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Tuesday, August 31, 2021 - Amended Financial Requirement Section 18 - Swap Dealer and Major Swap Participant Financial Requirements. An explanation of the amended financial requirement can be found in the August 31, 2021 rule submission letter.
SECTION 1. FUTURES COMMISSION MERCHANT FINANCIAL REQUIREMENTS.
[Effective dates of amendments: December 17, 1999; October 31, 2000; January 10, 2001; December 31, 2001; September 30, 2004; July 31, 2006; February 13, 2007; October 31, 2008; March 31, 2010; October 18, 2010; June 30, 2013; January 14, 2016; September 19, 2016; June 30, 2020 and October 6, 2021.]
(a) Each NFA Member that is registered or required to be registered with the Commodity Futures Trading Commission (hereinafter "CFTC") as a Futures Commission Merchant (hereinafter "Member FCM") must maintain "Adjusted Net Capital" (as defined in CFTC Regulation 1.17) equal to or in excess of the greatest of:
(i) $1,000,000, provided, however, that if the Member FCM is also a registered swap dealer, the minimum amount shall be $20,000,000;
(ii) For Member FCMs with less than $2,000,000 in Adjusted Net Capital, $6,000 for each remote location operated (i.e., proprietary branch offices, main office of each guaranteed IB and branch offices of each guaranteed IB);
(iii) For Member FCMs with less than $2,000,000 in Adjusted Net Capital, $3,000 for each AP sponsored (including APs sponsored by guaranteed IBs);
(iv) For securities brokers and dealers, the amount of net capital specified in Rule 15c3-1(a) of the Regulations of the Securities and Exchange Commission (17 CFR 240.15c3-1(a)); plus for a Member FCM that is also a registered swap dealer, two percent of the total uncleared swap margin, as defined in CFTC Regulation 1.17(b)(11);
(v) Eight (8) percent of domestic and foreign domiciled customer and non-customer (excluding proprietary) risk maintenance margin/performance bond requirements for all domestic and foreign futures, options on futures contracts and cleared over-the counter derivatives positions excluding the risk margin associated with naked long option positions; plus for a Member FCM that is also a registered swap dealer, two percent of the total uncleared swap margin, as defined in CFTC Regulation 1.17(b)(11);
(vi) For a Member FCM that acts as counterparty to a forex transaction (as forex is defined in Bylaw 1507(b) but excluding the counterparty limitation contained in Bylaw 1507(b)(ii)), $20,000,000, except that Forex Dealer Members must meet the requirements in Financial Requirements Section 11.
(b) A Member FCM that is also a registered swap dealer may not use an internal model(s) to calculate market and/or credit risk exposure under CFTC Regulation 1.17 without obtaining prior written approval from NFA or CFTC in accordance with CFTC Regulation 1.17(c)(6)(v), incorporating the requirements of CFTC Regulation 23.102. A Member FCM seeking NFA's approval to use an internal model(s) must submit an application to NFA in the form and manner required by NFA.
(c) A Member FCM that is also a registered swap dealer and has received approval to use internal models to compute market risk and credit risk charges for uncleared swaps, must maintain net capital equal to or in excess of $100 million.
(d) Each Member FCM for which NFA is the designated self-regulatory organization ("DSRO") must file financial reports with NFA for each month-end, including its fiscal year end, within 17 business days of the date for which the report is prepared. All financial reports must be filed on Form 1-FR-FCM; or, if the Member is a broker-dealer, on Form 1-FR-FCM or the FOCUS Report, and all financial reports must be filed electronically using an electronic medium approved by NFA.
(e) A Member FCM for which NFA is the DSRO that is required to file any document with or give any notice to its DSRO under CFTC Regulations 1.10 [Financial reports of futures commission merchants and introducing brokers], 1.12 [Maintenance of minimum financial requirements by futures commission merchants and introducing brokers], 1.16 [Qualifications and reports of accountants], or 1.17 [Minimum financial requirements for futures commission merchants and introducing brokers] or is required to file any financial report or statement (e.g., FOCUS Reports) with any other securities or futures self-regulatory organization of which it is a member shall also file one copy of such document with or give such notice to NFA, in a form and manner required by NFA, no later than the date such document or notice is due to be filed with or given to the CFTC or the self-regulatory organization.
(f) No Member FCM may use forex customer equity as capital or may record forex customer equity as an asset without recording a corresponding liability. For purposes of this requirement:
(i) Forex customer means any person who is not an eligible contract participant, as defined in Section 1a(18) of the Act, who enters into forex transactions (as defined in Bylaw 1507(b)) with the FCM or any of its affiliates described in Section 2(c)(2)(B)(i)(II)(cc)(BB) of the Act; and
(ii) Forex customer equity means money, securities, and property received by the FCM or any of its affiliates described in Section 2(c)(2)(B)(i)(II)(cc)(BB) of the Act to margin, guarantee, or secure forex transactions between a forex customer and the FCM or any of its affiliates described in Section 2(c)(2)(B)(i)(II)(cc)(BB) of the Act, or accruing to a forex customer as a result of such transactions.