Notices to Members

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Notice I-23-04

February 6, 2023

Educational resources, common deficiencies and other important regulatory information for SD Members

NFA is committed to providing its Members with the resources they need to meet their regulatory obligations as efficiently as possible. This Notice covers educational resources, common deficiencies and links to Notices to Members regarding recent amendments to NFA Rules and Interpretive Notices.

Members Section of NFA's Website

From the Members section of NFA's website, swap dealer (SD) Members can access information detailing their regulatory obligations including the following:

Regulatory Obligations Related to Common Deficiencies

The following section describes several regulatory obligations related to common deficiencies noted during NFA examinations.

Daily Trading Records: SD Members are required to make and keep daily trading records of all swaps executed, including all documents on which transaction information is originally recorded, pursuant to CFTC Regulation 23.202. SD Members should consider taking preventative measures against the use of unauthorized or unrecorded channels for pre-execution trade communications.

Supervision: SD Members are required to have a supervisory program and must diligently supervise all activities relating to their business pursuant to CFTC Regulation 23.602.

Business Conduct Standards: SD Members are required to obtain and retain a record of essential facts to accurately categorize their counterparties to facilitate compliance with various regulatory requirements pursuant to CFTC Regulation 23.402. The failure to properly identify and classify counterparties may result in non-compliance with other transaction-specific requirements. Additionally, SD Members are required to make several disclosures to non-SD counterparties pursuant to CFTC Regulation 23.431. A common deficiency in this area is a failure to disclose material information and pre-trade mid-market marks to counterparties prior to entering into uncleared swap transactions.

Market Practice: SD Members are required to implement policies and procedures designed to prevent fraud, manipulation and other abusive practices prohibited by CFTC Regulation 23.410. Additionally, SD Members are required to communicate with counterparties in a fair and balanced manner as detailed in CFTC Regulation 23.433. Common deficiencies in this area include:

  • Failure to implement adequate trade surveillance to detect fraud, manipulation and abusive practices; and
  • Failure to conduct communication surveillance reasonably designed to ensure fair and balanced communications and the prohibition of fraud, manipulation and other abusive practices.

Portfolio Reconciliation: SD Members must engage in portfolio reconciliation pursuant to CFTC Regulation 23.502. Firms are required to establish, maintain and follow written procedures to resolve discrepancies identified by portfolio reconciliation.

Swap Valuation Disputes: SD Members, including non-U.S. SDs relying on substituted compliance with respect to CFTC Regulation 23.502, must submit valuation disputes to NFA as set forth in Interpretive Notice 9072.

Swap Data Reporting: SD Members must report swap transaction data to swap data repositories pursuant to CFTC Regulation 23.204 and CFTC Regulation 23.205. Additionally, they must report corrections of identified errors or omissions as soon as technologically practicable (ASATP) after discovery. Common deficiencies in this area include:

  • Failure to report required regulatory messages, either at all or within the regulatory timeframes;
  • Failure to report accurately required data fields to the SDR; and
  • Failure to remediate errors and omissions ASATP after discovery.

Ongoing Updates

On an ongoing basis, each NFA Member must update its Annual Questionnaire in the event of a material change to its operations. For example, if a Member begins to hold or transact in digital assets, the Member must immediately update its Annual Questionnaire. Doing so ensures that NFA has correct information about the firm's business activities and that the firm receives all applicable notices relating to its reporting requirements in a timely manner.

Recent Amendments and Reminders

Capital Requirements: The compliance date for CFTC minimum capital requirements was October 6, 2021. SD Members subject to CFTC minimum capital requirements must maintain regulatory capital as defined under the bank holding company regulations in 12 CFR Part 217 as if the SD itself were a bank holding company or as defined in SEC Regulation 240.18a-1 as if the SD were a security-based SD registered with the SEC. Certain SDs that are predominately engaged in non-financial activities may instead choose to maintain tangible net worth in an amount equal to or in excess of minimum capital requirements. Regulatory capital, tangible net worth and minimum capital requirements are determined at the legal entity level. Additionally, when internal models are used to determine regulatory capital or minimum capital requirements, the SD must demonstrate independent model validation and ongoing performance monitoring of the SD's own use of the internal models at the legal entity level.

Phase VI Margin Requirements: The compliance date for entities in scope for Phase VI of the CFTC's final margin rules was September 1, 2022. SD Members without a prudential regulator must exchange initial margin with all covered counterparties exceeding initial margin threshold amounts.

Reporting Requirements: The compliance date for the CFTC's amendments to its final rules for SD reporting was December 5, 2022. The final rules revise the current CFTC reporting requirements to improve the quality, accuracy and completeness of the reporting data. Included in the amended rules are requirements for each reporting counterparty to compare swap data maintained by the relevant SDR to swap data in the firm's own internal records to verify accuracy and completeness of reported swap data.

Position Limits: The compliance date for CFTC's position limits regulations was January 1, 2023. SD Members must establish and enforce written policies and procedures that are reasonably designed to monitor for, and prevent violations of, applicable position limits.

Recent Notices to Members

I-21-30: Effective date for amendment imposing a late fee for certain SD filings and new Interpretive Notice clarifying existing SD filing requirements

I-22-27: SD holiday filing requirements

I-22-20: Reminder: NFA Member cybersecurity responsibilities

I-22-18: SD notice filing requirements under CFTC Regulation 23.154

I-22-15: Proxies and Approximations Related to Alternative Reference Rates and Other Indices for Initial Margin Model Purposes

I-22-08: NFA encourages Members to monitor U.S. sanctions on Russia and be vigilant of cybersecurity threats

Contact NFA

If you need assistance with any NFA requirements, please contact NFA's Information Center (312-781-1410 or 800-621-3570 or

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