1

6351-01-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 

“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.
2

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, D.C. 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 
3

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, maguilar-rocha@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 

mandate2 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 

 

1 Capital Requirements of Swap Dealers and Major Swap Participants, 85 FR 57462 (Sept. 15, 2020) (the

“Final Rule” or the “Final Rules”).

2 Section 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 DoddFrank 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 

http://www.cftc.gov/LawRegulation/OTCDERIVATIVES/index.htm.

3 The 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).
4

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 re-

 

4 To 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).

5 Capital Requirements of Swap Dealers and Major Swap Participants, 76 FR 27802 (May 12, 2011).
5

proposed 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 security-based swap dealers and major securitybased 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

 

6 Capital Requirements of Swap Dealers and Major Swap Participants, 81 FR 91252 (Dec. 16, 2016) (the 

“2016 Capital Proposal”).

7 The comment letters for the 2016 Capital Proposal are available at 

https://comments.cftc.gov/PublicComments/CommentList.aspx?id=1769 (the public comment file).

8 Capital, Margin and Segregation Requirements for Security-Based Swap Dealers and Major SecurityBased Swap Participants and Capital and Segregation Requirements for Broker-Dealers, 84 FR 43872 

(Aug. 22, 2019) (the “SEC Final Capital Rule”).

9 Capital Requirements of Swap Dealers and Major Swap Participants, 84 FR 69664 (Dec. 19, 2019).

10 Final Rules, 85 FR at 57462.

11 Id. at 57525.

12 Id.
6

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 

 

13 See generally id. at 57467. The three methods discussed in detail in the Final Rules include the BankBased Capital Approach, the Tangible Net Worth Capital Approach, and the Net Liquid Assets Capital 

Approach.

14 See generally id. at 57480-57502.

15 See 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).

16 See generally Performance of Registration Functions by National Futures Association with Respect to 

Swap Dealers and Major Swap Participants, 77 FR 2708 (Jan. 19, 2012).
7

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-CSENLA 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

 

17 Final Rules, 85 FR at 57507-57510.

18 Id. at 57515.

19 Id. at 57518.

20 CFTC Letter No. 21-03, Jan. 12, 2021, available at https://www.cftc.gov/csl/21-03/download.

21 NFA 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.
8

no-action and interpretative letters.

22

 Two letters, CFTC Letters No. 21-15 and 21-1823, 

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 § 23.10024 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 

 

22 CFTC 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.
9

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 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 

 

25 CFTC Letter No. 21-15.

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.

28 See 17 CFR 23.100 for the definition of the term “predominantly engaged in non-financial activities.”
10

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 

parent31 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 

 

29 See 17 CFR 23.100 for the definition of the term “tangible net worth.”

30 84 FR 69664 at 69668.

31 Final Rules, 85 FR at 57480.

32 Id. at 57499.

33 See 17 CFR 23.100 for the definition of the term “tangible net worth.”

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

35 Id.
11

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 

 

36 17 CFR 23.105.

37 Final Rules, 85 FR at 57514.

38 17 CFR 23.105(l).

39 Appendix B to subpart E of part 23.
12

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 

 

40 17 CFR 23.105(d).

41 Final Rules, 85 FR at 57514-57515.
13

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.

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 

 

42 SEC Form X-17A-5 FOCUS Report Part IIC, available at https://www.sec.gov/manage-filings/formsindex/form-x-17a-5-2c.

43 17 CFR 23.105(p).

44 Final Rules, 85 FR at 57463-57465.

45 17 CFR 23.105(p).
14

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 

 

46 Commission 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.

49 Appendix C to subpart E of part 23.

50 Federal 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.
15

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. 23-1154, 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 

 

52 See generally CFTC Letter No. 21-18.

53 CFTC Letter No. 23-11.

54 See supra note 23.

55 CFTC Letter No. 21-18 at 4-5.

56 Id. at 4-5, Condition 1.
16

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 dually-registered 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, 

 

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.

59 Letter 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.
17

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 

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 

 

60 Section 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).

61 As 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).
18

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 

 

62 17 CFR 23.105(k).
19

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 model-specific 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 

 

63 Appendix 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.

64 To 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).
20

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 dually-registered.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 dually-registered 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-

 

65 See SEC Form X-17A-5 FOCUS Report Part IIC, available at https://www.sec.gov/manage-filings/formsindex/form-x-17a-5-2c.

66 See Final Rules, 85 FR at 57519.

67 See 2016 Capital Proposal, 81 FR at 91278.

68 As 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 at 57515.

69 NFA section 18.

70 NFA section 18(e).
21

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 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 

 

71 For example, Commission regulation § 23.105(k)(1)(v)(B) requires that all model-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 18a7(a)(3). See 17 CFR 240.18a-7(a)(3).

72 As 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.

73 Final Rules, 85 FR at 57517.
22

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 

 

74 17 CFR 23.105(i).

75 17 CFR 23.101.

76 17 CFR 23.105(i)(1)(ii) and (i)(2)(ii).
23

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 

 

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

78 See 17 CFR 240.18a-7(b).
24

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 

 

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

80 17 CFR 1.10.
25

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 § 1.17.82 In addition, FCMs dually-registered 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 riskbased 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?

 

81 CFTC Form 1-FR-FCM at 6-8.

82 17 CFR 1.17(a)(1)(i)(B)(2) and (c)(5)(iii). See generally Final Rules, 85 FR at 57473-57476 and 57562.

83 17 CFR 1.10(h).

84 See 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/press-release/2023-58.
26

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 

 

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).

90 SDs 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).
27

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

 

91 17 CFR 23.102(d).

92 17 CFR 23.102(c).

93 Appendix A to subpart E of part 23.

94 Final Rules, 85 FR at 57506.
28

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 model-based 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 

 

95 17 CFR 23.103(c)(3).

96 17 CFR 23.105(c)(4).

97 17 CFR 1.12(g)(1).
29

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 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 

 

98 17 CFR 1.17(h).

99 17 CFR 23.101(a)(1).

100 See 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

%20permit%20these%20non-SEC%20registered%20SD,NFA%27s%20preapproval%20of%20the%20subordinated%20debt%20loan%20agreement.

101 Nonbanks 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.
30

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 

 

102 Final Rules, 85 FR at 57495.

103 See 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).

104 NFA section 18(d).
31

§ 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 

 

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).
32

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 

 

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.

112 See 5 U.S.C. 601(2), 603, 604 and 605.
33

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 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 

 

113 Policy 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.

115 OMB Control No. 3038-0024, available at 

http://www.reginfo.gov/public/do/PRAOMBHistory?ombControlNumber=3038-0024.
34

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 Estimates116

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 

 

116 This discussion does not include information collection requirements that are included under other 

Commission regulations and related OMB control numbers.
35

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.

 

117 17 CFR 23.105(a)-(n).
36

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.

 

118 7 U.S.C. 19(b).
37

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 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 

 

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

120 The Commission notes that the costs and benefits considered in this proposed rulemaking, and 

highlighted below, have informed the policy choices described throughout this release.

121 Section 4s(e)(2)(B) of the CEA, 7 U.S.C. 6s(e)(2)(B).

122 Section 4s(f) of the CEA, 7 U.S.C. 6s(f).
38

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 SDs123

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 PRA-related 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 

 

123 Currently, 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.
39

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 non-financial 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 NonU.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 Bank-Based 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.
40

1. Benefits

a. Amendments to Tangible Net Worth Capital Approach—CFTC Letter No. 21-

15

The amendments to definitions of “predominantly engaged in non-financial 

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 
41

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 SECapproved 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 

1-FR-FCM to add the 2 percent of uncleared swap margin capital requirement and swaps 

and security-based 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. 
42

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 
43

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 
44

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.
45

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. 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.
46

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
47

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 
48

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 
49

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 two-business 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.
50

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.
51

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.
52

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

Statement of the Computation of the Minimum Capital Requirements

CFTC FORM 1-FR-FCM 

STATEMENT OF THE COMPUTATION OF THE MINIMUM CAPITAL REQUIREMENTS 

ASOF 

liW.Camla1 

I . Currant assets (page 3. ina 20) 

2. lncrease/(decrease) IO U.S. daanng organaa110n stock IO rellact ma,gn value 

3. Nel curre<1I 8Sse1s 

4. Tocal iabiobes (page 5. lne 32) 

5. Oeducbons from total habilibl!S 

A. LoablMies subject IO sabsfaCIOl'f 

oubordalation agroemenlS 

(-5. ine 31.A) 

8. Canas, deferred income lax liatnty 

(see mgulabOn l.17{cX4Xrv)) 

C. Ce<lasl curmnl income tax habloty 

<-regulation l .17{cX4Xv)) 

0 . Long IAKrT1 debt pu,suant IO 

regulation 1.17(cX4){11i) 

E. Tocal deductions (add "-SA· 5.0 .) 

F. Adjusted liabiilies (subtract lne 5.E from ine 4) 

6. Nel capital (sublrad line 5.F. from line 3) 

Charges Against Net Capital (seo regulation 1.17(c)(5)) 

_____ 1 30&0 1 

_____ 1 3060 1 

-----~ 

-----I 3070 I 

7. Excess of advances paid on cash commodity contrac:IS CMlf 

95~ ct the masket value of commocflbes covered by sud> a>nlnlets 

8. rMt percent (5~) of the market vau, ct inventories covered by 

open fut.Jres a,ntnlCIS 0< commodity Ol)OOns (no charges appocable 

IO tn-,IOfies reg,Slerad as deliverable on a contrac;t martcat and 

which a,e cowred by fulures a,ntracts) 

9. r-,,1y peroant ~) of the marl<et value of uncowred ,nve<Uonos 0< 

lesser percentage charge f0< uncove<ed balances in specified r«elgn currencies 

10. Ten peroent (10%) of the market value of 00<nmoditles unde<lyw,g 

fixed price commitments and forward CO<Vllda whlch are covered 

by open fulures a,ntracts or 00<nmodity options 

11. T.,..,.,ty percent {20~) of the marl<el value ct commodities underlying 

fixed pnce commitments and forward contracts which are not 00W!t1ld 

by open fulures a,nlrlldS 0< 00<nrnodity opt,ons 

_____ I 3030 I 

_ ____ ! 3080 1 

_____ 1 3000 1 

-------~ 

_____ I 3020 1 

_____ ! :mo ! 

_______ ! 3100 I 

-------~ 

_______ Imo 1 _______ I 3130 I 

_______ I 31'0 1 

_______ I 3150 1 
53

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

 i percentage of margin requirements applicable to such contracts _______________ 

 ii Less: equity in proprietary accounts included in liabilities _______________ _______________ 

 B. 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

3360 3370

3380

3390

3410

3420

3430

3440

XXXX

12. Chari!"•• 1pec,f,eo In HCIIOn 240 15c3-1(c)(2)(vl) and (v11) 

ag1rnt1 HCUM~H O\Nno<I by ftrm. lnclllcltng MCUfi1iet •epr-bng 

inwllmerh of domottio and IOtolgn ClillamM' luncll 

A. U S and Canadian OD'l_n, obl,gabOn• 

B SUIUI ancl Munle,p,II OC)Yernnlenl abligallOnl 

C c;..1,llcDu,■ ol depoolt, C1101m1111:ial pnpar 

andbenlear,· ~ 

D Co,porato obilvAIIOn■ 

E $too.a and .. ar,11n1a 

f 01/,or oa111llo1 

G, Tctal Che<(lff (edd IINI 12 A • 12 F) 

13 Chargo1 ■■ pecllled In lllltJon 2.0.15o3-1(c)(2)(111)1F) 

A Agllntll MQllllJel PIK"'8Md Urclel 8glHlll4HU IO,_. 

B Agunt ucuntlo■ IIOld undef graam- lo repu,ch H 

M111\t\Ye!l/1 

14 C/lergfl on Mell(~ ... opljonl II ll)edfiecl In MCUon 2• 0 16c3-I Appendol A 

16 Undorma,glned commod,ty Mu,_ and oommodlly opllonl ocoounta • 

..-int In OKh aceounl requifed lo mNl m..,IO _ _,g,n reqyr,omonlll, i.u f,e amounl of 

cur,ont margin call 1n NI account GIid lho IWIIDYl'lt ol 1ny noncur,ont doled In tho aacounl 

A Cuitome, accounla 

B Nonouttomel -.nit 

C Omnlbut •~ti 

----' mo I 

-~ 

-------~ 

---i 

B 
54

Adjusted Net Capital Computation

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

22. Adjusted Net capital required

 A. Risk Based Capital Requirement

 i Amount of Customer Risk

 Maintenance Margin _______________

 ii Enter 8% of line 22.A.i _______________

 iii Amount of Non-Customer Risk

 Maintenance Margin _______________

 iv Enter 8% of line 22.A.iii _______________

 v Enter the sum of 22.A.ii and 22.A.iv _______________

 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 _______________

 C. Other NFA Requirement _______________

 D. Adjusted Net Capital Requirement Enter the greater of lines 22.A.viii, 22.B. or 22.C _______________

23. Excess adjusted net capital (line 21 less line 22.D.) _______________

________________________________________________________________________________________________________________

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 IBs with which guarantee agreements have been entered into by the FCM and which are currently in effect.

 See Attached.

3500

3515

3525

3535

3545

3555

XXXX

XXXX

XXXX

3565

3575

3600

3610

3620

3650

CJ 

CJ 

CJ 

CJ 

CJ 

CJ 

CJ 

CJ 

CJ 

CJ 

CJ 

CJ 
55

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 nonfinancial 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 non-financial 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 
56

represents less than 15 percent of the swap dealer’s or the swap dealer’s 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 
57

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 riskweighted 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;

* * * * *
58

(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 third-party 

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 

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 
59

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.

* * * * *
60

6. In § 23.105, revise paragraphs (c)(2), (c)(4), (d)(2) through (4), (e)(4)(v), 

(e)(6), (i)(1)(i) and (ii), (i)(2)(ii), (k)(1) introductory text, (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 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.

* * * * *
61

(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 
62

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 
63

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:
64

* * * * *

(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 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 
65

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 security-based swap dealer or a major security-based 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.
66

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
67

Reg. 23.105(k) 

and (l)

Appendix 

B

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)

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

1)

Aggregate Securities, Commodities, and Swaps Positions LONG/BOUGHT SHORT/SOLD

1. U.S. treasury securities............................................................................................ $ _______________________ 8200 $ ___________________ 8201

2. U.S. government agency and U.S. government-sponsored enterprises................. $ _______________________ 8210 $ ___________________ 8211

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

U.S. government-sponsored enterprises ......................................................... $ _______________________ 18001 $ ___________________18002

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

government-sponsored enterprises ................................................................. $ _______________________ 18003 $ ___________________18004

3. Securities issued by states and political subdivisions in the U.S ............................ $ _______________________ 8220 $ ___________________ 8221

4. Foreign securities

 A. Debt securities................................................................................................... $ _______________________ 8230 $ ___________________ 8231

 B. Equity securities ................................................................................................ $ _______________________ 8235 $ ___________________ 8236

5. Money market instruments....................................................................................... $ _______________________ 8240 $ ___________________ 8241

6. Private label mortgage backed securities................................................................ $ _______________________ 8250 $ ___________________ 8251

7. Other asset-backed securities ................................................................................. $ _______________________ 8260 $ ___________________ 8261

8. Corporate obligations................................................................................................ $ _______________________ 8270 $ ___________________ 8271

9. Stocks and warrants (other than arbitrage positions)............................................... $ _______________________ 8280 $ ___________________ 8281

10. Arbitrage.................................................................................................................. $ _______________________ 8290 $ ___________________ 8291

11. Spot commodities ................................................................................................... $ _______________________ 8330 $ ___________________ 8331

12. Other securities and commodities .......................................................................... $ _______________________ 8360 $ ___________________ 8361

13. Securities with no ready market

 A. Equity................................................................................................................. $ _______________________ 8340 $ ___________________ 8341

 B. Debt ................................................................................................................... $ _______________________ 8345 $ ___________________ 8346

 C. Other.................................................................................................................. $ _______________________ 8350 $ ___________________ 8351

 D. Total securities with no ready market ............................................................... $ _______________________ 12777 $ ___________________12782

14. Total net securities and spot commodities (sum of Lines 1-12 and 13D) .............. $ _______________________ 12778 $ ___________________12783

15. Security-based swaps

 A. Cleared .............................................................................................................. $ _______________________ 12106 $ ___________________12114

 B. Non-cleared ....................................................................................................... $ _______________________ 12107 $ ___________________12115

16. Mixed swaps

 A. Cleared .............................................................................................................. $ _______________________ 12108 $ ___________________12116

 B. Non-cleared ....................................................................................................... $ _______________________ 12109 $ ___________________12117

17. Swaps

 A. Cleared .............................................................................................................. $ _______________________ 12110 $ ___________________12118

 B. Non-cleared ....................................................................................................... $ _______________________ 12111 $ ___________________12119

18. Other derivatives and options ................................................................................. $ _______________________ 8295 $ ___________________ 8296

19. Counterparty netting ............................................................................................... $ _______________________ 12779 $ ___________________12784

20. Cash collateral netting ............................................................................................ $ _______________________ 12780 $ ___________________12785

21. Total derivative receivables and payables (sum of Lines 15-20)........................... $ _______________________ 12781 $ ___________________12786

D D 

D D 

D D 

D D 

D D 

D D 

D D 

D D 

D D 

D D 

D D 

D D 

D D 

D D 

D D 

D D 

D D 

D D 

D D 

D D 

D D 

D D 

D D 

D D 

D D 

D D 

D D 

D D 

D D 

D D 
68

22. Total net securities, commodities, and swaps positions

(sum of Lines 14 and 21) .............................................................................................. $ _______________________ 8370 $ ___________________ 8371

Name of firm: _____________

As of: ___________________

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. 

D D 
69

Reg. 23.105(k) 

and (l)

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

Counterparty Identifier

Gross Replacement Value

Receivable Payable 

(Gross Gain) (Gross Loss)

Net Replacement 

Value Current Net Exposure

Current Net and 

Potential Exposure Margin Collected

1. 12120 $ 12135 $ 12151 $ 12167 $ 12183 $ 12199 $ 12215

2. 12121 $ 12136 $ 12152 $ 12168 $ 12184 $ 12200 $ 12216

3. 12122 $ 12137 $ 12153 $ 12169 $ 12185 $ 12201 $ 12217

4. 12123 $ 12138 $ 12154 $ 12170 $ 12186 $ 12202 $ 12218

5. 12124 $ 12139 $ 12155 $ 12171 $ 12187 $ 12203 $ 12219

6. 12125 $ 12140 $ 12156 $ 12172 $ 12188 $ 12204 $ 12220

7. 12126 $ 12141 $ 12157 $ 12173 $ 12189 $ 12205 $ 12221

8. 12127 $ 12142 $ 12158 $ 12174 $ 12190 $ 12206 $ 12222

9. 12128 $ 12143 $ 12159 $ 12175 $ 12191 $ 12207 $ 12223

10. 12129 $ 12144 $ 12160 $ 12176 $ 12192 $ 12208 $ 12224

11. 12130 $ 12145 $ 12161 $ 12177 $ 12193 $ 12209 $ 12225

12. 12131 $ 12146 $ 12162 $ 12178 $ 12194 $ 12210 $ 12226

13. 12132 $ 12147 $ 12163 $ 12179 $ 12195 $ 12211 $ 12227

14. 12133 $ 12148 $ 12164 $ 12180 $ 12196 $ 12212 $ 12228

15. 12134 $ 12149 $ 12165 $ 12181 $ 12197 $ 12213 $ 12229

All other counterparties $ 12150 $ 12166 $ 12182 $ 12198 $ 12214 $ 12230

Totals: $ 7810 $ 7811 $ 7812 $ 7813 $ 7814 $ 12231

II. By Current Net and Potential Exposure

Counterparty Identifier

Gross Replacement Value

Receivable Payable 

(Gross Gain) (Gross Loss)

Net Replacement 

Value Current Net Exposure

Current Net and 

Potential Exposure Margin Collected

1. 12232 $ 12247 $ 12264 $ 12281 $ 12298 $ 12315 $ 12332

2. 12233 $ 12248 $ 12265 $ 12282 $ 12299 $ 12316 $ 12333

3. 12234 $ 12249 $ 12266 $ 12283 $ 12300 $ 12317 $ 12334

4. 12235 $ 12250 $ 12267 $ 12284 $ 12301 $ 12318 $ 12335

5. 12236 $ 12251 $ 12268 $ 12285 $ 12302 $ 12319 $ 12336

6. 12237 $ 12252 $ 12269 $ 12286 $ 12303 $ 12320 $ 12337

7. 12238 $ 12253 $ 12270 $ 12287 $ 12304 $ 12321 $ 12338

8. 12239 $ 12254 $ 12271 $ 12288 $ 12305 $ 12322 $ 12339

9. 12240 $ 12255 $ 12272 $ 12289 $ 12306 $ 12323 $ 12340

10. 12241 $ 12256 $ 12273 $ 12290 $ 12307 $ 12324 $ 12341

11. 12242 $ 12257 $ 12274 $ 12291 $ 12308 $ 12325 $ 12342

12. 12243 $ 12258 $ 12275 $ 12292 $ 12309 $ 12326 $ 12343

13. 12244 $ 12259 $ 12276 $ 12293 $ 12310 $ 12327 $ 12344

14. 12245 $ 12260 $ 12277 $ 12294 $ 12311 $ 12328 $ 12345

15. 12246 $ 12261 $ 12278 $ 12295 $ 12312 $ 12329 $ 12346

i i i i i i i 

i i i i i i i 

i i i i i i i 

i i i i i i i 

i i i i i i i 

i i i i i i i 

i i i i i i i 

i i i i i i i 

i i i i i i i 

i i i i i i i 

i i i i i i i 

i i i i i i i 

i i i i i i i 

i i i i i i i 

i i i i i i i 

i i i i i i 

i i i i i i 

i i i i i i i 

i i i i i i i 

i i i i i i i 

i i i i i i i 

i i i i i i i 

i i i i i i i 

i i i i i i i 

i i i i i i i 

i i i i i i i 

i i i i i i i 

i i i i i i i 

i i i i i i i 

i i i i i i i 

i i i i i i i 

i i i i i i i 
70

All other counterparties $ 12262 $ 12279 $ 12296 $ 12313 $ 12330 $ 12347

Totals: $ 12263 $ 12280 $ 12297 $ 12314 $ 12331 $ 12348

Name of firm: _____________

As of: ___________________

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. 
71

Reg. 23.105(k) 

and (l)

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)

Internal Credit Rating Gross Replacement Value

Receivable Payable

Net Replacement 

Value

Current Net Exposure Current Net and 

Potential Exposure

Margin Collected

1. 12349 $ 12386.. $ 12423.. $ 12460.. $ 12497.. $ 12534.. $ 12572..

2. 12350 $ 12387.. $ 12424.. $ 12461.. $ 12498.. $ 12535.. $ 12573..

3. 12351 $ 12388.. $ 12425.. $ 12462.. $ 12499.. $ 12536.. $ 12574..

4. 12352 $ 12389.. $ 12426.. $ 12463.. $ 12500.. $ 12537.. $ 12575..

5. 12353 $ 12390.. $ 12427.. $ 12464.. $ 12501.. $ 12538.. $ 12576..

6. 12354 $ 12391.. $ 12428.. $ 12465.. $ 12502.. $ 12539.. $ 12577..

7. 12355 $ 12392.. $ 12429.. $ 12466.. $ 12503.. $ 12540.. $ 12578..

8. 12356 $ 12393.. $ 12430.. $ 12467.. $ 12504.. $ 12541.. $ 12579..

9. 12357 $ 12394.. $ 12431.. $ 12468.. $ 12505.. $ 12542.. $ 12580..

10. 12358 $ 12395.. $ 12432.. $ 12469.. $ 12506.. $ 12543.. $ 12581..

11. 12359 $ 12396.. $ 12433.. $ 12470.. $ 12507.. $ 12544.. $ 12582..

12. 12360 $ 12397.. $ 12434.. $ 12471.. $ 12508.. $ 12545.. $ 12583..

13. 12361 $ 12398.. $ 12435.. $ 12472.. $ 12509.. $ 12546.. $ 12584..

14. 12362 $ 12399.. $ 12436.. $ 12473.. $ 12510.. $ 12547.. $ 12585..

15. 12363 $ 12400.. $ 12437.. $ 12474.. $ 12511.. $ 12548.. $ 12586..

16. 12364 $ 12401.. $ 12438.. $ 12475.. $ 12512.. $ 12549.. $ 12587..

17. 12365 $ 12402.. $ 12439.. $ 12476.. $ 12513.. $ 12550.. $ 12588..

18. 12366 $ 12403.. $ 12440.. $ 12477.. $ 12514.. $ 12551.. $ 12589..

19. 12367 $ 12404.. $ 12441.. $ 12478.. $ 12515.. $ 12552.. $ 12590..

20. 12368 $ 12405.. $ 12442.. $ 12479.. $ 12516.. $ 12553.. $ 12591..

21. 12369 $ 12406.. $ 12443.. $ 12480.. $ 12517.. $ 12554.. $ 12592..

22. 12370 $ 12407.. $ 12444.. $ 12481.. $ 12518.. $ 12555.. $ 12593..

23. 12371 $ 12408.. $ 12445.. $ 12482.. $ 12519.. $ 12556.. $ 12594..

24. 12372 $ 12409.. $ 12446.. $ 12483.. $ 12520.. $ 12557.. $ 12595..

25. 12373 $ 12410.. $ 12447.. $ 12484.. $ 12521.. $ 12558.. $ 12596..

26. 12374 $ 12411.. $ 12448.. $ 12485.. $ 12522.. $ 12559.. $ 12597..

27. 12375 $ 12412.. $ 12449.. $ 12486.. $ 12523.. $ 12560.. $ 12598..

28. 12376 $ 12413.. $ 12450.. $ 12487.. $ 12524.. $ 12561.. $ 12599..

29. 12377 $ 12414.. $ 12451.. $ 12488.. $ 12525.. $ 12562.. $ 12600..

30. 12378 $ 12415.. $ 12452.. $ 12489.. $ 12526.. $ 12563.. $ 12601..

31. 12379 $ 12416.. $ 12453.. $ 12490.. $ 12527.. $ 12564.. $ 12602..

32. 12380 $ 12417.. $ 12454.. $ 12491.. $ 12528.. $ 12565.. $ 12603..

33. 12381 $ 12418.. $ 12455.. $ 12492.. $ 12529.. $ 12566.. $ 12604..

34. 12382 $ 12419.. $ 12456.. $ 12493.. $ 12530.. $ 12567.. $ 12605..

35. 12383 $ 12420.. $ 12457.. $ 12494.. $ 12531.. $ 12568.. $ 12606..

36. 12384 $ 12421.. $ 12458.. $ 12495.. $ 12532.. $ 12569.. $ 12607..

Unrated 12385 $ 12422.. $ 12459.. $ 12496.. $ 12533.. $ 12570.. $ 12608..

i i i i i i i 

i i i i i i i 

i i i i i i i 

i i i i i i i 

i i i i i i i 

i i i i i i i 

i i i i i i i 

i i i i i i i 

i i i i i i i 

i i i i i i i 

i i i i i i i 

i i i i i i i 

i i i i i i i 

i i i i i i i 

i i i i i i i 

i i i i i i i 

i i i i i i i 

i i i i i i i 

i i i i i i i 

i i i i i i i 

i i i i i i i 

i i i i i i i 

i i i i i i i 

i i i i i i i 

i i i i i i i 

i i i i i i i 

i i i i i i i 

i i i i i i i 

i i i i i i i 

i i i i i i i 

i i i i i i i 

i i i i i i i 

i i i i i i i 

i i i i i i i 

i i i i i i i 

i i i i i i i 

i i i i i i i 
72

Name of firm: _____________

As of: ___________________

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. 

Totals: $$

d d d d 7822.. $ 7823.. $ 7821.. $ 7820.. $

H 12571.. $H 12609..
73

Reg. 23.105(k) 

and (l)

Appendix 

B

SCHEDULE 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)

I. By Current Net Exposure

Country

Gross Replacement Value

Receivable Payable Net Replacement Value Current Net Exposure

Current Net and 

Potential Exposure Margin Collected

1. 12610 $ 12620 $ 12630 $ 12640 $ 12650 $ 12661 $ 12671 

2. 12611 $ 12621 $ 12631 $ 12641 $ 12651 $ 12662 $ 12672 

3. 12612 $ 12622 $ 12632 $ 12642 $ 12652 $ 12663 $ 12673 

4. 12613 $ 12623 $ 12633 $ 12643 $ 12653 $ 12664 $ 12674 

5. 12614 $ 12624 $ 12634 $ 12644 $ 12654 $ 12665 $ 12675 

6. 12615 $ 12625 $ 12635 $ 12645 $ 12655 $ 12666 $ 12676 

7. 12616 $ 12626 $ 12636 $ 12646 $ 12656 $ 12667 $ 12677 

8. 12617 $ 12627 $ 12637 $ 12647 $ 12657 $ 12668 $ 12678 

9. 12618 $ 12628 $ 12638 $ 12648 $ 12658 $ 12669 $ 12679 

10. 12619 $ 12629 $ 12639 $ 12649 $ 12659 $ 12670 $ 12680 

Totals: $ 7803 $ 7804 $ 7802 $ 12660 $ 7801 $ 12681 

II. By Current Net and Potential Exposure

Country

Gross Replacement Value

Receivable Payable Net Replacement Value Current Net Exposure

Current Net and 

Potential Exposure Margin Collected

1. 12682 $ 12692 $ 12703 $ 12714 $ 12725 $ 12736 $ 12747 

2. 12683 $ 12693 $ 12704 $ 12715 $ 12726 $ 12737 $ 12748 

3. 12684 $ 12694 $ 12705 $ 12716 $ 12727 $ 12738 $ 12749 

4. 12685 $ 12695 $ 12706 $ 12717 $ 12728 $ 12739 $ 12750 

5. 12686 $ 12696 $ 12707 $ 12718 $ 12729 $ 12740 $ 12751 

6. 12687 $ 12697 $ 12708 $ 12719 $ 12730 $ 12741 $ 12752 

7. 12688 $ 12698 $ 12709 $ 12720 $ 12731 $ 12742 $ 12753 

8. 12689 $ 12699 $ 12710 $ 12721 $ 12732 $ 12743 $ 12754 

9. 12690 $ 12700 $ 12711 $ 12722 $ 12733 $ 12744 $ 12755 

10. 12691 $ 12701 $ 12712 $ 12723 $ 12734 $ 12745 $ 12756 

Totals: $ 12702 $ 12713 $ 12724 $ 12735 $ 12746 $ 12757 

Name of firm: _____________

As of: ___________________

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. 
74

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

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 $_________________ $_________________

 B. Non-cleared $_________________ $_________________

2. Mixed swaps

 A. Cleared $_________________ $_________________

 B. Non-cleared $_________________ $_________________

3. Swaps

 A. Cleared $_________________ $_________________

 B. Non-cleared $_________________ $_________________

4. Other derivatives $_________________ $_________________

5. Total (sum of Lines 1-4) $_________________ $_________________

Name of firm: ________________________________________

As of: ______________________________________________

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 IIC. Please refer to FOCUS 

REPORT PART IIC INSTRUCTIONS and related interpretations published by the SEC in the preparation of this form. 

Issued in Washington, DC, on December 22, 2023, by the Commission.

Christopher Kirkpatrick,

Secretary of the Commission.

12801 12809

12802 12810

12803 12811

12804 12812

12805 12813

12806 12814

12807 12815

12808 12816

CJ 

CJ 

CJ 

CJ 

CJ 

CJ 

CJ 

CJ 

CJ 

CJ 

CJ 

CJ 

CJ 

CJ 

CJ 

CJ 
75

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. 21-152regarding capital and financial reporting 

requirements for nonbank SDs and nonbank MSPs electing the tangible net worth capital 

approach;

3

codify the time-limited no-action position in CFTC Letter No. 21-184

regarding financial reporting requirements for bank SDs; clarify technical aspects of the 

reporting requirements; and update an FCM reporting form consistent with net capital 

 

1 Capital Requirements of Swap Dealers and Major Swap Participants, 85 FR 57462 (Sept. 15, 2020).

2 CFTC Letter No. 21-15, Jun. 29, 2021, available at https://www.cftc.gov/csl/21-15/download.

3 See 17 CFR 23.101.

4 CFTC Letter No. 21-18, Aug. 31, 2021, available at https://www.cftc.gov/csl/21-18/download.
76

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,6it 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.

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 

 

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/SpeechesTestimony/opabehnam31.

6 See, e.g., 17 CFR 140.99.
77

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 

Dodd-Frank 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,3and section 4s(f) of 

the CEA created financial reporting and recordkeeping requirements for all SDs.4

 

1 Since no MSP is currently registered with the Commission, in this statement, I will refer to SDs only.

2 Capital 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).
78

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.

 

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

6 Section 15F of the Exchange Act addresses capital requirements for SBSDs/MSBSPs.

7 Capital Requirements, 85 FR at 57465.
79

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;8the 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.

 

8 A 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.

9 A 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.

10 A capital requirement that is based on the SD’s tangible net worth, if the SD or parent is predominantly 

engaged in non-financial activities.
80

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 nonU.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.
81

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 as nonbank SDs. These regulations are critical to the oversight of the swaps market.
82

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 AguilarRocha, 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.

 

1 Statement of Commissioner Caroline D. Pham on Risk Management Program for Swap Dealers and 

Futures Commission Merchants Advance Notice of Proposed Rulemaking (June 1, 2023).

2 See 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).
83

Capital, the subject of today’s Proposal, is one area in which the CFTC’s 

provisionally-registered swap dealers are subject to multiple regulatory regimes. By this 

point, we know that the Dodd-Frank Wall Street Reform and Consumer Protection Act 

(Dodd-Frank Act) mandated the Commission establish capital requirements for swap 

dealers and major swap participants,3and that the Commission adopted capital 

requirements for nonbank swap dealers and major swap participants,4as 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.

 

3 Section 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).

6 Concurring 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.
84

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,7and 

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;8and (2) the timelimited, no-action relief in CFTC Letter No. 21-189

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 

 

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).

8 CFTC Letter No. 21-15 (June 29, 2021), https://www.cftc.gov/csl/21-15/download.

9 Staff 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.

10 CFTC 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).

11 Recent 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).

12 Luke Clancy, “US Basel Endgame Hits Clearing with Op Risk Capital Charges” Risk.net (Sept. 25, 

2023), https://www.risk.net/regulation/7957815/us-basel-endgame-hits-clearing-with-op-risk-capitalcharges.
85

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 

 

13 The CFTC maintains the archived webcast at: 

https://www.cftc.gov/PressRoom/Events/opaeventgmac110623.

14 17 CFR 23.101.

15 17 CFR 23.101(a)(2).

16 Id.
86

§ 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 

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 

 

17 CFTC Letter No. 21-15.

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 security-based swaps, mixed 

swaps, swaps, and other derivatives.
87

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 well-tailored 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.