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Securities Regulation Daily Wrap Up, SWAPS—CFTC amends capital and financial reporting requirements for SDs and MSPs, (Apr 30, 2024)

By Anne Sherry, J.D.

Commissioner Johnson said that the rules are an important step in mitigating systemic risk concerns.

The CFTC finalized rules intended to make it easier for swap dealers and major swap participants to comply with financial reporting obligations and de ...

By Anne Sherry, J.D.

Commissioner Johnson said that the rules are an important step in mitigating systemic risk concerns.

The CFTC finalized rules intended to make it easier for swap dealers and major swap participants to comply with financial reporting obligations and demonstrate compliance with minimum capital requirements. The rules codify previous CFTC staff letters regarding calculating capital and alternate financial reporting. They also revise certain Part 23 regulations regarding financial reporting. The final rule will apply to all financial reports with an “as of” reporting date of September 30, 2024, or later.

The Commission permits swap dealers to select one of three methods to calculate their capital requirements: the net liquid assets capital approach; the bank-based capital requirements; or the tangible net worth capital approach. The rules primarily affect swap dealers electing the tangible net worth capital approach, as well as non-U.S.-bank swap dealers. The Commission believes that adopting amendments consistent with important staff letters, while adding specificity or detail to existing requirements, will help swap dealers clearly demonstrate compliance.

All four of the substantive comment letters on the proposal generally supported the amendments. The proposal was largely adopted as-is, with some changes to report timing.

Pham statement. One of the amendments requires bank swap dealers that are also registered with the SEC as security-based swap dealers to file Form X-17A-5 FOCUS Report Part IIC with the CFTC no later than 35 calendar days from the date the report is made. This was initially proposed as 30 days, but a commenter pointed out that this deadline was inconsistent with the CFTC’s alignment of the deadline for certain swap dealers to submit the Call Report when require by the prudential regulators. The CFTC agreed and revised the deadline to 35 days.

In a statement, Commissioner Caroline D. Pham took only one issue with the rule: that it made the deadline an absolute 35 days instead of simply requiring filing by the date the report is due to the SEC. This evergreen approach “would avoid the Commission having to do another rulemaking to harmonize if the SEC updates its FOCUS report filing deadlines in the future,” Pham said.

Johnson statement. Commissioner Kristin N. Johnson called the rule “effective yet sensible” in its implementation of Dodd-Frank capital reforms. The amendments do not change the substantive capital requirements and buttress the financial condition reporting requirements, alleviating systemic risk concerns, Johnson said.

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