In a unanimous decision, the U.S. Commodity Futures Trading Commission (CFTC) approved proposals on Dec. 2 under the Dodd Frank Act to establish swap dealer (SDs) and major swap participant (MSPs) minimum capital requirements.
The proposed rules offer options for record keeping, reporting and notification requirements for SDs and MSPs relative to their capital requirements, and allow alternative approaches dependent on existing U.S. bank regulators’ capital requirements or future commission merchant and broker-dealer net liquid asset capital requirements under the CFTC and the Securities and Exchange Commission, respectively. While SDs could also use internal models to compute their regulatory capital, those efforts would be subject to prior approval by the CFTC of the National Futures Association.
All this stems from the Dodd Frank’s mandate that minimum levels of qualifying capital for SDs and MSPs are not subject to the capital rules of a prudential regulator, such as the FDIC, the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Farm Credit Administration, or the Federal Housing Finance Agency.
These requirements, which would also require some SDs and MSPs to satisfy defined liquidity requirements, were originally proposed in 2011. However, no further actions were taken at that time due to ongoing events. With the CFTC’s approval, though, a comment period for these proposed requirements will now open for 90 days following publication in the Federal Register.