UK: CFTC Adopts Rules Regarding Cleared Swap Customer Collateral Segregation, External Business Conduct Standards, And SD And MSP Registration, And Issues Proposed Volcker Rule Regulations

Last Updated: 1 March 2012
Article by Peter Y. Malyshev and Jonathan T. Ammons


On January 11, 2012, the Commodity Futures Trading Commission (CFTC or Commission) held its first open meeting of 2012 to consider rulemakings under the Dodd-Frank Act of 2010 (Dodd- Frank). At that meeting, the Commission approved the following rules and orders:

  1. Final Rule: Protection of Cleared Swaps Customer Contracts and Collateral (approved 4-1);
  2. Final Rule: Business Conduct Standards for Swap Dealers (SDs) and Major Swap Participants (MSPs) with Counterparties (approved 4-1);
  3. Final Rule: Registration of SDs and MSPs (approved 5-0);
  4. Final order delegating the performance of registration functions with respect to SDs and MSPs to the NFA (approved 5-0); and
  5. Proposed Rule: Prohibitions and Restrictions on Proprietary Trading and Certain Interests in, and Relationships with, Hedge Funds and Private Equity Funds (the Volcker Rule) (approved 3-2).

In total, the rules adopted at the January 11, 2012 meeting amount to over 1,000 pages of federal regulations.

Opening Statements by Commissioners

Commissioners O'Malia and Sommers opposed the Volcker Rule and the pace with which the Commission is forging ahead finalizing all other rules. Commissioner Sommers also opposed the segregation rule, stating that it was a "piecemeal approach to customer protection," as well as the external business conduct standards rule because of its potential to harm "Special Entities." The Commission posted a tentative schedule on its website broadly identifying when it plans to consider certain rules in 2012, which is attached as Appendix A. This schedule differs in significant ways from the Securities and Exchange Commission's (SEC) estimated timeline for promulgating rules under Dodd-Frank.1

Final Rule on Protection of Cleared Swaps Customer Contracts and Collateral

This rule finalizes the proposed and heavily debated segregation model for cleared swaps customer collateral, referred to as the Legally Segregated Operationally Commingled Model (LSOC Model), and also re-adopts a previously repealed segregation model that was authorized for use until 2005 for futures which permits swaps collateral to be deposited with certain independent third party custodians, subject to certain conditions ("Interpretation No. 10"). The rule importantly interacts (or, arguably, counteracts) with Section 766(h) of the US Bankruptcy Code, which requires that customer property be distributed "ratably to customers on the basis and to the extent of such customers' allowed net equity claims."2

LSOC Model. The new LSOC Model requires each futures commissioner merchant (FCM) and derivatives clearing organization (DCO) to segregate (on their books) the positions of FCM customers and the related cleared swaps customer collateral. However, both FCMs and DCOs may hold all cleared swaps customer collateral together in one commingled account.3 Additionally, the LSOC Model will require FCMs to transmit to the appropriate DCO (or FCM, if another FCM stands in between the margin-collecting FCM and the DCO) information sufficient to identify the portfolio of rights and obligations (e.g., positions and collateral) arising from the cleared swaps of each cleared swaps customer. FCMs must transmit this information to DCOs at least once per day, but DCOs (or FCMs) can require this information more frequently than that. The FCM or DCO receiving this information must then calculate the amount of collateral required for each cleared swap customer at least once per day.4

The efficacy of this model (versus certain other models that were considered, including (i) the model currently used for futures accounts (the futures model), (ii) the legal segregation with recourse model, and (iii) the full legal and physical segregation model) is best explained by describing its effect in the event of an FCM's bankruptcy. If an FCM's bankruptcy is caused by its own financial difficulties, e.g., due to losses suffered by the FCM with respect to its own proprietary book of trades, and is unrelated to investment of customer money, the LSOC Model will operate much like the current model used for futures accounts: customer positions and related collateral may be liquidated and sent to the trustee or transferred to another FCM. The LSOC Model will also operate much like the futures model if an FCM's bankruptcy is caused by: (i) misuse of customer funds; or (ii) significant losses due to permitted investment of customer funds. In these circumstances, customer positions and related collateral may be liquidated and sent to the trustee or transferred to another FCM, but only to the extent of each customer's pro rata share. In both of these instances, however, DCOs (and trustees) will have current information about each individual customer position and related collateral because the LSOC Model requires daily reports regarding individual customer positions, whereas under the current futures model, DCOs only recognize customer positions on a collective, or omnibus, basis.5

The LSOC Model is most different from the existing futures model in the situation where an FCM's bankruptcy is caused by a customer's losses that exceed both the specific customer's collateral and the FCM's ability to pay (i.e., a double default). Under the existing futures model, the DCO could access the general omnibus customer account to cover the loss created by such a default, so DCOs can effectively use non-defaulting customer collateral to cover the total position. The remaining positions and collateral would then be transferred or liquidated and returned to the trustee for pro rata distribution. Under the LSOC Model, however, DCOs will only be permitted to use the collateral attributable to specific defaulting customers to cover the double default.6

Importantly, the LSOC model and Interpretation No. 10 (discussed below) will generally only apply to cleared swaps, and not futures. The models will apply to futures, however, if they are commingled in a swaps account, which is permitted under certain circumstances. The models will not apply to swaps commingled in a futures account, though.

Interpretation No. 10.7 In 1984, the CFTC issued an interpretation which permitted FCMs to deposit futures customer property with independent third party custodians so long as the FCM had immediate and unfettered access to such funds. In 2005, however, the CFTC backtracked from this policy and prohibited futures customer collateral from being deposited with third party custodians (with limited exceptions). In response to a commenter's request after the passage of Dodd-Frank and the recent market events with an FCM's bankruptcy, the CFTC opted to follow the pre-2005 policy for swaps (but not futures) by specifically permitting swaps customer funds to be deposited in certain third-party custodial accounts in lieu of posting such funds directly to an FCM. However, the rule requires FCMs to have the ability to promptly liquidate and/or access such funds. Also, in the event of an FCM's bankruptcy other than due to a double default, the same pro rata distribution would apply to all swaps customer funds even if they are deposited with a third party.

According to CFTC staff, the Commission may consider other potential models going forward, and the adopted model (i.e., LSOC and Interpretation No. 10) will only act as a "base" for future models.

Compliance Dates. FCMs and DCOs must comply with the rules regarding segregation of cleared swaps customer collateral and the provision of information regarding cleared swaps positions by November 8, 2012. As one Commissioner pointed out in the January 11 meeting, mandatory clearing is expected to commence prior to that date (on July 16, 2012). The initial phase of mandatory clearing will apply primarily to dealer-to-dealer transactions, however, and this rule does not require segregation of dealer-to-dealer transactions.

Final Rule on Business Conduct Standards for SDs and MSPs with Counterparties

This final rule creates certain "external" business conduct requirements for SDs and MSPs (i.e., governing SDs' and MSPs' external conduct with their counterparties). The Commission also intends to adopt certain "internal" business conduct requirements soon, which will likely include, among other things, swap trading relationship documentation, confirmation, portfolio reconciliation, and portfolio compression requirements, chief compliance officer (CCO) requirements, and requirements regarding conflicts of interest policies. Entities that will be required to register as SDs and MSPs, as well as other market participants, should begin preparing implementing policies and procedures designed to ensure compliance with these external and internal business conduct requirements.

Under this final rule, all SDs and MSPs must, among other things: (i) verify that each counterparty is an eligible contract participant (ECP); (ii) provide potential counterparties with certain required disclosures; (iii) provide daily marks in certain circumstances; (iv) notify counterparties of their right to clear swaps or select a DCO in certain circumstances; and (v) communicate with their counterparties in a fair and balanced manner. SDs (but not MSPs) must also: (i) provide a scenario analysis (if the counterparty requests one, but only for swaps not "made available to trade"8 by a swap execution facility (SEF) or designated contract market (DCM)); (ii) comply with certain "know your counterparty" requirements; and (iii) have a reasonable basis to believe that a swap or swap trading strategy is suitable for the counterparty if the SD recommends such swap or strategy. At this time, the CFTC chose not to require SDs to be subject to any best execution requirements, although a suitability duty is imposed on SDs (as discussed below).

ECP Verification.9 SDs and MSPs must verify that each counterparty is an ECP and verify whether or not a counterparty is treated as a Special Entity prior to offering to enter into or entering into a swap with that counterparty. If the counterparty qualifies as a Special Entity, the SD or MSP must notify the counterparty of its right to be treated as a Special Entity. SDs and MSPs may rely on reasonable representations provided by the counterparty in order to satisfy these obligations, which representations can be provided in a master agreement or other type of relationship documentation. This verification requirement will not apply to anonymous transactions executed on a SEF or to any transactions executed on a DCM.

Disclosure Requirements.10 Similar to the previously proposed external business conduct rule, the final rule requires SDs and MSPs to make certain disclosures to counterparties, but only if the counterparty is not an SD, MSP, security-based SD, or security-based MSP (collectively, Swap Entities). Moreover, SDs and MSPs will not have to make these disclosures if the swap is executed on a SEF or DCM and the counterparty's identity is unknown prior to execution. When such disclosures are required, though, SDs and MSPs must disclose to the counterparty the material risks and material characteristics of a swap, and any material incentives or conflicts of interests the SD or MSP may have in connection with the swap. This latter disclosure will require the SD or MSP to disclose the price of the swap and the mid-market mark for the swap. It will also require SDs and MSPs to disclose any compensation or broker incentives that the SD or MSP may receive in connection with the swap, including any incentive payments from DCOs, DCMs, SEFs, or swap data repositories (SDRs). Additionally, if an SD or MSP is recommending more than one swap and/or strategy to accomplish a particular objective, it must include the relative compensation related to the different alternatives when comparing the strategies.

To the extent that the information in these disclosures relate to multiple swaps that will be entered into between the same counterparties, SDs and MSPs may be able to satisfy these obligations through relationship documentation. However, the rule states that whether standardized disclosures satisfy certain disclosure obligations will depend on the facts and circumstances, and that failure to disclose a material disclosure may be a material omission under the Commission's anti-fraud rules. Commission staff stated that the rule would allow SDs and MSPs to partner with SEFs in order to provide these disclosures, which may be standardized under certain conditions, and that they expect such partnerships to reduce compliance costs. These disclosure obligations will not apply to anonymous transactions executed on a SEF or DCM.11

Note that Dodd-Frank provides the CFTC with broad anti-fraud authority, and a violation of disclosure duties may also violate the CFTC's rules regarding fraud and manipulation. The anti-fraud authority provided to the CFTC under Dodd-Frank is largely similar to that provided for in Section 10(b) of the Securities Exchange Act, the statutory basis for the Securities and Exchange Commission's (SEC) Rule 10b-5. The CFTC therefore modeled its anti-fraud rule on SEC Rule 10b-5 and will likely interpret its rule in accord with SEC precedent. The CFTC's rule, which has a standard of recklessness, may therefore be applied to violations of disclosure requirements in a manner similar to that of Rule 10b-5.

Daily Mark.12 For uncleared swaps, SDs and MSPs must provide counterparties other than Swap Entities with a daily mark of each swap. They also must disclose the methodology used to arrive at that mark. For cleared swaps, SDs and MSPs must inform counterparties other than Swap Entities that they have the right to receive, upon request, a daily mark from the DCO clearing the swap.

Clearing Disclosures.13 For uncleared swaps, SDs and MSPs must notify counterparties other than Swap Entities that they may elect to have the swap cleared and select the DCO at which the swap will be cleared. For cleared swaps, SDs and MSPs must notify counterparties other than Swap Entities that they may select the DCO to clear the swap.

Different Obligations for SDs and MSPs. The final rule does not require MSPs to comply with scenario analysis provisions, the "know your counterparty" requirement, the suitability duty, or pay-to-play duties (i.e., restrictions on political contributions).

Scenario Analysis.14 The rule will require SDs to notify each counterparty, other than Swap Entities, of his or her right to receive a scenario analysis and will require SDs to provide a scenario analysis if requested. Unlike the proposed rule, this requirement is not based on whether the swap is a "high-risk complex bilateral swap." Instead, the same requirement applies to all swaps that are not "made available to trade" by a SEF or a DCM. SDs will be permitted to use appropriately qualified independent third party providers to perform the scenario analysis, but will remain responsible for ensuring compliance with the rule. These obligations will not apply to anonymous transactions executed on a SEF or DCM.

As described above, a violation of these disclosures may also constitute a violation of the CFTC's anti-fraud rules.

Know Your Counterparty.15 Under the proposed business conduct standards rule, SDs would have been required to, among other things, obtain facts necessary to effectively service the counterparty and implement special instructions from the counterparty. In response to comments, the Commission removed these requirements, acknowledging that such obligations are better suited for an "institutional suitability" requirement, which obligations are only triggered when an SD recommends a strategy or specific swap. Instead, the final rule requires SDs to obtain certain information, including: (i) facts necessary to comply with applicable law; (ii) facts necessary to implement the SD's credit and operational risk management policies; and (iii) information regarding the authority of any person acting for such counterparty. These obligations will not apply to anonymous transactions.

Institutional Suitability Requirement.16 When an SD makes a recommendation to a counterparty other than a Swap Entity, the SD must: (i) undertake reasonable diligence to understand the potential risks and rewards associated with the recommended swap or trading strategy involving a swap; and (ii) have a reasonable basis to believe that the recommended swap or trading strategy involving a swap is suitable for the counterparty. This latter obligation will require an SD to obtain certain information about its counterparty. The rule allows SDs to satisfy this requirement by obtaining certain representations from the counterparty, which can be included in relationship documentation.

SD Obligations as an Advisor to Special Entities.17 When acting as an advisor to a Special Entity, SDs must act in the Special Entity's best interest. However, the rule provides certain safe harbors through which SDs can satisfy their duties which, if complied with, will exempt an SD from this duty. The safe harbor requirements differ for advice to ERISA plans versus other Special Entities. According to staff, the safe harbors for ERISA plans require less action from SDs because ERISA plans are already subject to comprehensive regulation, and the Commission wanted to avoid creating potentially conflicting regulations.

SD and MSP Obligations as a Counterparty to Special Entities.18 When acting as a counterparty to a Special Entity, SDs and MSPs must have a reasonable basis to believe that the Special Entity has an independent representative. Again, the rule provides certain safe harbors which differ for transactions with ERISA plans versus other Special Entities. The rule also clarifies that no SD or MSP will qualify as an ERISA fiduciary under Department of Labor (DOL) standards simply by complying with the business conduct standards rule. The CFTC and DOL have engaged in extensive discussions as to how to best address this issue.

Compliance Date. SDs and MSPs must comply with these rules on the later of: (i) 240 days after the publication of the rule in the Federal Register; or (ii) the date on which such entity is required to register with the Commission (i.e., the effective date of the entity or product definitions rules, whichever is later).

Final Rule on Registration of SDs and MSPs (along with a final order delegating the performance of registration functions with respect to SDs and MSPs to the NFA)

This final rule and final order adopts the process for SD and MSP registration substantially as proposed. Under the rule, SDs and MSPs must become members of the National Futures Association (NFA) and will register by submitting Form 7-R (for each principal), Form 8-R, and a fingerprint card to the NFA.

Compliance and Provisional Registration.19 Persons and entities may register as SDs or MSPs at any time, but registration will become mandatory on the effective date of the entity or product definitions rules (whichever is later), which are joint rules between the CFTC and SEC. SD and MSP applicants will be provisionally registered upon filing the application and will remain so until the NFA either approves the application or provides notice of a deficiency. Recognizing that many applicants will likely register before all Dodd-Frank rulemakings applicable to SDs and MSPs (the 4s Regulations) are finalized, the rule states that SDs and MSPs applying for registration must only initially establish compliance with the 4s Regulations that are effective as of the date of the application. SDs and MSPs will be under a continuing obligation to establish compliance with new 4s Regulations as they become effective, however.

Both the NFA and CFTC will provide oversight of SDs and MSPs. Specifically, the NFA will oversee SD and MSP compliance by establishing rules applicable to SDs and MSPs as NFA members (which rules must require at least as much as the CFTC's rules). The CFTC will monitor the NFA's oversight and will also be able to examine any SD or MSP on its own volition for violations of the Commodity Exchange Act or CFTC rules.

Associated Persons.20 Unlike rules applicable to FCMs and certain other registered entities, associated persons of SDs and MSPs need not register with the CFTC or NFA. However, under Dodd-Frank, an SD or MSP cannot permit a person associated with it to effect swaps on its behalf if such person is subject to certain statutory disqualifications. The final rule adds an exception to this rule so that persons who are subject to statutory disqualification but have been approved by the NFA in certain other capacities may not be barred from effecting swaps on behalf of SDs and MSPs.

The Push-Out Rule.21 The final rule also addresses the "push-out" rule in Section 716 of Dodd-Frank. Under that section, insured depository institutions (IDIs) cannot receive Federal assistance if they are also SDs unless the IDI transfers its swaps activities to a non-IDI affiliate. Note that this rule does not apply to MSPs. These push-out affiliates must also register under the procedures described above.

Proposed Volcker Rule

This proposed rule incorporates certain common rules adopted by the OCC, Board of Governors, FDIC, and SEC in a joint release implementing Section 619 of Dodd-Frank (the Joint Volcker Rule) with minor modifications. The CFTC's Volcker Rule would only apply to banking entities whose primary financial regulator is the CFTC (covered banking entities), including certain banking entities that are SDs, MSPs, commodity pool operators (CPOs), and commodity trading advisors (CTAs).22 Banking entities whose primary financial regulator is not the CFTC would be covered by the Joint Volcker Rule. This rule would generally require covered banking entities to establish compliance programs designed to ensure that they: (i) do not engage in certain types of proprietary trading of certain financial instruments; and (ii) do not own more than 3 percent of or have certain interests in hedge funds, commodity pools or private equity funds (although both of these prohibitions are subject to certain exemptions).

Proprietary Trading Prohibited.23 In general, a covered banking entity must establish compliance programs designed to ensure that it does not engage as a principal for a "trading account" of the covered banking entity that acquires certain financial positions (including swaps, options, and futures (each, a covered financial position)) if those positions are acquired for: (i) short-term sale; (ii) potential benefits due to short-term price movements; or (iii) potential short-term arbitrage profits.

More broadly, the rule also generally prohibits SDs that are banking entities (and other covered banking entities) from acquiring any swaps, options, or futures positions that are acquired or taken in connection with the activities that require the SD (or other covered banking entity) to be registered with the CFTC. Subject to certain exceptions described below, then, this rule would largely prohibit SDs and MSPs that are banking entities from engaging in certain swaps transactions. The rule exempts certain types of activities from these prohibitions, however, and does not prohibit activities where the covered banking entity is acting solely as agent, broker, or custodian for an unaffiliated third party, or from buying or selling certain domestic government debt instruments.

60-Day Rebuttable Presumption.24 The rule creates a rebuttable presumption that an account is a prohibited trading account if the covered banking entity holds a position for a period of 60 days or less. Covered banking entities may rebut this presumption by demonstrating, based on all the facts and circumstances, that the covered financial position(s) were not acquired or taken for any prohibited enumerated purpose.

Underwriting Activities Permitted.25 Under the proposed CFTC Volcker Rule, covered banking entities would be able to engage in otherwise prohibited activities to the extent that they involve underwriting activities so long as certain requirements are met. Among other things, this would require that: (i) the financial position involved be a security; (ii) the covered banking entity be registered with the SEC as a dealer or be exempt from such registration; (iii) the activities not be designed to exceed the near-term demands of clients, customers, or counterparties; (iv) the activities be designed to generate revenue primarily from fees; and (v) the compensation arrangements of persons performing underwriting activities not be designed to reward proprietary risk-taking.

Market-Making Activities Permitted.26 Under the proposed CFTC Volcker Rule, covered banking entities would also be able to purchase or sell positions for the purposes of "market-making." In order for activities to qualify as market-making, the rule requires the trading desk or other organizational unit conducting the purported market-making activity to hold itself out as being willing to buy and sell, including through entering into long and short positions in, the covered financial position for its own account on a regular or continuous basis. The rule also sets forth several other requirements which largely track the criteria set forth above for underwriting.

Risk-Mitigating Hedging Activities Permitted.27 Under the proposed CFTC Volcker Rule, covered banking entities would also be permitted to purchase and/or sell positions in connection with and related to individual or aggregated holdings of the covered banking entity to the extent that they mitigate or hedge various types of risk posed by such holdings.

Restrictions on Permitted Activities and Conflicts of Interest.28 Although the rule permits certain underwriting, market-making, and risk-mitigating activity, it limits these permitted activities by stating that no transaction will be permitted if it would: (i) involve or create a material conflict of interest; (ii) result, directly or indirectly, in exposure by the covered banking entity to a "high-risk asset or a high-risk trading strategy;" or (iii) pose a threat to the safety of the covered banking entity or the United States financial system. The rule defines a conflict of interest as a situation where the covered banking entity's interests are materially adverse to those of the client, customer, or counterparty. However, the rule would permit such conflicts of interests if the covered banking entity either discloses the conflict of interest and permits the client, counterparty, or customer to negate, or substantially mitigate, any materially adverse effect, or creates certain information barriers designed to prevent the conflict from having a materially adverse impact on the client, customer, or counterparty.

Prohibition on Owning an Interest in Hedge Funds and Private Equity Funds.29 The proposed rule generally prohibits covered banking entities from owning more than 3 percent of the outstanding ownership in a "covered fund," which generally includes hedge funds and private equity funds. As required by Dodd-Frank, however, the rule would permit covered banking entities to place seed investments in covered funds in order to initially attract other investors, but would require covered banking entities to dilute that seed investment to 3 percent or less of the total outstanding ownership interests of such fund within one year (which may be extended under certain circumstances). The rule also limits a covered banking entity from investing more than 3 percent of its tier 1 capital in covered funds on an aggregate basis.

In addition to permitting covered banking entities to place seed investments in covered funds, the rule would permit covered banking entities to invest in, own, or sponsor a covered fund if such fund is: (i) a small business investment company; (ii) designed primarily to promote the welfare of low- or moderate-income communities or families; (iii) a qualified rehabilitation expenditure; (iv) an issuer of asset-backed securities whose assets are solely comprised of certain loans and interest rates or forex derivatives; or (v) an acquisition that is: (y) made in order to hedge certain individual or aggregate obligations or liabilities of the covered banking entity; or (z) made outside of the United States (subject to certain qualifications). The rule also clarifies that certain acquisitions or activities would not violate the restrictions imposed by the CFTC Volcker Rule.

Limitations on Relationships with Hedge Funds, Commodity Pools and Private Equity Funds.30 Subject to certain exceptions, the rule would prohibit covered banking entities (and their affiliates) that manage, sponsor, advise, or organize and offer a covered fund from providing loans to the fund or entering into asset purchases from the fund to the extent such transactions are deemed "covered transactions" under Section 23A of the Federal Reserve Act.31 It would also subject banking entities acting in those capacities to certain arm's length requirements found in Section 23B of the Federal Reserve Act.

Enforcement of the CFTC Volcker Rule. At the January 11, 2012 meeting, the Commissioners highlighted the fact that, under Dodd-Frank, the CFTC only has authority to require covered banking entities that violate this rule to liquidate their positions. The CFTC itself, therefore, cannot generally bring enforcement actions.


1 See (last visited January 24, 2012).

2 11 U.S.C. 766(h). Arguably, no revisions to the US Bankruptcy Code are necessary to implement the rule.

3 See Protection of Cleared Swaps Customer Contracts and Collateral, pp. 13-14.

4 See id. at 161-65 (to be codified at 17 C.F.R. §§ 22.11, 22.12).

5 See id. at 13-21.

6 See id.

7 See id. at 30-32.

8 The CFTC recently proposed a rule regarding the process for making a swap "available to trade." As proposed, SEFs and DCMs will make this determination based on 8 listed factors. The CFTC will hold a roundtable on this subject on January 30, 2012.

9 See Business Conduct Standards for Swap Dealers and Major Swap Participants with Counterparties, pp. 312-13 (to be codified at 17 C.F.R. § 23.430).

10 See id. at 313-14 (to be codified at 17 C.F.R. § 23.431(a)).

11 See Prohibition on the Employent, or Attempted Employment of Manipulative and Deceptive Devices and Prohibition on Price Manipulation, 76 Fed. Reg. 41398, 41402 n.55 (july 14, 2011).

12 See id. at 315-16 (to be codified at 17 C.F.R. § 23.431(d)).

13 See id. at 316 (to be codified at 17 C.F.R. § 23.432).

14 See id. at 314 (to be codified at 17 C.F.R. § 23.431(b)).

15 See id. at 309 (to be codified at 17 C.F.R. § 23.402(b)).

16 See id. at 316-18 (to be codified at 17 C.F.R. § 23.434).

17 See id. at 318-20 (to be codified at 17 C.F.R. § 23.440).

18 See id. at 320-24 (to be codified at 17 C.F.R. § 23.450).

19 See Registration of Swap Dealers and Major Swap Participants, pp. 54-59 (to be codified at 17 C.F.R. §§ 3.2, 3.10).

20 See id. at 66 (to be codified at 17 C.F.R. § 23.22).

21 See id. at 65 (to be codified at 17 C.F.R. § 23.21(c)).

22 The CFTC is the primary financial regulator for the following entities:

  1. any FCM registered with the CFTC under the CEA, with respect to the activities of the FCM that require the FCM to be registered under that Act;
  2. any CPO registered with the CFTC under the CEA, with respect to the activities of the CPO that require the CPO to be registered under that Act, or a commodity pool, as defined in that Act;
  3. any CTA or introducing broker registered with the CFTC under the CEA, with respect to the activities of the CTA or introducing broker that require the CTA or introducing broker to be registered under that Act;
  4. any DCO registered with the CFTC under the CEA, with respect to the activities of the DCO that require the DCO to be registered under that Act;
  5. any board of trade designated as a contract market by the CFTC under the CEA;
  6. any futures association registered with the CFTC under the CEA;
  7. any retail foreign exchange dealer (RFED) registered with the CFTC under the CEA, with respect to the activities of the RFED that require the RFED to be registered under that Act;
  8. any SEF, SDR, SD, or MSP registered with the CFTC under the CEA with respect to the swap activities of the person that require such person to be registered under that Act; and
  9. any registered entity under the CEA, with respect to the activities of the registered entity that require the registered entity to be registered under that Act.

23 See Prohibitions and Restrictions on Proprietary Trading and Certain Interests in, and Relationships With, Hedge Funds and Covered Funds, pp. 372-79 (to be codified at 17 C.F.R. § __.3).

24 See id. at 375 (to be codified at 17 C.F.R. § __.3(b)(2)(ii)).

25 See id. at 379-86 (to be codified at 17 C.F.R. § __.4).

26 See id.

27 See id. at 386-88 (to be codified at 17 C.F.R. § __.5).

28 See id. at 393-95 (to be codified at 17 C.F.R. § __.8).

29 See id. at 396-99 (to be codified at 17 C.F.R. § __.10).

30 See id. at 418-20 (to be codified at 17 C.F.R. § __.16).

31 12 U.S.C. 371c.

Appendix A

Dodd-Frank Title VII Final Rules and Interpretive Orders and CFTC may consider in 2012:

First quarter

  • Client Clearing Documentation, Clearing Member Risk Management, Straight Through Processing
  • Commodity Options
  • DCMs
  • End-User Exception
  • Entity Definitions
  • External Business Conduct
  • Internal Business Conduct (Duties, Recordkeeping, CCOs)
  • Product Definitions
  • Registration of SDs and MSPs
  • Reporting of Historical Swaps
  • Segregation for Cleared Swaps

Second through fourth quarters

  • Block Rule
  • Capital and Margin
  • Conforming Rules
  • Disruptive Trade Practices
  • Extraterritoriality
  • Governance and Conflict of Interest
  • Implementation (clearing and trade execution)
  • Internal Business Conduct (Documentation)
  • Process for Making a Swap Available to Trade (SEFs and DCMs)
  • SEFs
  • Segregation for Uncleared Swaps

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.