1

Swap Dealers (SDs) and Major Swap Participants 

(MSPs) are twin pillars of Dodd-Frank's comprehensive 

regulation of swaps. The statute defines SDs and MSPs 

as mutually exclusive entities and then sets out parallel 

regulatory authorizations for them. But Dodd-Frank does 

not state that SDs and MSPs should be subject to 

identical regulation. 

This statutory ambiguity raises the question: Did 

Congress intend that the agencies charged with 

implementing Dodd-Frank would subject SDs and MSPs 

to the same substantive regulation? Thus far, the 

agencies' answer apparently is "yes." The Commodity 

Futures Trading Commission ("CFTC") has proposed 

substantive regulations for SDs and MSPs that are 

identical, and the Securities and Exchange Commission 

("SEC") seems poised to do the same.1

 However, the 

separate definitions of SD and MSP indicate that 

different rules may be warranted. 

This paper summarizes the problems with the CFTC's 

application of the statute and its proposed rules for 

MSPs. At its core, the CFTC ignores the fundamental 

differences in SDs and MSPs. By definition, SDs are 

entities that make markets in swaps or sell swaps to 

others. MSPs are defined as parties that are NOT SDs, 

yet maintain swap positions with sufficient exposures to 

create systemically important default risk. Based on 

these definitions, MSP regulation should focus 

exclusively on default risk, while SD regulation should 

focus on market making, pricing and sales practices, as 

well as default risk. By equating MSPs with SDs for 

purposes of every substantive rule, the CFTC instead 

would impose regulation on MSPs that is a mismatch, 

resulting in unwarranted and over-burdensome costs for 

MSPs, including those qualifying corporate hedgers, 

pension plans and investment funds.2

 The CFTC should 

reconsider its approach of having identical regulation. 

How Dodd-Frank Defines MSP and SD 

Under Dodd-Frank, a "swap dealer" is defined to be any 

person who makes a market in swaps or holds itself out 

as a dealer in swaps. Section 1(a)(49) of the Commodity 

Exchange Act (“CEA”), as amended by Dodd-Frank, 

provides: 

The term ‘swap dealer’ means any person who— 

i. Holds itself out as a dealer in swaps; 

ii. Makes a market in swaps; 

iii. Regularly enters into swaps with counterparties as 

an ordinary course of business for its own 

account; or 

iv. Engages in any activity causing the person to be 

commonly known in the trade as a dealer or 

market maker in swaps.3

 

This definition includes entities engaging in wide-scale 

marketing and selling of swaps. Generally, financial 

institutions are understood to be SDs; often these parties 

are known as the "sell-side" because they offer or 

market swaps to others. 

Congress defined an MSP, by contrast, as "any person 

who is not a swap dealer" and who maintains 

outstanding swap positions that exceed certain 

thresholds determined by the CFTC under three different 

statutory tests.4

 MSPs are therefore those entities 

commonly known as the "buy-side" of the swaps market. 

The MSP swap position thresholds are designed to 

make sure that buy-side swap market participants whose 

swap positions could create system-wide risk if they 

default would be subject to regulation that would 

ameliorate that risk. 

Though SDs and MSPs play different roles in the swap 

market, Congress recognized that both types of entities 

could pose systemic risks and should be regulated to 

protect against those risks.5

 No one could dispute that 

conclusion. But swap dealing or market-making activities 

also trigger other regulatory concerns not related to 

By definition, SDs are entities that make markets in 

swaps or sell swaps to others. MSPs are defined as 

parties that are NOT SDs, yet maintain swap 

positions with sufficient exposures to create 

systemically important default risk. 

Swap Dealers and Major Swap Participants 

Should Not be Treated as Identical Twins 
2

systemic risk. Congress wanted to address these 

concerns as well. However, imposing regulation on 

MSPs that is geared to the activities of SDs would be 

misplaced. 

It would therefore have been illogical for Congress to 

require the CFTC to regulate SDs and MSPs alike in 

every way. Instead, as we will now see, Congress 

authorized, but did not necessarily require, regulation of 

SDs and MSPs in many areas, leaving the CFTC to 

decide whether regulation was needed and, if so, to 

tailor its regulation in each area to the distinct activities 

of the different regulatory classifications. The CFTC’s 

proposals do not take into account these key 

differences. 

Regulatory Authorizations for SDs and 

MSPs 

Dodd-Frank authorizes the CFTC to impose a wide-array 

of regulations on SDs and MSPs. Below, we group the 

provisions according to the risks they target. 

Default Risk 

► Registration requirements – Dodd-Frank requires 

that SDs and MSPs register with the CFTC.6 

► Capital and margin requirements – Dodd-Frank 

obligates SDs and MSPs to comply with minimum 

capital and margin requirements for swaps.7 

► Reporting, recordkeeping, and daily trading records 

– Dodd-Frank subjects SDs and MSPs to swap 

recordkeeping and reporting requirements as 

determined by the CFTC.8 

► Documentation standards – Dodd Frank directs the 

CFTC to adopt rules governing documentation 

standards for swap transactions entered into by SDs 

and MSPs.9 

Other Risks 

► Business conduct standards – Dodd-Frank imposes 

a plethora of business conduct standards on SDs 

and MSPs consistent with such regulations as the 

CFTC may prescribe.10 In addition, the statute 

imposes additional regulation to cover situations 

where a SD or MSP enters into a swap with socalled Special Entities (which ironically and circularly 

could also be MSPs). There are also requirements 

for situations where a SD acts as an advisor to a 

Special Entity (as such term is defined in the 

Appendix).11 

► Designation of a chief compliance officer – DoddFrank requires each SD and MSP to appoint an 

individual to serve as a chief compliance officer 

("CCO").12 

► Duties – Dodd-Frank imposes general trading, 

disclosure, risk management and conflict of interest 

prevention duties on SDs and MSPs.13 

► Segregation of collateral for uncleared swaps – 

Dodd-Frank allows any person who enters into an 

uncleared swap with a SD or MSP to choose 

whether to require that the collateral it posts to 

margin, guarantee, or secure its obligations for that 

swap be carried by an independent third-party 

custodian and designated as a segregated account 

for the benefit of the counterparty.14 

► Restrictions on ownership – Dodd-Frank allows the 

CFTC to limit the ability of SDs and MSPs to own 

equity in and participate in the operation of 

designated contract markets ("DCMs"), swap 

execution facilities ("SEFs"), and derivatives clearing 

organizations ("DCOs").15 

Although Dodd-Frank directs the CFTC to adopt 

regulations for some of the provisions mentioned above 

and authorizes the CFTC to adopt rules in others, DoddFrank typically gives the CFTC discretion to adopt rules 

tailored to the specific risks targeted by a provision. The 

statute never mandates that the CFTC adopt an 

"identical twin" approach to regulation. In some cases, 

as with certain of the business conduct standards, the 

statute allows the CFTC to determine not only what 

regulations are appropriate, but whether regulations 

should be adopted at all.16 In other words, the statute 

grants the CFTC flexibility to establish an effective 

regulatory regime for MSPs that is not a clone of SD 

regulation. 

CFTC proposals applicable to SDs and 

MSPs 

To date, the CFTC has largely ignored its regulatory 

flexibility and has consistently interpreted Dodd-Frank as 

if the statute required identical regulations for SDs and 

MSPs. In the following proposals, which cover each of 

the substantive requirements for SDs and MSPs 

proposed to date, the CFTC would treat SDs and MSPs 

the same: 

► Registering as a SD or MSP;17

► Duties of an SD or MSP with respect to risk 

management procedures, diligent supervision, 

business continuity and disaster recovery, disclosure 

and the ability of regulators to obtain general 

information, and antitrust considerations;18 

► Reporting, recordkeeping, and daily trading 

records;19 
3

► Confirmation, portfolio reconciliation, and portfolio 

compression;20 

► Designating a Chief Compliance Officer, required 

compliance policies and required annual reports;21 

and 

► Business conduct standards for entering swaps with 

counterparties;22

► Ownership limitations and governance standards for 

DCOs.23 

► Swap trading relationship documentation 

requirements.24

Inconsistencies and Anomalies 

Consistent rules for credit and default risk make sense, 

as both SDs and MSPs may have sizable swaps 

positions that could create systemic risk. The CFTC’s 

proposed rules that address credit or default risk for both 

SDs and MSPs are appropriate. Unfortunately, some of 

the CFTC's proposed rules would implement DoddFrank provisions intended to mitigate other types of risk, 

such as those risks associated with swap dealing. By 

law, MSPs do not engage in swap dealing activities and 

regulating them as if they did leads to regulatory 

anomalies at best and regulatory impossibilities in some 

instances. 

The universe of potential MSPs is large. It includes 

corporate hedgers, investment funds, ERISA plans, and 

a host of other non-dealer entities. Regulating these buyside participants as if they were SDs could lead to 

unintended and undesirable consequences. To avoid 

these outcomes, the CFTC should use the regulatory 

flexibility bestowed by Dodd-Frank, as well as its own 

expertise, to craft workable regulations for MSPs. The 

examples below provide a sample of problematic 

proposed regulations. 

Business Conduct Standards 

Dodd-Frank imposes certain business conduct 

standards on SDs and MSPs, including requiring that 

SDs and MSPs "verify that any counterparty meets the 

eligibility standards for an eligible contract participant" 

and disclose certain information about a swap 

transaction.25 The CFTC's proposed business conduct 

standards, however, would extend far beyond the 

statutory provision by requiring additional duties of 

MSPs, including the duties to protect the interest of their 

counterparties, even if those counterparties are SDs. 

For example, proposed rule 23.402(c)(2) would require 

SDs and MSPs to use reasonable diligence to gather 

facts necessary to "[e]ffectively service the counterparty 

... [i]mplement any special instructions from the 

counterparty...[and] [e]valuate the previous swaps 

experience, financial wherewithal and flexibility, trading 

objectives and purposes of the counterparty."26 If 

adopted, this rule would stand the business conduct 

standards, which were proposed to protect the buyer of 

a swap from the seller, on their head. Instead of 

protecting the corporate hedger from its SD, the CFTC's 

proposal would require the hedger to protect the SD. 

This outcome is illogical, as it would require the SD's 

counterparty to look out for the interests of the SD. 

Moreover, customer protections of this sort, which seek 

to ensure that SDs treat counterparties fairly, are distinct 

from the prevention of default or credit risk. Since MSPs 

do not create risks other than default or credit risk, the 

requirements of proposed rule 23.402(c)(2) should not 

apply to MSPs. The CFTC should use its discretion to 

apply this rule and other business conduct standards to 

SDs alone.27 

Duties of SDs and MSPs 

Dodd-Frank requires that SDs and MSPs establish a risk 

management program meeting certain criteria, but 

otherwise allows the CFTC broad latitude to tailor its 

regulations to SDs and MSPs.28 The CFTC's proposal 

for regulating uniformly both SDs and MSPs fails to 

consider the particular business arrangements of the 

wide array of buy-side participants who may be subject 

to MSP regulation. 

Apparently, the CFTC assumes that all MSPs will be 

organizations with numerous employees. For some 

MSPs, this may be true. But others could have no 

employees at all. For example, pooled investment funds 

(e.g., registered investment companies and exempt 

private funds) have a unique operational structure and 

would struggle to comply with the CFTC's proposed 

rules. Usually, funds employ, at most, a handful of 

people. They rely instead on their asset managers to 

provide risk management, recordkeeping, compliance, 

and other business services. They are not, generally 

speaking, divided into business units. 

The proposed regulations on the duties of SDs and 

MSPs would require each SD and MSP to "establish and 

maintain a risk management unit with sufficient authority; 

qualified personnel; and financial, operational, and other 

resources to carry out the risk management program" of 

By law, MSPs do not engage in swap dealing 

activities and regulating them as if they did leads to 

regulatory anomalies at best and regulatory 

impossibilities in some instances. 
4

the SD or MSP.29 In order to comply, a fund MSP would 

need to create a new risk management unit and hire new 

personnel. Congress did not intend to force MSPs to 

choose between altering their organizational structures 

and ceasing their swaps activities, but the CFTC's 

proposed regulations could create such a choice. 

Chief Compliance Officer 

Dodd-Frank requires each SD and MSP to designate a 

Chief Compliance Officer (“CCO”) who will be 

responsible for reviewing and reporting on the entity's 

compliance with the CEA as well as resolving any 

compliance issues that may arise. The CFTC's rule 

proposal on CCOs would require each of SDs, MSPs 

and Futures Commission Merchants ("FCMs") to adhere 

to identical requirements.30 

This approach is a poor fit for MSPs. CCOs typically 

monitor whether an intermediary is discharging its 

regulatory obligations to its customers. MSPs are 

customers and it would be odd to have CCOs created to 

make sure MSPs do not take advantage of SDs. In 

addition, for many MSPs, this would create another 

unnecessary cost burden. 

Conflicts of Interest 

New CEA § 4s(j)(5) contains a broad mandate for SDs 

and MSPs to implement conflict of interest procedures 

that, among other things, ensure almost complete 

separation of the research and trading functions of the 

SD or MSP. As written, this requirement could be 

unworkable for many MSPs, such as corporate hedgers 

who hire personnel to research commodity prices and 

recommend trading strategies. In addition, those funds 

that hire staff may use this staff to conduct research 

reports to inform the funds' trading decisions or selection 

of asset managers. In either case, forcing separation of 

research and trading personnel would defeat the 

purpose of conducting research. 

The CFTC's proposed rules on the implementation of 

conflict of interest policies for SDs and MSPs attempt to 

narrow Dodd-Frank's mandate to apply in situations 

where research personnel create reports to be 

distributed outside of the particular SD or MSP.31 While 

we applaud the CFTC for attempting to give a workable 

construction to the statutory language, we believe that 

this approach may still subject certain MSPs, like 

corporate hedgers or investment funds, to exposure. In 

order to effectuate its goal of crafting workable 

regulation, the CFTC's rules on conflict of interest should 

explicitly exempt entities whose research personnel 

produce reports for internal use only. This would remove 

any ambiguity with respect to the steps that a MSP 

would need to take to fulfill its duties. 

Documentation Standards 

New CEA § 4s(i) requires SDs and MSPs to "conform 

with such standards as may be prescribed by the [CFTC] 

by rule or regulation that relate to timely and accurate 

confirmation, processing, netting, documentation and 

valuation of all swaps." Instead of adopting specific 

documentation requirements, the statute grants broad 

rulemaking discretion to the CFTC. The CFTC's 

proposed documentation rules treat SDs and MSPs 

equally.32

This approach is inappropriate for MSP regulation. 

MSPs are buy-side entities, yet many of the proposed 

documentation standards are designed to regulate 

dealing activity. These requirements are unnecessary 

and will cause both MSPs and the CFTC to use 

resources inefficiently. 

Special Entity-Specific Concerns 

In addition to the anomalies discussed above, which 

would apply with equal force to many MSPs, regardless 

of their organizational form, the CFTC's proposed rules 

governing SDs and MSPs that enter into swap 

transactions with Special Entities (cities, states, 

endowments and pension plans) pose unique problems 

that should be addressed. Dodd-Frank requires that SDs 

and MSPs who act as the counterparty to a Special 

Entity observe heightened business conduct standards 

to protect the Special Entity counterparty. The CFTC's 

proposed rules, however, could actually harm Special 

Entities, instead of protecting them, because they do not 

account for situations where the MSP is also a Special 

Entity. 

Assume that a pension plan (a Special Entity by 

definition) maintains swap positions that exceed the 

second test of the MSP definition (making the pension 

plan a MSP). Under the CFTC's proposed business 

conduct standards, the pension plan, as an MSP would 

owe all of its counterparties – including SDs – the full 

array of business conduct standards protections 

contemplated by Dodd-Frank. For example, the CFTC's 

proposed rules would obligate the plan to learn 

information to service effectively its counterparty (SD) 

and otherwise consider whether a particular swap 

transaction is suitable for its counterparty (SD). 

This result is illogical and incompatible with the notion of 

Special Entities. Congress created the Special Entity 

classification to ensure that certain types of market 

participants receive a heightened level of protection 

when entering into swaps, not to saddle them with the 

duty of protecting major banks and other SDs.33 Since 

the CFTC has, at least to date, refused to categorically 

exclude Special Entities from the MSP definition, it must 

revisit other areas of its proposed rules governing the 
5

duties of MSPs to ensure Special Entities receive the 

treatment Congress intended. 

Other Concerns 

In addition to the concerns raised above, the CFTC has 

proposed ownership and governance standards for 

DCOs, DCMs and SEFs to implement this provision that 

would create anomalies if adopted in their current form.34 

These proposed rules would treat MSPs strangely. On 

the one hand, they would limit the ability of MSPs to own 

a stake in DCOs. On the other hand, they would also 

require DCOs to install "customers" on their Risk 

Management Committees or their Boards of Directors.35 

These rules appear not to recognize that MSPs likely will 

also be customers – they are, after all, buy-side entities. 

In fact, the customers that are most likely to be MSPs 

(and thus limited in their ability to own a DCO) are likely 

to be some of the largest and most well-informed 

customers, meaning that their input on the Risk 

Management Committee or Board of Directors could be 

most valuable. 

It is hard to understand why the CFTC would, with one 

set of rules, seek to limit buy-side ownership of DCOs 

while simultaneously requiring buy-side involvement in 

key DCO committees with a different regulation. We 

believe the CFTC should examine these rules and 

ensure that they encourage, rather than discourage, 

customer involvement with DCOs. 

Conclusion 

Although the statute does not specify how the CFTC 

should tailor its regulations to either SDs or MSPs, there 

is no need for such explicit guidance. The advantage of 

delegating rulemaking to a regulatory agency like the 

CFTC is that agencies have expertise in particular areas 

of law and are better suited to write subject matter 

specific regulation. An agency is exactly the forum for 

developing nuanced and workable regulation. We 

recommend that the CFTC reconsider all of its proposed 

substantive regulations for MSPs to tailor those rules to 

the interests and activities of the major buy-side market 

participants that could become MSPs and not seek to 

subject SDs and MSPs to identical regulation. 

1

 This analysis will focus on the CFTC because the CFTC, which has been coordinating with the SEC, has issued a more complete set of swap rule 

proposals to date. But this analysis would apply equally to the SEC as well if, as seems likely, it follows the same course as the CFTC. 

2

 The statute expressly excludes corporate and pension plan use of swaps for hedging from the MSP calculation under one of the three tests for MSP 

status, but not the other tests. In a joint rulemaking, the CFTC and SEC have construed the MSP definition potentially to apply to corporate hedgers as 

well as pension plans. See Further Definition of "Swap Dealer," Security-Based Swap Dealer," "Major Swap Participant," "Major Security-Based Swap 

Participant," and "Eligible Contract Participant", 75 Fed. Reg. 80,174, 80,197 (Dec. 21, 2010) (Noting that the second prong of the MSP definition "does 

not explicitly account for positions for hedging commercial risk or ERISA Positions." Noting further that the threshold for the second prong " reflect[s] the 

fact that this second test (unlike the first major participant test) encompasses certain hedging positions.") 

3 See Dodd-Frank § 721(a)(21) (New CEA § 1a(49)) (for swap dealers). Dodd-Frank § 761(a)(21) provides a substantially similar definition of securitybased swap dealer. It will be incorporated as Exchange Act § 3(a)(71). 

4 See Dodd-Frank § 721(a)(16) (New CEA § 1a(33)) (emphasis added). 

Section 761(a)(6) of Dodd-Frank contains a provision defining Major Security-based Swap Participant that is substantially similar but lacks the exclusion 

for captive finance affiliates. It will be incorporated as Exchange Act § 3(a)(67). 

5

 As key liquidity providers, SDs will be interconnected with many swap market participants and with each other. This interconnectedness means that a 

default by one SD, unless properly regulated, could result in myriad other defaults throughout the financial system. Similarly, absent appropriate 

regulation, the magnitude of an MSP's swap positions could create systemic risk if that MSP defaults because an MSP default could be large enough to 

cause a SD to default as well. 

6 See Dodd Frank § 731 (New CEA § 4s(a) and (b)). 

7 See Dodd Frank § 731 (New CEA § 4s(e)). 

8 See Dodd Frank § 731 (New CEA §§ 4s(f) and (g)). 

9 See Dodd Frank § 731 (New CEA § 4s(i)). 

10 See Dodd Frank § 731 (New CEA § 4s(h)(1) and (3)). 

11 See Dodd Frank § 731 (New CEA § 4s(h)(5)). The statutory title reads "Special Requirements for Swap Dealers as Counterparties to Special 

Entities," but the section addresses requirements for swap dealers and MSPs. See also Dodd Frank § 731 (New CEA § 4s(h)(4)), addressing situations 

where an SD acts as an advisor to a Special Entity. Note that certain of the statutory provision apply only to SDs, see New CEA §§ 4s(h)(B) and (C), 

while others may also apply to MSPs, see New CEA § 4s(h)(4)(A). 

12 See Dodd Frank § 731 (New CEA § 4s(k)). 

13 See Dodd Frank § 731 (New CEA § 4s(j)). Some, but not all of these duties may address systemic risk, but others, particularly the duties that address 

conflict of interest, are inapposite to mitigating systemic risk. 

14 See Dodd-Frank § 724(c) (New CEA § 4s(l)). Technically speaking, this category is related to default risk, but it concerns the default risk of the 

counterparty, not the SD or MSP. 

15 See Dodd-Frank § 726(a). 

16 See Dodd-Frank § 731 (New CEA § 4s(h)(1)) ("Each registered swap dealer and major swap participant shall confirm with such business conduct 

standards as prescribed in paragraph (3) and as may be prescribed by the Commission by rule or regulation...") (emphasis added). 
6

17 Registration of Swap Dealers and Major Swap Participants, 75 Fed. Reg. 71379 (Nov. 23, 2010). 

18 Regulations Establishing and Governing the Duties of Swap Dealers and Major Swap Participants, 75 Fed. Reg. 71397 (Nov. 23, 2010). 

19 Reporting, Recordkeeping, and Daily Trading Records Requirements for Swap Dealers and Major Swap Participants, 75 Fed. Reg. 76666 (Dec. 9, 

2010). 

20 Confirmation, Portfolio Reconciliation, and Portfolio Compression Requirements for Swap Dealers and Major Swap Participants, 75 Fed. Reg. 81519 

(Dec. 28, 2010). 

21 Designation of a Chief Compliance Officer; Required Compliance Policies; and Annual Report of a Futures Commission Merchant, Swap Dealer, or 

Major Swap Participant, 75 Fed. Reg. 70881 (Nov. 19, 2010). 

22 Business Conduct Standards for Swap Dealers and Major Swap Participants With Counterparties, 75 FR 80638 (Dec. 22, 2010). Some provisions of 

this rule differ to reflect the fact that certain provisions of the statute apply only to SDs and not to MSPs. 

23 Requirements for Derivatives Clearing Organizations, Designated Contract Market, and Swap Execution Facilities Regarding the Mitigation of 

Conflicts of Interest, 75 Fed. Reg. 63, 732 (Oct. 18, 2010); Governance Requirements for Derivatives Clearing Organizations, Designated Contract 

Markets, and Swap Execution Facilities; Additional Requirements Regarding the Mitigation of Conflicts of Interest, 76 Fed. Reg. 722 (Jan. 6, 2011). 

24 Swap Trading Relationship Documentation Requirements for Swap Dealers and Major Swap Participants, 76 Fed. Reg. 6725 (Feb. 8, 2011); Orderly 

Liquidation Termination Provision in Swap Trading Relationship Documentation for Swap Dealers and Major Swap Participants, 76 Fed. Reg. 6708 (Feb. 

8, 2011). 

25 See Dodd-Frank § 731 (New CEA § 4s(h)(3)(A-C)). 

26 See 75 Fed. Reg. at 80657. 

27 The statute grants the CFTC the discretion to "establish such other standards and requirements as the [CFTC] may determine are appropriate in the 

public interest, for the protection of investors, or otherwise in furtherance of the purposes of [the CEA]." See Dodd-Frank § 731 (New CEA § 

4s(h)(3)(D)). The use of the disjunctive specifically gives the CFTC the discretion to tailor its requirements to swap dealers (when addressing investor or 

customer protection) or to MSPs (when acting otherwise in furtherance of the CEA). 

28 Specifically, New CEA § 4s(j)(2) requires SDs and MSPs to "establish robust and professional risk management systems adequate for managing the 

day-to-day business of the [SD] or [MSP]." 

29 See 75 Fed. Reg. at 71404. 

30 See Designation of a Chief Compliance Officer; Required Compliance Policies; and Annual Report of a Futures Commission Merchant, Swap Dealer, 

or Major Swap Participant, 75 Fed. Reg. 70881 (Nov. 19, 2010). 

31 See Proposed Rule 23.605(a)(9)(iv) (exempting internal communications that are not given to current or prospective customers from the definition of 

"research report"). 

32 See Swap Trading Relationship Documentation Requirements for Swap Dealers and Major Swap Participants, 76 Fed. Reg. 6725 (Feb. 8, 2011); see 

also Orderly Liquidation Termination Provision in Swap Trading Relationship Documentation for Swap Dealers and Major Swap Participants, 76 Fed. 

Reg. 6708 (Feb. 8, 2011). 

33 Dodd-Frank may require MSPs that are also special entities to follow certain de minimis business conduct standards, but the Commission has chosen 

to propose additional standards for MSPs (even those MSPs that are also Special Entities) without considering the different functions of SDs and MSPs. 

See Dodd-Frank § 731 (New CEA § 4s(h)(3)) (requiring MSPs and SDs to certify that their counterparty is an ECP, to communicate in a fair and 

balanced manner based on principles of good faith and fair dealing and, to provide certain disclosure when entering into a swap with a non-SD/MSP 

counterparty). 

34 See Requirements for Derivatives Clearing Organizations, Designated Contract Market, and Swap Execution Facilities Regarding the Mitigation of 

Conflicts of Interest, 75 Fed. Reg. 63, 732 (Oct. 18, 2010); Governance Requirements for Derivatives Clearing Organizations, Designated Contract 

Markets, and Swap Execution Facilities; Additional Requirements Regarding the mitigation of Conflicts of Interest, 76 Fed. Reg. 722 (Jan. 6, 2011). 

35 Compare Proposed Rule 39.25(b)(2) (establishing ownership limits) with Proposed Rules 39.13(g)(3) (proposing to require customer representation on 

the DCO Risk Management Committee) and 39.26(b) (proposing to require customer representation a DCO's Board of Directors). It is also worth noting 

that the ownership limitation would group SDs and MSPs together and would not account for the fact that SDs and MSPs play different roles in the 

swaps markets and are likely to have different interests.