Swap Dealers (SDs) and Major Swap Participants (MSPs)

Definitions

Section 1a(49) of the Commodity Exchange Act (CEA) defines, in general, an SD as a person (which includes entities) that: holds itself out as a dealer in swaps; makes a market in swaps; regularly enters into swaps with counterparties as an ordinary course of business for its own account; or engages in any activity causing the entity to be commonly known in the trade as a dealer or market maker in swaps. An insured depository institution that enters into a swap with a customer in connection with originating a loan with that customer is not considered to be an SD.

Section 1a(33) of the CEA defines, in general, an MSP as a person (which includes entities) that is not an SD and: maintains a substantial position in swaps for any of the major swap categories (with certain hedging and benefit plan exclusions); whose outstanding swaps create substantial counterparty exposure that could have serious adverse effects on the financial stability of the US banking system or financial markets; or is a financial entity that is highly leveraged relative to the amount of capital it holds and that is not subject to capital requirements established by an appropriate Federal banking agency and maintains a substantial position in outstanding swaps in any major category as determined by the CFTC.

The CFTC published final rules on May 23, 2012, that further define SD and MSP.

SDs and MSPs are required to be registered with the CFTC. Firms register with the CFTC through NFA's Online Registration System. SDs and MSPs begin the application process by submitting a completed Form 7-R application, a completed Form 8-R application and fingerprint cards for each of its principals, the application fee and documentation required to demonstrate compliance with CFTC regulations Implementing Sections 4s(e), 4s(f), 4s(g), 4s(h) and 4s(i) of the CEA (Section 4s Implementing Regulations*) that have an effective compliance date as of the completed registration application date and are applicable to the applicant. SDs and MSPs must submit this documentation to NFA for review via a web-based system called the Registration Documentation Submission System (RDSS), which is part of NFA's EasyFile system. Once NFA receives the completed Form 7-R application (and required Forms 8-R) and 4s documentation, NFA will notify the applicant that it is provisionally registered.

EasyFile (RDSS)

View The Registration Process: The 4s Document Submission Process for Swap Dealers and Major Swap Participants video tutorial for more information on the 4s submission process.

NFA recommends SDs/MSPs to submit 4s documents one or two weeks prior to the date they are seeking to be provisionally registered. Once NFA notifies an applicant that it is provisionally registered, NFA will review the applicant’s 4s Implementing Regulation documentation to determine whether the documentation demonstrates compliance with the applicable Section 4s Implementing Regulations.

NFA will accept an SD's and MSP's documentation demonstrating compliance with Section 4s Implementing Regulations beginning on the effective date of the particular final 4s Implementing Regulation. In general, an SD or MSP should submit policies and procedures that address the requirements set forth in any final CFTC Implementing Regulations with which the firm is required to comply. It is important for each firm to review the final Section 4s Implementing Regulations and ensure that its policies or procedures address all of the relevant requirements.

Please see the following chart regarding the submission of documentation required to demonstrate compliance with the Section 4s Implementing Regulations.

	Section 4s Final Implementing Rule Descriptions	Rule References	Effective Date of Rule	RDSS Call #	Non-US Firm 4s Submission Date	US Firm 4s Submission Date (Regulated by Prudential Regulator or SEC)	US Firm 4s Submission Date (Not Regulated Prudential Regulator or SEC)
A	Internal Business Conduct Standards
1	Designation of a Chief Compliance Officer; Required Compliance Policies; and Annual Report of a Swap Dealer and Major Swap Participant	CEA Section 4s(k), CFTC Regulations 3.1 & 3.3	6/4/2012	4SK1	7/12/2013	Due by Provisional Registration Date	Due by Provisional Registration Date
2	Implementation of Conflicts of Interest Policies and Procedures by Swap Dealers and Major Swap Participants	CEA Section 4s(j), CFTC Regulation 23.605(c)-(d)	6/4/2012	4SJ3	7/12/2013	Due by Provisional Registration Date	Due by Provisional Registration Date
3	Duties of Swap Dealers and Major Swap Participants - Risk Management1	CEA Section 4s(j), CFTC Regulation 23.600	6/4/2012	4SJ1	7/12/2013	Due by Provisional Registration Date	Due by Provisional Registration Date
4	Duties of Swap Dealers and Major Swap Participants - Disclosure of Information to the CFTC and Anti-Trust Considerations	CEA Section 4s(j), CFTC Regulations 23.606 & 23.607	6/4/2012	4SJ4	7/12/2013	Due by Provisional Registration Date	Due by Provisional Registration Date
5	Duties of Swap Dealers and Major Swap Participants - Business Continuity and Disaster Recovery	CEA Section 4s(j), CFTC Regulation 23.603	6/4/2012	4SJ2	7/12/2013	Due by Provisional Registration Date	Due by Provisional Registration Date
6	Duties of Swap Dealers and Major Swap Participants - Diligent Supervision	CEA Section 4s(j) CFTC Regulation 23.602	6/4/2012	4SJ5	7/12/2013	Due by Provisional Registration Date	Due by Provisional Registration Date
7	Duties of Swap Dealers and Major Swap Participants - Recordkeeping	CEA Section 4s(f) and (g), CFTC Regulation 23.201 (with the exception of 23.201(a)(1) and 23.201(b)(3)Iii)); and 23.203	6/4/2012	4SR1	7/12/2013	Due by Provisional Registration Date	Due by Provisional Registration Date
8	Duties of Swap Dealers and Major Swap Participants - Recordkeeping - Transaction Records	CEA Section 4s(f) and (g), CFTC Regulation 23.201(a)(1)	6/4/2012	4SR0	7/12/2013	Due by Provisional Registration Date2	Due by Provisional Registration Date2
9	Duties of Swap Dealers and Major Swap Participants - Recordkeeping - Business Records	CEA Section 4s(f) and (g), CFTC Regulation 23.201(b)(3)(ii)	6/4/2012	4SRA	7/12/2013	Due by Provisional Registration Date3	Due by Provisional Registration Date3
10	Swap Dealer and Major Swap Participant - Daily Trading Records #1	CEA Section 4s(g), CFTC Regulation 23.202 (EXCLUDING CFTC No-Action Letter 12-29 ONLY)	6/4/2012	4SRB/4SR9	Due by Provisional Registration Date4	Due by Provisional Registration Date2	Due by Provisional Registration Date2
11	Swap Dealer and Major Swap Participant - Daily Trading Records #2	CEA Section 4s(g), CFTC Regulation 23.202 (PERTAINING to CFTC No-Action Letter 12-29 ONLY)	6/4/2012	4SR8/4SR9	Due by Provisional Registration Date4	Due by Provisional Registration Date2	Due by Provisional Registration Date2
12	Swap Data Reporting - Interest Rate and Credit Default Swap	CEA Section 4s(f), CFTC Regulation 23.204	6/4/2012	4SR2/4SR3	Due by Provisional Registration Date7	Due by Provisional Registration Date	Due by Provisional Registration Date
13	Swap Data Reporting - Foreign Exchange and Commodity Swaps	CEA Section 4s(f), CFTC Regulation 23.204	6/4/2012	4SR4/4SR5	Due by Provisional Registration Date7	Due by Provisional Registration Date7	Due by Provisional Registration Date7
14	Real-Time Public Reporting	CEA Section 4s(f), CFTC Regulation 23.205	6/4/2012	4SR6/4SR7	Due by Provisional Registration Date4	Due by Provisional Registration Date	Due by Provisional Registration Date
15	Swap Processing and Clearing - Restrictions on Counterparty and Clearing Member Risk Management	CEA Section 4s(j) CFTC 23.608, 23.609	10/1/2012	4SIC	7/12/2013	Due by Provisional Registration Date	Due by Provisional Registration Date
16	Swap Processing and Clearing	CEA Section 4s(i) CFTC 23.506; CEA Section 4s(j) CFTC 23.610	10/1/2012	4SI1/4SI2	Due by Provisional Registration Date4	Due by Provisional Registration Date	Due by Provisional Registration Date
17	Swap Confirmation	CEA Section 4s(i), CFTC Regulation 23.500 & 23.501	11/13/2012	4SI3/4SI4	Due by Provisional Registration Date4	Due by Provisional Registration Date5	Due by Provisional Registration Date5
18	Portfolio Reconciliation	CEA Section 4s(i), CFTC Regulation 23.502	11/13/2012	4SI5/4SI6	7/1/20134	7/1/20133	7/1/20133
19	Portfolio Compression	CEA Section 4s(i), CFTC Regulation 23.503	11/13/2012	4SI9/4SI0	Due by Provisional Registration Date4	Due by Provisional Registration Date	Due by Provisional Registration Date
20	Swap Trading Relationship Documentation	CEA Section 4s(i), CFTC Regulation 23.504	11/13/2012	4SI7/4SIA	7/1/20134	7/1/20133	7/1/20133
21	End User Exception Documentation	CEA Section 4s(i), CFTC Regulation 23.505	11/13/2012	4SI8/4SIB	Due by Provisional Regiatration Date4	Due by Provisional Registration Date3	Due by Provisional Registration Date3
B	External Business Conduct Standards
22	Business Conduct Standards with Counterparties #1	CEA Section 4s(h), CFTC Regulation 23.400; 23.401; 23.410(a)-(b); 23.431(d); 23.433; 23.434(a)(1); and 23.451	4/17/2012	4SH1/4SH2	Due by Provisional Registration Date	Due by Provisional Registration Date	Due by Provisional Registration Date
23	Business Conduct Standards with Counterparties #2	CEA Section 4s(h), CFTC Regulation 23.402; 23.410(c); 23.430; 23.431(a)-(c); 23.432; 23.434(a)(2),(b),(c); 23.440; and 23.450	4/17/2012	4SH3/4SH4	Due by Provisional Registration Date3,8,9	Due by Provisional Registration Date3,8,9	Due by Provisional Registration Date3,8,9
1 The CFTC has announced the procedures to be used by SDs and MSPs for submitting Risk Exposure Reports and Chief Compliance Officer Annual Reports. Provisionally registered firms should use the link below to submit the reports: https://forms.cftc.gov/fp/SDAndMSPReport.aspx. 2: The CFTC's No-Action Letter 12-29 can be found http://www.cftc.gov/ucm/groups/public/@lrlettergeneral/documents/letter/12-29.pdf. The no-action relief covers the time period to March 31, 2013. Upon the expiration of the no-action relief, provisionally registered SDs and MSPs are required to submit policies and procedures to NFA’s RDSS system through the 4SR8 filing code. However, if a firm is seeking additional relief from any of the provisions contained in No-Action Letter No. 12-29, the firm should clearly indicate the scope and status of such request for relief within the policies and procedures submitted to both the 4SR8 and the 4SR0 filing codes in RDSS. 3: The CFTC issued Interim Final Rule on 12/18/2012, which rule can be found http://www.cftc.gov/ucm/groups/public/@newsroom/documents/file/federalregister121812.pdf. 4: For non-US counterparties, the compliance date and due date of 4s submissions is 7/12/2013. 5: The CFTC is establishing an implementation schedule that is differentiated by swap asset class and counterparty. 6: The CFTC issued No-Action Letter 12-41, which can be found http://www.cftc.gov/ucm/groups/public/@lrlettergeneral/documents/letter/12-41.pdf. 7: For swaps with non-US counterparties that are entered into by non-US Swap Dealers, that are not part of an affiliated group in which the ultimate parent entity is a US Swap Dealer, the compliance date and due date of the 4s submission is 7/12/2013. See Final Exemptive Order regarding Compliance with Certain swap regulations at http://www.cftc.gov/ucm/groups/public/@newsroom/documents/file/federalregister122112.pdf. 8: The CFTC issued No-Action Letter 13-11, which can be found at http://www.cftc.gov/ucm/groups/public/@lrlettergeneral/documents/letter/13-11.pdf. 9: The CFTC issued No-Action Letter 13-12, which can be found at http://www.cftc.gov/ucm/groups/public/@lrlettergeneral/documents/letter/13-12.pdf.

As a part of the 4s review process, NFA may request additional information or supporting materials from an SD or MSP. Supplementary materials may be submitted to NFA by appending those documents to the documentation originally submitted with respect to a particular Section 4s Implementing Regulation. For a listing of supplementary materials that are currently anticipated, please click here. The list of supplementary materials is not exhaustive and NFA may make additional requests as part of the 4s review process (and it is important that each SD or MSP respond promptly to any such requests).

Provisional registration will be maintained as long as the SD or MSP continues to submit the documentation required to demonstrate compliance with additional Section 4s Implementing Regulations on or before the date compliance with those requirements is required and NFA determines that the documentation demonstrates compliance with them. A failure of an SD or MSP to submit the required documentation to demonstrate compliance with an applicable Section 4s Implementing Regulation on or before the date compliance is required or a determination by NFA that the submitted documentation does not demonstrate compliance with the applicable requirement may result in the SD's or MSP's registration application being deemed withdrawn. If NFA determines that an applicant’s documentation does not comply with the applicable Section 4s Implementing Regulation, NFA staff will discuss these matters with the SD or MSP and attempt to resolve any deficiencies. If the SD or MSP fails to remedy any deficiencies and the Section 4s Implementing Regulation’s compliance date has passed, NFA will formally notify the SD or MSP that its application is deficient, that it must withdraw its application for registration, and that it is no longer provisionally registered. CFTC Regulation 3.10(a)(1)(v)(D)(1) outlines the process for an applicant to cure such deficiencies and continue to be provisionally registered.

A provisionally registered SD or MSP will become a registered SD or MSP when compliance with all the Section 4s Implementing Regulations is required, the SD or MSP is in compliance with all such requirements and neither the SD or MSP nor any of its principals are statutorily disqualified from registration pursuant to Section 8a(2) or (3) of the CEA.

*The CEA imposes substantive ongoing compliance requirements for SDs/MSPs in a number of areas including capital and margin, reporting and recordkeeping, daily trading records, business conduct standards, documentation standards, monitoring of trading, risk management procedures, disclosure of information, ability to obtain information, conflicts of interest, segregation of collateral, and a requirement that each SD/MSP designate a chief compliance officer who is a principal of the firm. The CFTC has proposed and is in the process of finalizing the Section 4s Implementing Regulations pertaining to these ongoing compliance requirements. The CFTC published final rules in the Federal Register on the following 4s requirements on the date noted:

Business Conduct Standards for SDs and MSPs with Counterparties (Section 4s(h)) - February 17, 2012

SD and MSP Reporting, Recordkeeping and Daily Trading Records Requirements (Section 4s(f) and 4s(g)); Internal Business Conduct Duties for SDs and MSPs (Section 4s(j)) and Chief Compliance Officer Requirements for SDs (Section 4s(k)) - April 3, 3012

Confirmation, Portfolio Reconciliation, Portfolio Compression, and Swap Trading Relationship Documentation Requirements for SDs and MSPs (Section 4s(i)) - September 11, 2012

If you have any questions concerning the registration process, NFA's Information Center is available Monday through Friday from 8:00 a.m. to 5:00 p.m. CST to answer your questions. Call (312) 781-1410 or toll-free at (800) 621-3570. You may also email inquiries to information@nfa.futures.org. Questions on the substantive requirements of the Section 4s Implementing Regulations should be directed to the CFTC staff contacts identified in the respective rulemaking.