Commodity Futures Trading Commission 

Office of Public Affairs 

Three Lafayette Centre 

1155 21st Street, NW 

Washington, DC 20581 

cftc.gov 

January 24, 2024 

Fact Sheet – Proposed Comparability Determination and Related Order for Nonbank Swap 

Dealers Subject to Capital and Financial Reporting Requirements of the United Kingdom 

and Regulated by the United Kingdom Prudential Regulation Authority 

The Commodity Futures Trading Commission (“CFTC” or “Commission”) is requesting comment on a proposed 

comparability determination and related order. Under this order, certain CFTC-registered swap dealers (“SDs”) domiciled in 

the United Kingdom (“UK”) and subject to prudential supervision by the UK Prudential Regulation Authority (“UK PRA”) 

could comply with certain capital and financial reporting requirements under the Commodity Exchange Act (“CEA”) by

complying with corresponding capital and financial reporting requirements in the UK. 

Swap Dealer Capital and Financial Reporting Requirements 

On July 24, 2020, pursuant to sections 4s(e) and 4s(f) of the CEA, the CFTC adopted final capital and financial reporting rules 

applicable to, among other entities, SDs that are not subject to regulation by a prudential regulator (“nonbank SDs”). 

The CFTC capital rules are designed to ensure the safety and soundness of nonbank SDs by requiring firms to maintain 

appropriate levels of capital to operate as SDs. The regulatory framework provides nonbank SDs with three alternative capital 

approaches: (i) the Tangible Net Worth Capital Approach; (ii) the Net Liquid Assets Capital Approach; and (iii) the BankBased Capital Approach. The Bank-Based Capital Approach, most relevant here, is based on certain capital requirements 

imposed by the Federal Reserve Board for bank holding companies. The Bank-Based Capital Approach also is consistent with 

the Basel Committee on Banking Supervision’s (“BCBS”) international framework for bank capital requirements.

As part of the overall assessment and monitoring of nonbank SDs for compliance with the Commission’s capital 

requirements, the CFTC financial reporting rules require nonbank SDs to file with the Commission and the National Futures 

Association (“NFA”) financial information, including periodic unaudited and annual audited financial statements, specific 

financial position information, and notices of certain events that may indicate a potential financial or operational issue that 

may adversely impact a nonbank SD’s ability to meet its obligations to counterparties and other creditors in the swaps market. 

The Commission has also established a substituted compliance mechanism whereby a non-U.S. domiciled nonbank SD, trade 

association, or foreign-country regulator may submit an application requesting the Commission to determine that compliance 

with applicable home country capital and financial reporting requirements will satisfy all or parts of the Commission’s capital 

rules and financial reporting rules. Such determination is referred to as a “capital comparability determination.”

Standard of Review for Capital Comparability Determinations 

The Commission’s review process reflects a principles-based, holistic approach that focuses on whether the applicable foreign 

jurisdiction’s capital and financial reporting requirements achieve comparable outcomes to the corresponding Commission 

requirements for nonbank SDs, and whether such requirements are comparable to the Commission’s in purpose and effect, 

not whether they are comparable in every aspect or contain identical elements. In making a preliminary comparability 

determination, the Commission considers, among other factors, the scope and objectives of the foreign jurisdiction’s capital 

and financial reporting requirements; whether the foreign jurisdiction’s capital and financial reporting requirements achieve

comparable outcomes to the Commission’s corresponding capital requirements and financial reporting requirements; and the 

ability of the foreign regulatory authority or authorities to supervise and enforce compliance with the foreign jurisdiction’s 

capital adequacy and financial reporting requirements. 

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

Summary of the Capital Comparability Determination 

On May 4, 2021, the Institute of International Bankers, International Swaps and Derivatives Association, and Securities 

Industry and Financial Markets Association submitted an application (“Application”) requesting that the Commission 

determine that registered nonbank SDs organized and domiciled in the UK may satisfy certain capital and financial reporting 

requirements under the CEA by being subject to and complying with corresponding capital and financial reporting 

requirements under UK laws and regulations. 

Of note, this proposed comparability determination only addresses nonbank SDs organized and domiciled in the UK which 

are licensed as investment firms and designated for prudential supervision by the UK PRA (“UK PRA-designated nonbank 

SDs”). Furthermore, the proposed comparability determination is limited to the comparison of the UK capital rules to the 

Bank-Based Capital Approach under the CFTC capital rules. 

Based on its review of the Application and applicable UK laws and regulations, the Commission preliminarily determined that 

the UK capital and financial reporting rules applicable to UK PRA-designated nonbank SDs generally achieve comparable 

outcomes and are comparable in purpose and effect to the CFTC capital rules and financial reporting rules. In reaching this 

determination, the CFTC took account of various factors, including that: 

• Both the CFTC capital rules and the relevant UK capital rules are based on the BCBS capital framework and seek to 

ensure the safety and soundness of nonbank SDs by requiring nonbank SDs to maintain a sufficient amount of 

qualifying regulatory capital to absorb losses from the firm’s business activities and decreases in the value of firm 

assets without the nonbank SD becoming insolvent; and 

• Both the CFTC financial reporting rules and the relevant UK financial reporting rules are designed to provide the 

Commission and the UK PRA, respectively, with financial information to monitor and assess the financial condition 

of nonbank SDs and their ability to absorb decreases in firm assets and increases in firm liabilities. 

Although certain differences between the relevant UK and CFTC capital and financial reporting rules exist, in the 

Commission’s view, the differences generally would not be inconsistent with providing a substituted compliance framework 

for UK PRA-designated nonbank SDs, subject to specified conditions, including those described below. 

With regard to capital requirements, the proposed conditions include a requirement that each UK PRA-designated nonbank 

SD maintain, at all times, a minimum level of $20 million regulatory capital in the form of equity defined as common equity 

tier 1 capital. Concerning financial reporting, the proposed conditions include requirements to provide the Commission and 

NFA with copies of certain reports and a notice of certain events, including notice if the UK PRA-designated nonbank SD’s

capital falls below certain thresholds or if the firm fails to make or keep current financial books and records. 

Comment Period 

The CFTC is inviting public comment on its analysis and proposed comparability determination and order, including the 

proposed conditions, as well as on the Application and relevant UK laws. 

The public comment period will be open for 60 days following the publication of the proposed comparability determination 

and order on cftc.gov. Comments, identified by “UK Swap Dealer Capital Comparability Determination” may be

submitted via the CFTC Comments Portal at: https://comments.cftc.gov. 

Comments may also be submitted by mail or by hand delivery to the Commission’s address at Three Lafayette Centre, 1155 

21st Street NW, Washington, DC 20581, although submission through the CFTC Comments Portal is encouraged to avoid 

possible delays. 

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