This report was approved on February 10, 2021 by the Market Structure Subcommittee of the Market 

Risk Advisory Committee (MRAC). The views, analyses, and conclusions expressed herein reflect the work 

of the Market Structure Subcommittee of the MRAC, and do not necessarily reflect the views of the 

MRAC, the Commodity Futures Trading Commission or its staff, or the U.S. government. Reference to 

any products, services, websites, organizations, or enterprises, or the use of any, organization, trade, 

firm, or corporation name is for informational purposes only and does not constitute endorsement, 

recommendation, or favoring by the U.S. Government.

RECOMMENDATIONS REGARDING 

THE SWAP DEALER LANDSCAPE

Report of the Market Structure Subcommittee,

Market Risk Advisory Committee of the 

U.S. Commodity Futures Trading Commission

Acting Chairman Rostin Behnam, Sponsor 

Stephen Berger & Lisa A. Shemie, Co-Chairmen

 VOTING DRAFT FOR MRAC CONSIDERATION ONLY
February 10, 2021 Page 1 

Objective

The Market Structure Subcommittee of the Market Risk Advisory Committee has focused on considering 

ways to seek to encourage liquidity and diversity among liquidity providers trading on swap execution 

facilities (SEFs) and designated contract markets (DCMs) without undermining the goals of swap dealer 

regulation.

Recommendations

The Market Structure Subcommittee of the Market Risk Advisory Committee recommends that the 

Commission (a) exempt swaps that are exchange-traded1 and centrally cleared from the swap dealer 

registration threshold calculation, and (b) further explore additional modifications to the swap dealer 

regime to encourage additional liquidity without undermining its objectives or increasing systemic risk, 

as further set forth below.

I. Background; History; Key elements of swap market reform

• The primary objective of swap market reform was to address the risks the previously unregulated

swaps market posed to the financial system. In response to the role the swap markets played in the

financial crisis the various financial regulatory agencies proposed, and Congress chose to adopt, two

complimentary regulatory regimes:

o Central clearing/trading: Recognizing that the futures markets functioned well during the

financial crisis and that certain parts of the swaps markets had become sufficiently

standardized to be supported by a centrally traded and cleared market infrastructure,

Congress called for those swaps that were sufficiently standardized to be centrally cleared,

and those suitable for central trading to be traded on a DCM or SEF.

o Bespoke/other swaps not suitable for central clearing/trading: Separately, to regulate what

remained, bespoke and certain other swaps products not suitable for centralization were to

remain in the OTC market under a specific regime designed to address the risks to the

marketplace by regulating the large dealers/intermediaries in that space, namely “swap

dealers”2

.

• Swap dealers are required to comply with capital and margin requirements, reporting and

recordkeeping, daily trading records, business conduct standards, Chief Compliance Officer

requirements and annual reports, as well as segregation requirements related to collateral held

against uncleared swaps.

1 As used herein, references to “exchange-traded” swaps denote swaps that are traded on a SEF or a DCM. 2 The Commission does not, nor has it ever, regulated futures market “dealing” activity through registration at the entity level. 

No such regulatory regime exists for liquidity provision in futures.

VOTING DRAFT FOR MRAC CONSIDERATION ONLY
February 10, 2021 Page 2 

• The policy considerations/key elements of each of the central clearing/trading and the swap dealer

regime are the same (the “key elements”):

a. Capital

b. Margin

c. Reporting

d. Business conduct standards

Alongside implementation of the central clearing and trading mandates, Congress included registration 

and regulation of large dealers as part of its swaps markets reforms.

II. Previous Commission actions

The Commission has recognized the regulatory benefits of central clearing/trading and the lack of new 

entrants as liquidity providers, and has put forth proposed solutions:

Floor Trader Exemption

• The floor trader exception to the swap dealer definition was intended to allow firms that registered

as floor traders, but not as swap dealers, to access the swaps markets on DCMs and SEFs.

o See Regulation 1.3(ggg)(6)(iv), 17 C.F.R. 1.3(ggg)(6)(iv); Entity Definition Rules, 77 Fed. Reg.

at 30,746

• Following the receipt of input from market participants, the Commission has sought to clarify

through no-action relief what has been considered to be an ineffective provision.

o See Division of Swap Dealer and Intermediary Oversight (DSIO) No-Action Letter 13-37 (June

27, 2013)

(https://www.cftc.gov/sites/default/files/idc/groups/public/@lrlettergeneral/documents/le

tter/13-37.pdf)

o See DSIO No-Action Letter 13-61 (September 30, 2013)

(https://www.cftc.gov/sites/default/files/idc/groups/public/@lrlettergeneral/documents/le

tter/13-61.pdf)

o See DSIO No-Action Letter 19-14 (June 27, 2019)

(https://www.cftc.gov/system/files/csl/final/pdfs/19/1561667900/19-14.pdf)

• In seeking to address the issue through the above-cited No-Action Letters, Commissioner Berkovitz

noted that the current Floor Trader rule has not worked as intended and that “a rulemaking to

amend the swap dealer definition is the best way to fix the issues with the current rule”

o See Statement of Commissioner Dan Berkovitz in Support of the Staff No Action Letter

Regarding Floor Traders (June 27, 2019)

(https://www.cftc.gov/PressRoom/SpeechesTestimony/berkovitzstatement062719)
February 10, 2021 Page 3 

• Notwithstanding the issuance of this no-action relief, firms have not availed themselves of this

avenue in any meaningful way. As stated by Commissioner Quintenz in his objection to the issuance

of the no-action relief, “the floor trader exception from swap dealer registration targeted by today’s

no-action relief only applies to proprietary trading firms that have historically never been required

to register with the Commission. These firms, which risk their own capital and do not have

customers or investors, can participate freely in the futures markets without registering with the

CFTC.” He went on to say that “[A]ny proprietary trading firm that takes advantage of this revised

floor trader exception should remember that no-action relief can be withdrawn at any time and

with little notice.”

De Minimis Exception

• The de minimis exception to the swap dealer definition sought to define the level of swaps activity

beyond which registration is required. The Commission has continued to consider whether that

level is appropriate, and as recently as last year determined that lowering the threshold was not

needed to achieve the goal of regulating systemically important firms.

o See Swap Dealer De Minimis Exception Final Staff Report (August 15, 2016)

(https://www.cftc.gov/sites/default/files/idc/groups/public/@swaps/documents/file/dfrep

ort_sddeminis081516.pdf)

o See De Minimis Exception to the Swap Dealer Definition – Final Rule

(https://www.federalregister.gov/documents/2018/11/13/2018-24579/de-minimisexception-to-the-swap-dealer-definition)

• As part of the work culminating in the Final Rule on the de minimis exception, the Commission

sought comment on the idea of exempting exchange-traded and/or cleared swaps from the de

minimis threshold, as well as exempting non-deliverable foreign exchange forwards (NDFs).

o See De Minimis Exception to the Swap Dealer Definition – Notice of Proposed

Rulemaking (https://www.govinfo.gov/content/pkg/FR-2018-06-12/pdf/2018-

12362.pdf), Sections III(B) and (C)

o Most commenters supported including an exception for exchange-traded and/or

cleared swaps; only two commenters were opposed.

o Further, most commenters generally supported including an exception for NDFs; one

commenter was opposed.

• In the Final Rule, the Commission stated that it might consider exempting exchange-traded and/or

cleared swaps in response to the comments.

o Page 55681, in section IV, states: “At this time, the Commission is not adopting final rules

regarding any of these three potential changes [i.e., exempting cleared swaps]. The

Commission may take subsequent action or conduct further study with respect to any of

these issues.”
February 10, 2021 Page 4 

o Also at page 56682, in “B. Exception for Exchange-Traded and/or Cleared Swaps,” there is

acknowledgement that most commenters supported including an exception for exchangetraded and/or cleared swaps.

o Chairman Giancarlo’s statement in support of the Final Rule indicated that he would direct

Commission staff to conduct a study on calculating de minimis trigger and the feasibility of

exempting cleared swaps.

• In response to Chairman Giancarlo’s statement, the Commission’s Division of Swap Dealer and

Intermediary Oversight (DSIO) issued a report in July 2019 setting forth the results of that study,

which sought to explore the impact to the swap dealer landscape that could result from the

exemption of certain swaps from the de minimis determination. The report demonstrated that 95

of the 108 then-currently-registered swap dealers would have been required to register as swap

dealers even if swaps that were exchange-traded and cleared were not counted towards their de

minimis threshold. The report did not, however, consider whether exempting such swaps would

have the effect of inducing additional firms to trade them on DCMs/SEFs as a result of such trading

not triggering a requirement to register as a swap dealer.

o See Report Regarding the Swap Dealer De Minimum Exception and On-Venue and

Cleared Swaps (July 8, 2019) (https://www.cftc.gov/PressRoom/PressReleases/7958-19)

(the “DSIO Report”)

III. Effect on Swap Dealer Regulation’s “Key Elements” of Excluding Certain Swaps from the Swap

Dealer De Minimis Determination

Swaps that are exchange-traded and centrally cleared

Each of the key elements is met in a swap that is exchange-traded and cleared without the need to 

require market participants to register as a swap dealer or to place additional regulatory requirements 

on them. Taking each of the key elements individually, in a swap that is exchange-traded and cleared:

• Clearing members of the CCP facilitate swap clearing and are already subject to regulatory capital

requirements

• Approved margin requirements are met by both counterparties clearing through the CCP

• Reporting requirements are met by the SEF or DCM

• Business conduct standard regulations are met by the policies of the SEF or DCM governing

trading behavior

Given that each of the key elements of swap dealer regulation is met under this scenario, coupled with 

the recognition that parallel futures trading activity does not carry an analogous entity-level registration 

regime, the Subcommittee urges the Commission to follow through with the longstanding suggestion of 

exempting swaps that are exchange-traded and centrally cleared from the swap dealer registration 

threshold calculation.
February 10, 2021 Page 5 

Swaps that are exchange-traded and not centrally cleared

In addition to exempting swaps that are both exchange-traded and cleared from the registration 

threshold, the Commission should also consider the exemption of certain swaps that are exchangetraded but not centrally cleared. Certain swaps that are currently not listed for clearing – primarily 

foreign exchange options and NDFs – are executed through SEFs, and many market participants access 

SEFs through a prime broker (PB) relationship, and most (if not all) PBs are registered swap dealers. As a 

result, all such swaps executed on a SEF through a PB, as well as the mirror swap executed off-exchange, 

would have at least one swap dealer counterparty, thus satisfying each of the key elements

notwithstanding the absence of central clearing. 

IV. Conclusions and recommendations

The Subcommittee urges the Commission to exempt swaps that are exchange-traded and cleared from 

the swap dealer registration threshold calculation. 

Further, the Subcommittee recommends that the Commission consider other solutions to seek to 

increase liquidity, such as:

• exempting swaps that are exchange-traded but not centrally cleared from the swap dealer

registration threshold calculation to the extent they are traded through a PB that is a registered

swap dealer (such as FX options and NDFs that are traded through this common model);

• pursuing additional fact finding to better understand the reasons why certain firms are reluctant

to pursue registration as floor traders notwithstanding the no-action relief from certain of the

regime’s conditions, and to seek to quantify the potential effect of exempting certain swaps

from the swap dealer registration threshold in terms of increased liquidity.

The Market Structure Subcommittee of the Market Risk Advisory Committee believes that the 

Commission’s goal of increasing liquidity and diversity among liquidity providers trading on SEFs and 

DCMs would be aided by the recommendations supported above and would reduce unnecessary 

barriers to entry to SEFs and DCMs without sacrificing the policy objectives of swap dealer regulation, 

and appreciates the opportunity to provide the views of its diverse membership in furtherance of the 

accomplishment of those goals. 
February 10, 2021 Page 6 

Members of the MRAC Market Structure Subcommittee

Name Entity Representing Title

1. Stephen Berger

(Co-Chair)

Citadel Managing Director and Global Head of 

Government & Regulatory Policy

2. Lisa Shemie

(Co-Chair)

Cboe Global Markets Associate General Counsel, Chief Legal 

Officer – Cboe FX Markets and Cboe SEF

3. B. Salman Banaei IHS Markit Executive Director, Global Head of 

Clearance and Settlement

4. Lee Betsill CME Group Managing Director and Chief Risk Officer

5. Peter Borish Quad Group Chief Strategist

6. Biswarup Chatterjee Citigroup Managing Director, Global Head of 

Innovation, Markets & Securities Services

7. Shelly Goodwin BP IST Global Americas Compliance Director, Refining & Products 

Trading Americas and Global Crude

8. Graham Harper Futures Industry Association –

Principal Traders Group

Head of Public Policy and Market Structure 

at DRW

9. Frank Hayden Calpine Corporation Vice President, Trading Compliance

10. Annette Hunter Federal Home Loan Bank of Atlanta Senior Vice President and Director of 

Accounting Operations

11. Eileen Kiely BlackRock Managing Director, Deputy Head of 

Counterparty Risk

12. Derek Kleinbauer Bloomberg SEF LLC Global Head of Fixed Income & Equities 

Electronic Trading, Bloomberg LP and Vice 

President, Bloomberg SEF LLC

13. Laura Klimpel The Depository Trust & Clearing 

Corporation

Managing Director

14. Craig Messinger Virtu Financial Vice Chairman

15. Robert Mangrelli Chatham Financial Director

16. Dr. Sam Priyadarshi Vanguard Principal, Global Head of Portfolio Risk 

Management and Derivatives
February 10, 2021 Page 7 

Members of the MRAC Market Structure Subcommittee

Name Entity Representing Title

17. Jonathan Raiff Nomura Global Financial Products, 

Inc.

Senior Managing Director, Head of Global 

Markets Americas

18. Tyson Slocum Public Citizen Director, Energy Program

19. Sujatha Srinivasan Goldman Sachs Co-Head of Market Risk Specialists, 

Securities Division

20. Janine Tramontana1 Federal Reserve Bank of New York Vice President and Senior Counsel

21. Nadia Zakir2 Pacific Investment Management 

Company LLC (PIMCO)

Executive Vice President and Deputy 

General Counsel

22. Scott Zucker Tradeweb Chief Administrative Officer

1 Ms. Tramontana, in representing the Federal Reserve Bank of New York, is a non-voting member. In this capacity, 

she did not provide advice and recommendations on this report.

2 Ms. Zakir, as the Chair of the MRAC, is a non-voting member. 
Concurring Statement
Citi Concurring Statement on MRAC Market Structure Subcommittee 

Recommendation on Swap Dealer Landscape

Citi supports efforts to increase market liquidity that promote Dodd-Frank reforms of the swaps market to 

address systemic risk. We commend Acting Chairman Behnam on his leadership in exploring these important 

issues and support the effort of the subcommittee. We believe that the CFTC’s comprehensive regulation of 

swap dealers and market participants has improved market integrity and oversight while mitigating risk. 

Therefore, policymakers should be cautious in approaching any change to the swap dealer registration regime 

that may undermine the benefits of these market reforms. 

Accordingly, it is important to ensure that all considerations related to capital adequacy and business conduct 

are addressed carefully while considering the recommendation to exempt exchange-traded and centrally 

cleared swaps from the swap dealer registration threshold calculation. Unlike some listed markets, the same 

swap contract can be traded on multiple venues, and in some cases no single SEF or DCM may be able to 

oversee the trading activity and monitor conduct risk of a participant across the entire market. Further, no 

single DCO may be able to ensure that overall individual counterparty risk has been adequately addressed via 

margin posting for that market participant. A participant could build up a large cumulative cleared position 

across the market while clearing smaller pieces through multiple clearinghouses. 

We also agree with the subcommittee’s recommendation that any potential future rulemaking should be datadriven and based on evidence. We support a study on these recommendations to identify what pools of new 

market participants and liquidity would come into the market if these exemptions were given, so that a careful 

analysis of the costs and benefits can be performed.
Dissenting Statement
• 

Dissenting Statement 

Sujatha Srinivasan, Goldman Sachs & Co. LLC. 

Market Risk Advisory Committee, Subcommittee on Market Structure 

Recommendation Regarding the Swap Dealer Landscape 

February 16, 2021 

Goldman Sachs supports the objective of the Subcommittee, which is to e11courage liquidity and 

diversity among liquidity providers on SEFs, and looks forward to working with the industry and 

the CFfC to that end. However, we cannot support the recotru11e11dation that the CFfC exetnpt 

• 

cleared swaps traded on swap execution facilities (SEFs) fro1n the swap dealer registration 

tln·eshold calculation. 

The Subcommittee's report would remove key aspects of the CFTC' s regulatory regin1e critical 

to market integrity and market resilience, including risk mai1agemen�, co1npliance oversight, 

recordkeeping and capital. These requirements are relevant to all swaps, regardless of whether a .

swap is cleared or executed on a venue. 

Further, the report does not adequately address the policy ru.1d legal issues raised by bifurcating 

swap dealers into regulated and unregulated categories for the same activity on a SEF� For 

example� while the report provides as justification that there is no ''dealer'' regime in futures 

markets, Congress did not take the same approach for swaps in the Dodd-Frank Act, even as it 

applied other requirements intended to make swaps markets more similar to futures markets, 

including central clearing and SEF-trading. 

In light of these considerations, a comprehensive review of the factors affecting swap market 

liquidity is warranted, and would support more targeted solutions to address barriers to liquidity 

provision, rather than exempting a class of 1narket participants from all of the CFTC's Swap 

Dealer rules and oversight. 

Sujatha Srinivasan 

Goldman Sachs & Co. LLC.