CFTC extends comment period for new capital requirements

The Commodity Futures Trading Commission is extending the comment period on proposed capital requirements applicable to swap dealers and major swap participants for an additional 60 days.

The original comment period, initiated on Dec. 2, was set to expire March 16, 2017. The comment period will now expire on May 15. Notice of the extension will be published in the Federal Register. All comments will be posted on CFTC’s website.

The proposed rules establish swap dealer (SDs) and major swap participant (MSPs) minimum capital requirements. As required by the Dodd Frank Act, the rules propose minimum levels of qualifying capital for SDs and MSPs that are not subject to the capital rules of a prudential regulator.

The proposed rules generally permit the application of alternative approaches based upon existing U.S. bank regulators’ capital requirements or the CFTC’s future commission merchant and the Securities and Exchange Commission’s broker-dealer net liquid asset capital requirements. The proposal further provides that SDs predominantly engaged in non-financial activities and MSPs may elect minimum capital requirements based upon the tangible net worth of the entities.

SDs may use internal models for purposes of computing their regulatory capital, subject to prior approval by either the CFTC or the National Futures Association. The rules would also require certain SDs and MSPs to satisfy defined liquidity requirements.

In addition, the rules also propose recordkeeping, reporting and notification requirements for SDs and MSPs relative to their respective capital requirements.

The proposal would also allow the CFTC to issue capital comparability determinations to foreign jurisdictions or foreign SDs under a program of substituted compliance.

The CFTC had proposed SD and MSP capital requirements in 2011, but as global consultation on appropriate margin standards for uncleared swaps was proceeding, no further action was taken. With margin requirements now final and being implemented, the Commission re-proposed capital standards..