Commodity Futures Trading Commission 

 Office of Public Affairs 

 Three Lafayette Centre 

 1155 21st Street, NW 

 Washington, DC 20581 

 www.cftc.gov

Proposed Rules Regarding Capital Requirements 

for Swap Dealers and Major Swap Participants 

The Commodity Futures Trading Commission (Commission) is proposing rules to implement section 731 of the 

Dodd-Frank Act, regarding capital requirements for swap dealers and major swap participants. 

Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) 

The Commodity Futures Trading Commission is proposing rules to implement section 731 of the Dodd-Frank Wall 

Street Reform and Consumer Protection Act (Dodd-Frank Act). Section 731 requires the Commission to adopt 

capital requirements for swap dealers (SDs) and major swap participants (MSPs) that are not subject to prudential 

regulation by the Federal Reserve Board, the Office of the Comptroller of the Currency, the Federal Deposit 

Insurance Corporation, the Farm Credit Administration or the Federal Housing Finance Agency (collectively the 

prudential regulators). The CFTC has consulted with the prudential regulators as well as with the Securities and 

Exchange Commission in developing the proposed capital rules. The proposed rules also address the capital 

requirements of any SDs or MSPs that may also be registered as futures commission merchants (FCMs). 

Proposed capital requirements 

The proposed rules address the SD’s or MSP’s qualifying capital and the minimum levels of such qualifying capital 

that the SD or MSP would be required to maintain. The proposed requirements would be included as amendments 

to existing Commission regulations governing FCM capital requirements, and also as new capital rules that would 

apply to SDs and MSPs that are not FCMs. The proposed rules also address when internal models may be used for 

purposes of the required capital calculations. 

a) SDs and MSPs that are also FCMs. These SDs and MSPs would be required to meet existing FCM 

requirements to hold minimum levels of adjusted net capital, and also would be required to calculate the 

required minimum level as the greatest of the following: 

• a fixed dollar amount, which under the proposed rules would be $20 million; 

• the amount required for FCMs that also act as retail forex exchange dealers; 

• 8 percent of the risk margin required for customer and non-customer exchange-traded futures 

positions and over-the-counter (OTC) swap positions that are cleared by a clearing organization; 

• the amount of adjusted net capital required by a registered futures association of which the FCM is a 

member; and 

• for an FCM that also is registered as a securities broker or dealer, the amount of net capital required 

by SEC rules. 

b) SDs and MSPs that are not FCMs and are nonbank subsidiaries of U.S. bank holding companies. These SDs 

and MSPs would be required to meet the same capital requirements that U.S. banking regulations apply to 

the bank holding company. Generally, such banking regulations require a minimum ratio of qualifying total 

capital to risk-weighted assets of 8 percent, of which at least half, i.e., 4 percent, should be in the form of 

Commodity Futures Trading Commission ♦ Office of Public Affairs ♦ 202-418-5080 
Commodity Futures Trading Commission ♦ Office of Public Affairs ♦ 202-418-5080 

Tier 1 capital. The proposed rules also specify a minimum fixed dollar amount of at least $20 million of Tier 

1 capital. 

 

c) SDs and MSPs that are neither FCMs nor a bank holding company subsidiary as described above. These 

SDs and MSPs would be required to maintain tangible net equity equal to $20 million, plus additional 

amounts for market risk and over-the-counter derivatives credit risk. A firm’s tangible net equity generally 

would be based on net equity as determined under U.S. GAAP, minus intangibles such as goodwill. 

Application for approval of internal models 

Under the proposed rules an SD or MSP may apply for Commission approval to use internal models for purposes 

of its capital calculations. Initially, only SDs and MSPs whose internal models are approved and subject to ongoing 

review by the Federal Reserve Board or, as applicable, the SEC, would be permitted to apply for such Commission 

approval. The proposed rules also provide that the Commission may at any time determine by written order to 

accept applications requesting approval of internal models used by other SDs and MSPs that are not subject to 

review by the Federal Reserve Board or the SEC. 

If an SD or MSP is subject to the tangible net equity requirement and has not received approval to use internal 

models, it would be required to calculate its market risk and over-the-counter credit risk exposures based upon 

certain internationally recognized standardized methodologies under the Basel Accord. 

Financial condition reporting and related recordkeeping requirements 

The proposed rules also include financial condition reporting and related recordkeeping requirements for SDs and 

MSPs. FCMs would be required to meet the current requirements for unaudited monthly financial reports and 

annual audited financial statements. SDs and MSPs that are not subject to supervision by a prudential regulator 

would be subject to similar financial condition reporting requirements under the proposed rules. 

Also, the Commission proposes to require FCMs to provide the same financial reporting for the segregated funds 

of customers with swaps cleared by a derivatives clearing organization that existing Commission rules require FCMs 

to provide for the segregated funds of their customers trading futures on regulated exchanges. This reporting 

consists of an additional schedule that would be included in the monthly and annual financial condition reports filed 

with the Commission. The proposed schedule is to be published in the Federal Register together with the proposed 

rules.