Swap Dealer and Major Swap Participant Conflicts of Interest and Business Conduct Standards with Counterparties

The Commission has adopted Subpart H of Part 23 of its regulations (EBCS Rules) and Commission regulation 23.605, requiring swap dealers and major swap participants to follow specified procedures and provide specified disclosures in their dealings with counter-parties, to adopt and implement conflicts of interest procedures and disclosures, and to maintain specified records related to those requirements. In addition, the Commission recently finalized certain exceptions from the EBCS Rules for certain foreign swaps in § 23.23(e). To the extent a swap dealer or major swap participant avails itself of one or more of these exceptions, when effective, § 23.23(h)(1) imposes information collection requirements in lieu of such requirements in the EBCS Rules. The information collection obligations imposed by the regulations are essential to ensuring that swap dealers and major swap participants develop and maintain procedures and disclosures required by the Commodity Exchange Act (CEA) and Commission regulations. In its notice of proposed rulemaking (the “Proposal”), the Commission proposes to (1) amend certain business conduct standards for SDs and MSPs (together “Swap Entities”) in their dealings with counterparties contained in the EBCS Rules; and (2) amend the swap trading relationship documentation rule for Swap Entities in existing Commission regulation 23.504. These amendments would provide exceptions to compliance with such requirements when executing swaps that are: (1) intended by the parties to be cleared contemporaneously with execution; or (2) subject to prime broker arrangements that meet certain qualifying conditions. These proposed amendments, if adopted, are intended to supersede the Market Participants Division’s (“MPD”) no-action positions contained in CFTC Staff Letters 12-58, 13-11, 13-12, 19-06, and 23-01 (collectively, the “Covered Staff Letters”) and to make other adjustments to such rules in order to harmonize such requirements with those of the Securities and Exchange Commission (“SEC”) and the Municipal Securities Rulemaking Board to reduce administrative burdens on dually-registered entities.

The latest form for Swap Dealer and Major Swap Participant Conflicts of Interest and Business Conduct Standards with Counterparties expires 2028-12-31 and can be found here.