


ddrumheller on DSK120RN23PROD with PROPOSALS1
2580 Federal Register / Vol. 89, No. 10 / Tuesday, January 16, 2024 / Proposed Rules 

1Statement of Commissioner Caroline D. Pham 

on Risk Management Program for Swap Dealers and 

Futures Commission Merchants Advance Notice of 

Proposed Rulemaking (June 1, 2023). 

2See Concurring Statement of Commissioner 

Caroline D. Pham Regarding Proposed Order and 

Request for Comment on an Application for a 

Capital Comparability Determination (June 2, 2022). 

3Section 731 of the Dodd-Frank Act added a new 

section 4s to the Commodity Exchange Act (CEA) 

to require the CFTC adopt rules establishing 

minimum initial margin, variation margin and 

capital requirements for swap dealers and major 

swap participants. Under CEA section 4s(e), the 

CFTC is required to adopt capital requirements for 

swap dealers and major swap participants that are 

not subject to the capital rules of the prudential 

regulators, which include nonbank subsidiaries of 

bank holding companies. 

4 I.e., swap dealers and major swap participants 

that are not subject to the capital requirements of 

a prudential regulator, as opposed to swap dealers 

and major swap participants for which there is a 

prudential regulator. 

5 I.e., swap dealers and major swap participants 

that are not subject to the capital requirements of 

a prudential regulator, along with the swap dealers 

and major swap participants for which there is a 

prudential regulator. See Capital Requirements of 

Swap Dealers and Major Swap Participants, 85 FR 

57462 (Sept. 15, 2020). 

6Concurring Statement of Commissioner Caroline 

D. Pham Regarding the CFTC Request for 

Information on Climate-Related Financial Risk 

(June 2, 2022). I reiterate the importance of keeping 

our focus on our markets, products, and purpose to 

avoid the risk of diluting our limited resources and 

potentially straying from our core expertise and 

responsibilities into areas already tasked to others. 

7 During that time, staff worked to develop 

processes, procedures, and forms to accept the 

financial reports and notifications required by the 

capital and financial reporting rules. In so doing, 

CFTC staff received several compliance related 

questions, and as a result, issued eight staff letters, 

all available at the Commission’s website, 

www.cftc.gov: CFTC Letter Numbers 21–15 (June 29, 

2021); 21–18 (Aug. 31, 2021); 21–20 (Sept. 30, 

2021); 21–21 (Sept. 30, 2021); 21–22 (Sept. 30, 

2021); 21–23 (Sept. 30, 2021); 22–01 (Jan. 5, 2022); 

22–02 (Jan. 5, 2022). 

8CFTC Letter No. 21–15 (June 29, 2021), https:// 

www.cftc.gov/csl/21-15/download. 

9Staff extended the relief in CFTC Letter No. 21– 

18 until the earlier of October 6, 2025 or the 

adoption of any revised financial reporting 

requirements for bank swap dealers and major swap 

participants under Regulation 23.105(p). CFTC 

Letter No. 23–11 (July 10, 2023), available at https:// 

www.cftc.gov/csl/23-11/download. 

10CFTC Letter No. 21–18 (Aug. 31, 2021), https:// 

www.cftc.gov/csl/21-18/download. Bank swap 

dealers and major swap participants have limited 

financial reporting obligations, recognizing that 

prudential regulators have an obligation to impose 

their capital requirements and are primarily 

responsible for monitoring bank swap dealer and 

major swap participant capital under the CEA. 7 

U.S.C. 6s(e)(2)(i). 

11Recent coverage has focused on what the 

Federal Reserve Board supports and could look to 

do. Victoria Guida, ‘‘Fed’s Waller: Support for Final 

Basel Rule ‘a Possibility’ ’’ PoliticoPro (Nov. 28, 

2023). 

12Luke Clancy, ‘‘US Basel Endgame Hits Clearing 

with Op Risk Capital Charges’’ Risk.net (Sept. 25, 

2023), https://www.risk.net/regulation/7957815/usbasel-endgame-hits-clearing-with-op-risk-capitalcharges. 

13The CFTC maintains the archived webcast at: 

https://www.cftc.gov/PressRoom/Events/opaevent

gmac110623. 

14 17 CFR 23.101. 

15 17 CFR 23.101(a)(2). 

16 Id. 

17CFTC Letter No. 21–15. 

as non-bank SDs. These regulations are 

critical to the oversight of the swaps market. 

I want to thank MPD and the Office of the 

Chief Economist (OCE) for their excellent 

work bringing forth this proposed 

rulemaking, in particular Jennifer Bauer, 

Maria Aguilar-Rocha, Andrew Pai, Joshua 

Beale, Thomas Smith, and Amanda L. Olear 

of MPD, and Lihong McPhail of OCE. 

Appendix 4—Statement of Support of 

Commissioner Caroline D. Pham 

I support the Notice of Proposed 

Rulemaking on Capital and Financial 

Reporting Requirements for Swap Dealers 

and Major Swap Participants (Proposal) 

because it addresses issues left outstanding 

from implementing a rule by offering 

pragmatic solutions that not only rectify the 

problem at hand, but do so without imposing 

unnecessary burdens or complications. I 

would like to thank Andrew Pai, Maria 

Aguilar-Rocha, Josh Beale, Tom Smith, and 

Amanda Olear in the Market Participants 

Division for their work on the Proposal. I 

greatly appreciate the time staff took to 

discuss my questions and concerns. 

It is important to remember that most of 

the CFTC’s provisionally-registered swap 

dealers are subject to three or more regulatory 

regimes.1 Of the CFTC’s 106 currently 

provisionally registered swap dealers, most 

are also registered with and supervised by 

another agency or authority, such as a 

prudential, functional, or market regulator. 

This awareness must inform the 

Commission’s approach when considering 

any rule impacting swap dealers.2 Otherwise, 

we risk missing the nuances associated with 

the complex interplay or conflict that arises 

between the various regulations. 

Capital, the subject of today’s Proposal, is 

one area in which the CFTC’s provisionallyregistered swap dealers are subject to 

multiple regulatory regimes. By this point, 

we know that the Dodd-Frank Wall Street 

Reform and Consumer Protection Act (DoddFrank Act) mandated the Commission 

establish capital requirements for swap 

dealers and major swap participants,3 and 

that the Commission adopted capital 

requirements for nonbank swap dealers and 

major swap participants,4 as well as financial 

reporting requirements for bank swap dealers 

and major swap participants, together with 

nonbank swap dealers and major swap 

participants.5

Therefore, when considering solutions to 

challenges that have arisen while 

implementing the capital rules, we must 

remember that we are not a prudential 

banking regulator like the Fed, OCC, or FDIC, 

nor are we a primarily disclosures-based 

market regulator like the SEC.6 Today’s 

proposal offers a pragmatic solution to 

challenges faced by our market participants 

that respects the differences among the 

financial regulators. 

The extent of capitalization and reach of 

financial reporting were decided years ago 

and are not the subject of today’s Proposal. 

Rather, today we consider, primarily, fixing 

issues that arose when implementing the 

capital and financial reporting rules,7 and 

secondarily, miscellaneous technical changes 

to make the rules more workable. 

I support the entire Proposal, but will focus 

my comments on the codification of: (1) 

CFTC Staff Interpretative Letter No. 21–15 for 

commercial swap dealers and major swap 

participants electing the Tangible Net Worth 

Capital Approach; 8 and (2) the time-limited, 

no-action relief in CFTC Letter No. 21–18 9

regarding financial reporting requirements 

for bank swap dealers and major swap 

participants.10

Before I begin, I want to draw attention to 

a bigger issue relating to capital for the 

coming year. The broad impacts of the Basel 

III Endgame are being widely reported and 

discussed,11 including impact to CFTC swap 

dealers and major swap participants.12 I am 

deeply concerned about this issue for our 

markets, which is why I expect that under 

my sponsorship, the Global Markets 

Advisory Committee (GMAC) will work on 

offering actionable recommendations for the 

Commission in this area. I encourage 

everyone to watch the presentation made on 

the subject at the recent November 6th 

meeting via the meeting’s archived 

webcast,13 and look forward to working with 

the GMAC and all of you on the issue in 

2024. 

A. Codifying CFTC Letter No. 21–15 

Nonbank swap dealers and major swap 

participants can elect one of three 

approaches to calculating their regulatory 

capital.14 One option allows certain 

qualifying nonbank swap dealers and major 

swap participants to use a regulatory capital 

approach that is based on the firm’s tangible 

net worth.15 Generally, these nonbank swap 

dealers and major swap participants have to 

be ‘‘predominantly engaged in non-financial 

activities’’ and maintain positive tangible net 

worth according to U.S. generally accepted 

accounting practices (GAAP) at all times.16

When the rules were being implemented, 

nonbank swap dealers identified three 

problems: (1) the rule’s preamble expanded 

the definition of ‘‘predominantly engaged in 

financial activities’’ to permit these nonbank 

swap dealers and major swap participants to 

meet the regulation’s tangible net worth test 

directly or through its ultimate consolidated 

parent entity, but the text of regulation 

§ 23.100 was unclear about it; (2) regulation 

§ 23.105(b) allowed books and records to be 

maintained in accordance with International 

Financial Reporting Standards (IFRS) but the 

‘‘tangible net worth’’ definition in regulation 

§ 23.100 only referenced U.S. GAAP; and (3) 

there was an inconsistency in the timelines 

of certain financial reports required by 

regulation § 23.105(l).17

To fix these issues, the Commission is 

proposing to adopt the remedies provided in 

Letter No. 21–15: revise the definitions of 

‘‘tangible net worth’’ and ‘‘predominantly 

engaged in non-financial activities’’ and 

regulation § 23.105 to clarify the test can be 

applied at the parent or entity level, as well 

as using U.S. GAAP or IFRS; and amend 

regulation § 23.105(l) to clarify that position 

and other related exposure reporting must be 


ddrumheller on DSK120RN23PROD with PROPOSALS1
Federal Register / Vol. 89, No. 10 / Tuesday, January 16, 2024 / Proposed Rules 2581 

18 17 CFR 23.105(p)(2). The required financial 

information consists of a statement of financial 

condition, a statement of regulatory capital, and a 

schedule of the aggregate positions in securitybased swaps, mixed swaps, swaps, and other 

derivatives. 

made at the same frequency as financial 

reporting, which in this instance is quarterly. 

B. Codifying CFTC Letter No. 21–18 

Bank swap dealers and major swap 

participants must file unaudited quarterly 

financial information with the CFTC within 

30 calendar days of the end of their fiscal 

quarter.18 The information should be 

submitted via the specific forms in Appendix 

C to subpart E of part 23. The Commission 

intended that these forms would be identical 

to those filed by banks with their prudential 

regulator. However, when the capital and 

financial reporting rules were being 

implemented, it became evident that there 

were some differences in the forms, as well 

as with the timelines for filing. 

Therefore, CFTC Letter No. 21–18 let bank 

swap dealers and major swap participants 

provide home country regulator reports and 

comparable schedules on the prudential 

regulators’ timeline; foreign bank swap 

dealers and major swap participants provide 

home country regulator balance sheets and 

statements of regulatory capital information 

as long as they are in English, USD, and 

within 15 days of filing with home country 

regulator; and SEC dually-registered foreign 

bank swap dealers and major swap 

participants file comparable SEC approved 

financial reports and schedules. 

To fix these issues, the Commission is 

proposing to adopt the remedies provided in 

CFTC Letter No. 21–18: amend regulation 

§ 23.105(p) to allow foreign bank swap 

dealers and major swap participants to file 

the applicable financial reporting within 90 

days of the end of the financial reporting 

period; accept balance sheet and regulatory 

capital schedules under prudential regulator 

reports for U.S. bank swap dealers and major 

swap participants; and to accept the filing of 

such schedules at the same time as filed with 

prudential regulators. For foreign swap 

dealers, the Commission is proposing to 

permit the filing of a balance sheet and 

statement of regulatory capital schedules in 

the format provided to their home country 

regulator, as long as they are in English and 

converted to USD, and filed no later than 90 

days following the reporting period end date. 

I support this rule because codifying welltailored relief helps provide market certainty 

while avoiding imposing unnecessary 

burdens and creating compliance 

complications. I also support this rule 

because the Commission does so while also 

continuing to respect the differences between 

our rules and those of the other regulators 

overseeing swap dealers on capital. It is a 

laudable achievement. I again commend staff 

in the Market Participants Division for their 

hard work on this rule, and look forward to 

reviewing the comments. 

[FR Doc. 2023–28649 Filed 1–11–24; 8:45 am] 

BILLING CODE 6351–01–P 


ddrumheller on DSK120RN23PROD with PROPOSALS1