[Federal Register Volume 89, Number 101 (Thursday, May 23, 2024)]
[Rules and Regulations]
[Pages 45569-45594]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-10342]


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COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 23

RIN 3038-AF33


Capital and Financial Reporting Requirements for Swap Dealers and 
Major Swap Participants

AGENCY: Commodity Futures Trading Commission.

ACTION: Final rule.

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SUMMARY: The Commodity Futures Trading Commission (``Commission'' or 
``CFTC'') is adopting amendments to certain of the Commission's 
regulations that impose minimum capital requirements and financial 
reporting obligations on swap dealers (``SDs'') and major swap 
participants (``MSPs''). The Commission is adopting amendments 
consistent with previously issued staff letters addressing the Tangible 
Net Worth Capital Approach for calculating capital under the applicable 
Commission regulation and alternative financial reporting by SDs 
subject to the capital requirements of a prudential regulator. The 
Commission is also adopting amendments to certain of its regulations 
applicable to SDs, in areas including the required timing of certain 
notifications, the process for approval of subordinated debt for 
capital, and the revision of financial reporting forms to conform to 
the rules. The amendments are intended to facilitate SDs' compliance 
with the Commission's financial reporting obligations and minimum 
capital requirements.

DATES: 
    Effective date: This rule is effective June 24, 2024.
    Compliance date: September 30, 2024. The compliance date applies to 
all financial reports with an ``as of'' reporting date of September 30, 
2024 or later, to allow for sufficient time to effectuate amendments 
discussed herein.

FOR FURTHER INFORMATION CONTACT: Amanda L. Olear, Director, 202-418-
5283, [email protected]; Thomas Smith, Deputy Director, 202-418-5495, 
[email protected]; Joshua Beale, Associate Director, 202-418-5446, 
[email protected]; Jennifer Bauer, Special Counsel, 202-418-5472, 
[email protected]; Maria Aguilar-Rocha, Special Counsel, 202-418-5840, 
[email protected]; Andrew Pai, Attorney-Advisor, 646-746-9893, 
[email protected]; Christine McKeveny, Attorney-Advisor, 646-746-3923, 
[email protected]; Market Participants Division; Lihong McPhail, 
Research Economist, 202-418-5722, [email protected], Office of the 
Chief Economist; Commodity Futures Trading Commission, Three Lafayette 
Centre, 1155 21st Street NW, Washington, DC 20581.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Background
II. Amendments to Commission Regulations
    A. CFTC Staff Letters and Other Amendments
    1. Amendments to Tangible Net Worth Capital Approach--CFTC Staff 
Letter No. 21-15
    2. Amendments to Bank SD Financial Reporting Requirements--CFTC 
Staff Letter No. 21-18
    3. Amendments Regarding Financial Reporting and Other 
Requirements of SDs
    a. Amendments to Schedules in Financial Reporting
    b. Changes to Public Disclosure Requirements
    c. Changes to Form 1-FR-FCM
    d. Additional Cross References To Clarify Applicable Market and 
Credit Risk Charges
    B. Other Amendments
    1. Notice of Substantial Reduction in Capital
    2. Subordinated Debt Approval
    3. Statement of No Material Difference
III. Related Matters
    A. Regulatory Flexibility Act
    B. Paperwork Reduction Act
    1. Background
    2. OMB Collection 3038-0024--Regulations and Forms Pertaining to 
Financial Integrity of the Market Place; Margin Requirements for 
SDs/MSPs
    C. Section 15(b) Antitrust Laws
IV. Cost-Benefit Considerations
    A. Background
    B. CFTC Staff Letters and Other Amendments
    1. Benefits
    2. Costs
    3. Section 15(a) Factors
    a. Protection of Market Participants and the Public
    b. Efficiency, Competitiveness, and Financial Integrity of Swap 
Markets
    c. Price Discovery
    d. Sound Risk Management Practices
    e. Other Public Interest Considerations
    C. Other Amendments
    1. Benefits
    2. Costs
    3. Section 15(a) Factors
    a. Protection of Market Participants and the Public
    b. Efficiency, Competitiveness, and Financial Integrity of Swaps 
Markets
    c. Price Discovery
    d. Sound Risk Management Practices
    e. Other Public Interest Considerations

I. Background

    Section 4s(e) of the Commodity Exchange Act (``CEA'' or the 
``Act'') requires the Commission to adopt minimum capital and margin 
requirements for SDs and MSPs.\1\ On September 15, 2020, the Commission 
issued final rules adopting such requirements under part 23 of the 
Commission's regulations (the ``Final Rule'' or the ``Final 
Rules'').\2\ The Final Rules became effective on November 16, 2020, 
with an extended compliance date of October 6, 2021 (``2021 Compliance 
Date'').\3\ The Final Rules imposed capital requirements on SDs and 
MSPs that are not subject to a prudential regulator (``nonbank SDs'' 
and ``nonbank MSPs,'' respectively).\4\ The Final Rules included a 
detailed capital model application process whereby eligible nonbank SDs 
and nonbank MSPs could apply to the Commission, or a registered futures 
association (``RFA'') of which they are a member, for approval.\5\ The 
Final Rules also adopted a capital comparability determination process 
for certain eligible foreign domiciled nonbank SDs and nonbank MSPs to 
seek substituted compliance for the Commission's capital and financial 
reporting requirements.\6\ Further, the Final Rules adopted detailed 
financial reporting, recordkeeping and notification requirements, 
including limited financial reporting requirements for SDs and MSPs 
subject to the capital requirements of a prudential regulator (``bank 
SDs'' and ``bank MSPs,''

[[Page 45570]]

respectively).\7\ The Final Rules also included amendments to existing 
capital rules for futures commission merchants (``FCMs'') to provide 
explicit additional capital requirements for proprietary positions in 
swaps and security-based swaps that are not cleared by a clearing 
organization.\8\ Finally, the Final Rules required that financial 
reports and notices be filed with both the Commission and the NFA \9\ 
and explicitly recognized NFA's ability to adopt standardized forms and 
processes to carry out the Commission's financial reporting and 
notification requirements for SDs.\10\
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    \1\ 7 U.S.C. 6s(e).
    \2\ Capital Requirements of Swap Dealers and Major Swap 
Participants, 85 FR 57462 (Sept. 15, 2020) (the ``Final Rule'' or 
the ``Final Rules''). Commission regulations referred to herein are 
found at 17 CFR chapter I. Commission regulations are accessible on 
the Commission's website at https://www.cftc.gov.
    \3\ Id.
    \4\ Id. The term ``prudential regulator'' is defined as the 
Board of Governors of the Federal Reserve System (``Federal Reserve 
Board''); the Office of the Comptroller of the Currency (``OCC''); 
the Federal Deposit Insurance Corporation (``FDIC''); the Farm 
Credit Administration; and the Federal Housing Finance Agency. 
Section 1a(39) of the CEA, 7 U.S.C. 1a(39).
    \5\ See generally Final Rules, 85 FR 57467. The three methods 
discussed in detail in the Final Rules include the Bank-Based 
Capital Approach, the Tangible Net Worth Capital Approach, and the 
Net Liquid Assets Capital Approach (as defined therein). Each method 
permits the use of models upon approval of the Commission or an RFA 
and determines the frequency and type of financial reporting 
information to be provided to the Commission by each nonbank SD and 
nonbank MSP.
    \6\ 17 CFR 23.106.
    \7\ Final Rules, 85 FR 57463. Bank SDs, which are not subject to 
the capital requirements of the Commission, are required to provide 
the Commission and National Futures Association (``NFA'') with 
limited financial information regarding the capital and swap 
positions of the firms. 17 CFR 23.105(p).
    \8\ Id.
    \9\ Id. at 57515.
    \10\ Id. at 57518.
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    In the period leading up to the 2021 Compliance Date, Commission, 
NFA, and SEC staff worked together to develop a process for collecting 
financial reports and responding to market participant inquiries 
regarding compliance with financial reporting and notice requirements. 
The Commission also approved NFA's capital model requirements and 
review process,\11\ and NFA adopted new Financial Requirements Section 
18,\12\ which included capital rules largely modeled after the 
Commission's Final Rules, and published new standardized financial 
reporting forms FR-CSE-NLA and FR-CSE-BHC for use by nonbank SDs that 
are not also registered with the SEC.\13\ Commission staff also issued 
eight no-action and interpretive letters in response to inquiries from 
market participants regarding compliance with various capital and 
financial reporting obligations under the Final Rules.\14\
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    \11\ CFTC Staff Letter No. 21-03, Jan. 12, 2021, available at 
https://www.cftc.gov/csl/21-03/download.
    \12\ NFA section 18.
    \13\ NFA submitted these rules for Commission review under 
section 17(j) of the CEA, 7 U.S.C. 21(j), on November 22, 2021, and 
the rules became effective on December 21, 2021. NFA Notice to 
Members I-21-45, available at https://www.nfa.futures.org/news/newsNotice.asp?ArticleID=5437.
    \14\ CFTC Staff Letter No. 21-15, June 29, 2021, available at 
https://www.cftc.gov/csl/21-15/download; CFTC Staff Letter No. 21-
18, Aug. 31, 2021, available at https://www.cftc.gov/csl/21-18/download; CFTC Staff Letter No. 21-20, Sept. 30, 2021, available at 
https://www.cftc.gov/csl/21-20/download; CFTC Staff Letter No. 21-
21, Sept. 30, 2021, available at https://www.cftc.gov/csl/21-21/download; CFTC Staff Letter No. 21-22, Sept. 30, 2021, available at 
https://www.cftc.gov/csl/21-22/download; CFTC Staff Letter No. 21-
23, Sept. 30, 2021, available at https://www.cftc.gov/csl/21-23/download; CFTC Staff Letter No. 22-01, Jan. 5, 2022, available at 
https://www.cftc.gov/csl/22-01/download; CFTC Staff Letter No. 22-
02, Jan. 5, 2022, available at https://www.cftc.gov/csl/22-02/download.
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    On December 15, 2023, the Commission proposed several amendments to 
the capital and financial reporting requirements of SDs and MSPs that 
are consistent with parts of the staff positions taken in two of the 
letters issued by Commission staff prior to the 2021 Compliance Date: 
CFTC Staff Letters No. 21-15 and 21-18 (``CFTC Staff Letters''),\15\ 
and that would make other technical and clarifying changes necessary to 
effectuate the Final Rules' purpose (the ``Proposal'').\16\ CFTC Staff 
Letter No. 21-15 \17\ provides the staff's interpretation of the 
Tangible Net Worth Capital Approach for calculating capital under 
Commission regulation 23.101.\18\ CFTC Staff Letter No. 21-18 (further 
extended by CFTC Staff Letter No. 23-11) sets out staff's time-limited, 
no-action position regarding alternative financial reporting by SDs 
subject to the capital requirements of a prudential regulator.\19\ The 
technical and clarifying amendments proposed by the Commission included 
revisions to the required timing of certain notifications; 
modifications to the process for approval of subordinated debt for 
capital; and changes to financial reporting forms to conform to the 
rules.\20\ The purpose of the amendments is to facilitate compliance by 
SDs and MSPs with the Commission's financial reporting and applicable 
minimum capital obligations.
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    \15\ CFTC Staff Letter No. 21-18 was time-limited and set to 
expire on October 6, 2023. To permit time for the Commission to 
issue a proposed rulemaking and address any comments received, the 
Market Participants Division extended the expiration of the letter 
to the earlier of October 6, 2025 or the adoption of any revised 
financial reporting requirements for bank SDs under regulation 
23.105(p). CFTC Staff Letter No. 23-11, July 10, 2023, available at 
https://www.cftc.gov/csl/23-11/download.
    \16\ Capital and Financial Reporting Requirements for Swap 
Dealers and Major Swap Participants, 89 FR 2554 (Jan. 16, 2024) 
(designated above as ``the Proposal'').
    \17\ CFTC Staff Letter No. 21-15.
    \18\ 17 CFR 23.101.
    \19\ CFTC Staff Letter No. 21-18; CFTC Staff Letter No. 23-11.
    \20\ See the Proposal, 89 FR 2561-2562.
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    The comment period for the Proposal ended on February 13, 2024.\21\ 
The Commission received four substantive comment letters.\22\ In 
general, all of these letters expressed general support for the 
proposed amendments.\23\ One commenter stated that it strongly supports 
the Commission's proposed amendments, as they are intended to provide 
technical and other clarifying changes necessary to effectuate the 
Final Rule's purpose.\24\ Another commenter stated that it applauds the 
Commission's efforts to provide regulatory certainty and consistency 
through the codification of the CFTC Staff Letters and amendments to 
the Tangible Net Worth Capital Approach for nonbank SDs.\25\ 
Specifically, as to the amendments consistent with parts of CFTC Staff 
Letters No. 21-15 and 21-18, discussed in further detail below, one 
commenter stated that such amendments enhance the transparency and 
clarity of the SD capital regime and provide legal certainty and 
guidance for SDs, while improving transactional efficiency by avoiding 
the need for one-off staff letters.\26\ This commenter further stated 
that these amendments also facilitate the implementation and 
enforcement of the capital and financial reporting requirements and 
promote compliance and cooperation.\27\ After considering the comments, 
the Commission is adopting the Proposal subject to certain changes as 
noted below.\28\
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    \21\ Id. at 2555.
    \22\ Letter from Stephanie Webster, Institute of International 
Bankers, Chris Young, International Swaps and Derivatives 
Association, and Kyle Brandon, Securities Industry and Financial 
Markets Association (Feb. 13, 2024) (``IIB/ISDA/SIFMA Letter''); 
Letter from Matthew J. Picardi, Shell Energy North America (U.S.) 
L.P., Shell Trading Risk Management, LLC, and their affiliates (Feb. 
13, 2024) (``Shell Letter''); Letter from Chris Barnard (Feb. 10, 
2024) (``Barnard Letter''); and Letter from Michael Ravnitzky (Jan. 
16, 2024) (``Ravnitzky Letter'').
    \23\ See id.
    \24\ IIB/ISDA/SIFMA Letter at 1-2.
    \25\ Shell Letter at 2.
    \26\ Ravnitzky Letter at 1.
    \27\ Id.
    \28\ Note that as of the effective date of this rulemaking, CFTC 
Staff Letters No. 21-15 and 21-18 are hereby withdrawn and no longer 
in effect. These letters are superseded by the rules being adopted 
in this release.
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II. Amendments to Commission Regulations

A. CFTC Staff Letters and Other Amendments

1. Amendments to Tangible Net Worth Capital Approach--CFTC Staff Letter 
No. 21-15
    The Commission proposed amendments to certain of its part 23 
regulations consistent with parts of interpretive CFTC Staff Letter No. 
21-15 addressing the Tangible Net Worth Capital Approach for 
calculating capital under Commission regulation 23.101.\29\ The 
Commission's Market Participants Division (the ``Division'') issued 
CFTC Staff Letter No. 21-15 on June 29, 2021, in response to concerns 
raised by

[[Page 45571]]

nonbank SDs intending to elect the Tangible Net Worth Capital Approach 
for calculating capital under Commission regulation 23.101 \30\ 
regarding the application of the eligibility test to different 
corporate structures.\31\ In CFTC Staff Letter No. 21-15, the Division 
issued its interpretation that the asset and revenue tests for 
``predominantly engaged in non-financial activities'' could be assessed 
at the nonbank SD's entity level or ultimate parent level and, further, 
such tests could be computed under International Financial Reporting 
Standards issued by the International Accounting Standards Board 
(``IFRS'') in lieu of generally accepted accounting principles as 
adopted in the United States (``U.S. GAAP''), if the entity was 
permitted to use IFRS for financial reporting.\32\ The Division also 
stated its position that supplemental position reporting for nonbank 
SDs meeting these qualifications may be filed on a quarterly basis 
along with the firm's financial reports, as opposed to monthly.\33\
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    \29\ 17 CFR 23.101.
    \30\ 17 CFR 23.101.
    \31\ CFTC Staff Letter No. 21-15.
    \32\ Id. at 3-6.
    \33\ Id. at 5-6. Compare 17 CFR 23.105(d) with 17 CFR 23.105(l), 
as the former includes monthly or quarterly periodicity as opposed 
to the latter only referring to monthly.
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    To ensure that the Tangible Net Worth Capital Approach may be 
utilized by eligible nonbank SDs as intended in the Final Rules, the 
Commission proposed amendments to definitions in Commission regulation 
23.100 \34\ and in the periodicity of Commission regulation 23.105(l) 
\35\ in the Proposal,\36\ which are consistent with the terms of CFTC 
Staff Letter No. 21-15. Specifically, the Commission proposed to amend 
the definitions in Commission regulation 23.100 of the terms 
``predominantly engaged in non-financial activities'' and ``tangible 
net worth'' to explicitly permit the satisfaction of both the revenue 
and asset-based tests at the consolidated parent level of the nonbank 
SD and to clarify that ``tangible net worth'' may be determined under 
either U.S. GAAP or IFRS accounting standards.\37\ The Proposal 
clarified that the tests may be satisfied either at the level of the 
nonbank SD or at the level of the nonbank SD's consolidated parent 
rather than seeming to exclude the consolidated parent of the nonbank 
SD, as addressed in CFTC Staff Letter No. 21-15 in response to 
questions raised by industry.\38\ The amendment to the definition of 
``tangible net worth'' in Commission regulation 23.100 clarifies that 
``tangible net worth'' may be determined under either applicable 
accounting standard, U.S. GAAP or IFRS.\39\ This amendment aligns and 
corrects the permitted use of IFRS in determining eligibility for the 
approach with the standard permitted and utilized by the nonbank SD in 
preparation of its financial statements.\40\ As discussed in the Final 
Rule, the Commission is generally comfortable with both U.S. GAAP and 
IFRS accounting standards in this context, as both of these accounting 
standards are designed to provide a complete, consistent, and 
comparable view of the financial condition of a company, especially as 
both standards continue to move toward greater convergence.\41\
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    \34\ 17 CFR 23.100.
    \35\ 17 CFR 23.105(l).
    \36\ The Proposal, 89 FR 2556-2557.
    \37\ Id. See 17 CFR 23.100 for the definition of the term 
``predominantly engaged in non-financial activities.''
    \38\ Id.
    \39\ Id. See 17 CFR 23.100 for the definition of the term 
``tangible net worth.''
    \40\ Id. Nonbank SDs electing the Tangible Net Worth Capital 
Approach are currently permitted to use IFRS for their financial 
reporting obligations under Commission regulation 23.105 (17 CFR 
23.105(d) and (e)). IFRS is also permitted as an acceptable 
reporting standard for all nonbank SDs provided that they otherwise 
do not prepare financial statements in accordance with U.S. GAAP.
    \41\ Final Rules, 85 FR 57514.
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    The Commission received comments generally supporting the proposed 
amendments to the definitions of the terms ``predominantly engaged in 
non-financial activities'' and ``tangible net worth'' in Commission 
regulation 23.100.\42\ One commenter stated that the proposed 
amendments would recognize the financial strength and support of the 
parent company for the nonbank SD and align the capital requirement 
with the accounting standards and practices of the parent company.\43\ 
This commenter further stated that the proposed amendments would reduce 
regulatory burden and costs for some nonbank SDs, especially those that 
are predominantly engaged in non-financial activities and have a high 
level of tangible net worth.\44\ Another commenter stated that the 
proposed amendments are crucial to clarify and simplify the 
interpretation and implementation of the ``tangible net worth'' test 
for eligible nonbank SDs.\45\ The Commission agrees with the commenters 
and believes, as discussed above, that the proposed amendments will 
confirm its intention to permit consideration of the parent company in 
the assessment of predominantly engaged in non-financial activities 
under the Final Rules. This approach, as identified in the Final Rules, 
permits the eligibility test to be applied at the consolidated entity 
level, which does not penalize a non-financial entity from establishing 
separate SD subsidiaries to provide financial services for the 
corporate group, including engaging in swaps on behalf of the corporate 
group.\46\ Further, the proposed amendment to allow nonbank SDs to 
utilize the same accounting standard permitted for their financial 
reporting comports with the purpose of the eligibility test. As such, 
the Commission is adopting the amendments to the definitions as 
proposed.
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    \42\ See IIB/ISDA/SIFMA Letter; Shell Letter; Barnard Letter; 
Ravnitzky Letter.
    \43\ Ravnitzky Letter at 1.
    \44\ Id.
    \45\ Barnard Letter at 2.
    \46\ Final Rules, 85 FR 57502.
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    The Commission also proposed to amend Commission regulation 
23.105(l) \47\ to require that each nonbank SD and nonbank MSP file 
Appendix B to subpart E of part 23 (``Appendix B''),\48\ which contains 
aggregate securities, commodities, and swap position information and 
certain credit exposure information, with the Commission and NFA on a 
quarterly or monthly basis in keeping with their routine financial 
reporting, rather than a monthly basis.\49\ This amendment would align 
that filing with the periodicity permitted as part of the nonbank SD's 
or nonbank MSP's routine financial report filings required by 
Commission regulation 23.105(d) \50\ and would clarify that the 
information provided should be consistent with those financial report 
filings.\51\
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    \47\ 17 CFR 23.105(l).
    \48\ Appendix B to subpart E of part 23.
    \49\ The Proposal, 89 FR 2557. The Commission intended the swap 
position and credit information in Commission regulation 23.105(l) 
(17 CFR 23.105(l)) and Appendix B to be filed together with other 
financial information required by Commission regulation 23.105(d) 
(17 CFR 23.105(d)) as this information is supplementary to the 
financial statements as a whole and completes the routine financial 
reporting package. This approach is also consistent with how dually-
registered SDs with the SEC complete the SEC's Form X-17A-5 (``FOCUS 
Report'') Part II. SEC Form X-17A-5 FOCUS Report Part II, available 
at https://www.sec.gov/manage-filings/forms-index/form-x-17a-5-2.
    \50\ 17 CFR 23.105(d). Commission regulation 23.105(d) permits 
nonbank SDs electing the Tangible Net Worth Capital Approach to file 
required financial reports quarterly, whereas nonbank SDs electing 
either the Bank Based Capital Approach or the Net Liquid Asset 
Capital Approach are required to file such information on a monthly 
basis.
    \51\ The Proposal, 89 FR 2557. The Commission previously 
determined that nonbank SDs electing the Tangible Net Worth Capital 
Approach may engage in a wide variety of businesses and not be 
otherwise subject to any financial reporting. Thus, the Commission 
determined in the Final Rule that such SDs need only file financial 
reports quarterly and not monthly and may take a longer period of 
time to file audited financial reports. Final Rules, 85 FR 57514-
57515.

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[[Page 45572]]

    The Commission requested comment on the proposed amendment to 
Commission regulation 23.105(l) \52\ to require that each nonbank SD 
and nonbank MSP file Appendix B with the Commission and NFA on the same 
quarterly or monthly basis, as applicable, that the firm files its 
financial information pursuant to Commission regulation 23.105(d).\53\ 
In response, the Commission received comments generally supporting the 
amendment.\54\ The Commission believes, as discussed above, that this 
amendment will align the filing of Appendix B with the same periodicity 
of nonbank SD financial reporting. As such, the Commission is adopting 
the amendment as proposed.
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    \52\ 17 CFR 23.105(l).
    \53\ The Proposal, 89 FR 2557-2558.
    \54\ See IIB/ISDA/SIFMA Letter; Shell Letter; Barnard Letter; 
Ravnitzky Letter.
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2. Amendments to Bank SD Financial Reporting Requirements--CFTC Staff 
Letter No. 21-18
    The Commission proposed amendments to certain of its part 23 
regulations congruous with parts of CFTC Staff Letter No. 21-18 (and 
its successor, CFTC Staff Letter No. 23-11) regarding alternative 
financial reporting by SDs subject to the capital requirements of a 
prudential regulator.\55\ The Division issued CFTC Staff Letter No. 21-
18 \56\ on August 31, 2021, in response to concerns by several bank SDs 
\57\ regarding compliance with financial reporting requirements under 
Commission regulation 23.105(p).\58\ Bank SDs asserted that the 
financial reporting filing deadline adopted by the Commission preceded 
the financial reporting filing deadline imposed by prudential 
regulators, which conflicted with the Commission's intent in the Final 
Rules that the reporting requirements of bank SDs and bank MSPs be 
consistent with the SEC requirements for bank security-based swap 
dealers (``SBSDs'') and bank major security-based swap participants 
(``MSBSPs''), to maintain equivalent financial reporting requirements 
for dually-registered firms.\59\ Several bank SDs did not register as 
SBSDs, and therefore are subject only to limited financial reporting 
under the Commission's rules.\60\ In certain instances, the financial 
reporting required by the prudential regulators for these bank SDs 
permit a longer period of time and utilize a different format than that 
adopted by the Commission. Some of these bank SDs are not required to 
file financial reports with a prudential regulator if the bank SDs are 
domiciled outside the United States and may instead be subject only to 
financial reporting of a home country supervisor. Moreover, although 
Appendix C to subpart E of part 23 (``Appendix C'') \61\ was intended 
to capture line items on existing Federal Financial Institutions 
Examination Council (``FFEIC'') \62\ Form 031 (``Call Report'') 
provided to prudential regulators, line items on specific schedules 
within the Call Report had either been removed, added, or otherwise 
changed since the Commission adopted Appendix C.\63\
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    \55\ The Proposal, 89 FR 2557-2558.
    \56\ CFTC Staff Letter Staff No. 21-18.
    \57\ Letter from Steven Kennedy, Institute of International 
Bankers and Kyle Brandon, Securities Industry and Financial Markets 
Association (Aug. 20, 2021) (the ``ISDA-SIFMA Joint Request 
Letter'').
    \58\ 17 CFR 23.105(p).
    \59\ Commission regulation 23.105(p) requires bank SDs to report 
financial information within 30 calendar days of quarter-end. 17 CFR 
23.105(p)(2). The Instructions for Preparation of Consolidated 
Reports of Condition and Income, Schedule RC-D, available at https://www.ffiec.gov/pdf/FFIEC_forms/FFIEC031_FFIEC041_202303_i.pdf, 
however, permit a bank with more than one foreign office to submit 
its FFIEC 031 forms within 35 calendar days following quarter-end. 
Additionally, the SEC extended the filing deadline of FOCUS Report 
Part IIC for non-U.S. SBSDs subject to a prudential regulator from 
30 to 35 days following quarter end, noting that ``U.S. prudential 
regulators permit certain U.S. banks to file their financial reports 
35 days after the quarter end.'' Order Specifying the Manner and 
Format of Filing Unaudited Financial and Operational Information by 
Security-Based Swap Dealers and Major Security-Based Swap 
Participants That Are Not U.S. Persons and Are Relying on 
Substituted Compliance Determinations With Respect to Rule 18a-7, 86 
FR 59208 (Oct. 26, 2021) at 59210.
    \60\ 17 CFR 23.105(p).
    \61\ Appendix C to subpart E of part 23.
    \62\ Federal Financial Institutions Examination Council, 
Consolidated Reports of Condition and Income for a Bank with 
Domestic and Foreign Offices--FFIEC 031, available at https://www.ffiec.gov/pdf/FFIEC_forms/FFIEC031_202203_f.pdf.
    \63\ ISDA-SIFMA Joint Request Letter at 3-4.
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    CFTC Staff Letter No. 21-18, as extended under CFTC Staff Letter 
No. 23-11,\64\ articulates a position by the Division that it would not 
recommend that the Commission engage in an enforcement action against 
bank SDs providing the Commission with copies of financial reports that 
are required by, and filed with, their respective prudential or home 
country regulators, in lieu of complying with the substantive 
requirements of Appendix C, subject to certain conditions.\65\ CFTC 
Staff Letter No. 21-18 also contains a no-action position with respect 
to bank SDs filing comparable Call Report schedules with the Commission 
in lieu of the schedules contained in Appendix C, provided that the 
comparable schedules are filed with the Commission within the timeframe 
permitted by the prudential regulators for filing the schedules with 
the applicable home country regulator.\66\ CFTC Staff Letter No. 21-18 
further provides that the Division would not recommend enforcement 
action against certain foreign-domiciled bank SDs (``Non-U.S. bank 
SDs'') that do not provide financial reports to a prudential regulator 
if they file with the Commission balance sheet and statement of 
regulatory capital information in accordance with applicable home 
country requirements in lieu of the schedules contained in Appendix C, 
so long as the financial information is in English, with balances 
converted to U.S. dollars, and the financial information is filed 
within 15 days of the earlier of the date such financial information is 
filed or required to be filed with the Non-U.S. bank SDs' applicable 
home country regulator.\67\ Finally, the Division stated that it would 
not recommend enforcement action against dually-registered Non-U.S. 
bank SDs filing comparable SEC-required financial reports and schedules 
with the Commission in lieu of the schedules contained in Appendix 
C.\68\
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    \64\ See supra note 15.
    \65\ CFTC Staff Letter No. 21-18 at 4-5.
    \66\ Id. at 4-5, Condition 1.
    \67\ Id. at 5, Conditions 2-4.
    \68\ Id., Condition 5. In comparison to the SEC's approach to 
similarly situated bank SBSDs, the Commission's capital 
comparability process adopted in Commission regulation 23.106 (17 
CFR 23.106) does not extend to bank SDs.
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    The Commission also proposed to amend Commission regulation 
23.105(p) \69\ to add an exception to the financial reporting 
requirements for Non-U.S. bank SDs that do not submit financial reports 
to a prudential regulator.\70\ The amendment would permit Non-U.S. bank 
SDs to file with the Commission financial reports that are submitted to 
their respective home country regulator, provided the financial reports 
submitted to the Commission are translated into English with balances 
converted to U.S. dollars.\71\ These Non-U.S. bank SDs, however, would 
continue to be required to file specific swap position information set 
forth in Schedule 1 to Appendix C.\72\ Finally, these Non-U.S. bank SDs 
would be required to file with the Commission such reports no later 
than 90 calendar days following quarter-end.\73\ This amendment would 
enable

[[Page 45573]]

the Commission to collect such reports to support its ability to 
monitor the capital condition of all SDs, although the Commission does 
not establish the capital or margin requirements of bank SDs.\74\
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    \69\ 17 CFR 23.105(p).
    \70\ The Proposal, 89 FR 2558.
    \71\ Id.
    \72\ Id.
    \73\ Id. Note that the Commission did not propose and is not 
adopting the restriction in CFTC Staff Letter No. 21-18 that Non-
U.S. bank SDs be subject to home country capital standards in a G-20 
jurisdiction. CFTC Staff Letter No. 21-18 at 3-5.
    \74\ Id. at 2559. Section 4s(f) of the CEA requires SDs and 
MSPs, including those for which there is a prudential regulator, to 
make any reports regarding transactions and positions, as well as 
any reports regarding financial condition, that the Commission 
adopts by rule or regulation. 7 U.S.C. 6s(f).
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    The Commission requested comment on the proposed amendment to 
Commission regulation 23.105(p) \75\ to add the exception discussed 
above to the financial reporting requirements for Non-U.S. bank SDs 
that do not submit financial reports to a prudential regulator.\76\ In 
response, the Commission received comments generally supporting the 
amendment.\77\ One commenter stated that it agreed that the proposed 
90-day time period should permit the Non-U.S. bank SDs sufficient time 
to prepare and submit the financial reports that are submitted to their 
respective home country regulator, translated into English with 
balances converted to U.S. dollars, along with Schedule 1 to Appendix 
C.\78\ This commenter further stated that this approach allows the 
Commission to monitor the capital condition of such Non-U.S. bank SDs, 
although the Commission does not establish the capital or margin 
requirements of bank SDs.\79\ Another commenter stated that this 
amendment, and the one discussed immediately below, would simplify the 
compliance and reporting process for some SDs, especially those that 
are subject to the oversight of other regulators, such as prudential 
regulators, the SEC, or foreign regulators.\80\ This commenter further 
stated that this amendment would also avoid duplication, inconsistency, 
or conflict among different reporting requirements and standards.\81\ 
The Commission has considered the comments, and believes, as discussed 
above, that this amendment will align the financial reporting 
requirements of Non-U.S. bank SDs with those of their prudential 
regulators, while still maintaining the Commission's ability to 
properly monitor the capital condition of all SDs, as these reports 
still provide the Commission with essentially the same critical 
financial data.\82\ As such, the Commission is adopting the amendment 
as proposed, with the exception of the modification of the word 
``approved'' to ``permitted'' with respect to the use of acceptable 
accounting standards to recognize that certain regulatory authorities 
may not specifically issue an official approval of such standards.
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    \75\ 17 CFR 23.105(p).
    \76\ The Proposal, 89 FR 2558-2559.
    \77\ See IIB/ISDA/SIFMA Letter; Shell Letter; Barnard Letter; 
Ravnitzky Letter.
    \78\ IIB/ISDA/SIFMA Letter at 3.
    \79\ Id.
    \80\ Ravnitzky Letter at 1.
    \81\ Id.
    \82\ As noted in the Proposal, the Commission did not propose to 
include the restriction in CFTC Staff Letter No. 21-18 that Non-U.S. 
bank SDs be subject to home country capital standards in a G-20 
jurisdiction. The Commission did not receive comment on this, and as 
indicated, to date all registered Non-U.S. bank SDs have met this 
criterion. The Proposal, 89 FR 2558.
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    The Commission also proposed to add a definition of the term ``Call 
Report'' to Commission regulation 23.100 and to amend Commission 
regulation 23.105(p) \83\ to permit bank SDs to file the relevant 
schedules under the Call Report (Schedule RC and Schedule RC-R), rather 
than replicating various line items from within those reports on a 
separately constructed balance sheet and statement of regulatory 
capital currently maintained in Appendix C.\84\ Schedule 1 of Appendix 
C, which contains relevant swap, mixed swap, and security-based swaps 
position information, would remain a required schedule to be provided 
by all bank SDs.\85\ This approach would permit the Commission to 
collect the necessary financial information to monitor the financial 
condition of bank SDs, even though it is prepared in accordance with 
prudential regulators' guidance, while eliminating the necessity that 
bank SDs familiarize themselves with a new reporting form and prevent 
the Commission from having to routinely monitor and update its form 
when prudential regulators amend their schedules.\86\ These changes are 
consistent with the terms of CFTC Staff Letter No. 21-18, which have 
resulted in the Commission and its staff receiving the requisite 
information to meaningfully oversee its population of bank SDs since 
2021.\87\ In addition, and as mentioned above, these amendments would 
enable the Commission to collect such reports enabling it to continue 
to monitor the capital condition of all SDs, although the Commission 
does not establish the capital requirements of banks.\88\
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    \83\ 17 CFR 23.105(p).
    \84\ The Proposal, 89 FR 2558-2559. As adopted, Appendix C 
contains three schedules: 1. Statement of Financial Condition 
(balance sheet); 2. Statement of Regulatory Capital; and 3. Schedule 
1. Both the Statement of Financial Condition and Statement of 
Regulatory Capital schedules within Appendix C are modeled off the 
FOCUS Report Part IIC as adopted by the SEC for bank SBSDs and 
contain specific line item references corresponding to the Call 
Report. See Final Rules, 85 FR 57566-57569. Following adoption of 
these schedules, changes were made to the underlying Call Reports 
making the schedules obsolete. The SEC has since proposed revisions 
to the FOCUS Report Part IIC to reflect these changes. See generally 
Electronic Submission of Certain Materials Under the Securities 
Exchange Act of 1934; Amendments Regarding the FOCUS Report, 88 FR 
23920 (Apr. 18, 2023), available at https://www.federalregister.gov/documents/2023/04/18/2023-06330/electronic-submission-of-certain-materials-under-the-securities-exchange-act-of-1934-amendments (the 
``FOCUS Report Amendments'').
    \85\ Id.
    \86\ Id.
    \87\ Id.
    \88\ Id.
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    The Commission requested comment on the added definition to 
Commission regulation 23.100 and the proposed amendment to Commission 
regulation 23.105(p) \89\ to permit bank SDs to file the relevant 
schedules under the Call Report (Schedule RC and Schedule RC-R), rather 
than replicating various line items from within those reports on a 
separately constructed balance sheet and statement of regulatory 
capital currently maintained in Appendix C.\90\ In response, the 
Commission received comments generally supporting the amendment.\91\ 
One commenter stated that it agreed that the above-described approach, 
which is consistent with the conditions in CFTC Staff Letter No. 21-18, 
has resulted in the Commission and its staff receiving the requisite 
information to meaningfully oversee its population of bank SDs since 
2021.\92\ This commenter further stated that it supported the proposed 
evergreen approach that provides for U.S. bank SDs to submit the 
relevant portions of the Call Report, as updated by U.S. prudential 
regulators from time to time, noting that it will avoid the need to 
periodically update the Commission's forms to ensure the cross 
references align with the current version of the Call Report.\93\ The 
Commission agrees with commenters and believes, as discussed above, 
that this amendment will align the financial reporting requirements of 
bank SDs with those of their prudential regulators, while still 
maintaining the Commission's ability to monitor the capital condition 
of all SDs. As such, the Commission is adopting the definition of Call 
Report and the amendment as proposed.
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    \89\ 17 CFR 23.105(p).
    \90\ The Proposal, 89 FR 2559.
    \91\ See IIB/ISDA/SIFMA Letter; Shell Letter; Barnard Letter; 
Ravnitzky Letter.
    \92\ IIB/ISDA/SIFMA Letter at 4.
    \93\ Id.
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    The Commission also proposed to amend Commission regulation

[[Page 45574]]

23.105(p)(7) \94\ to require a bank SD or bank MSP that is also 
registered with the SEC as an SBSD or MSBSP and files a quarterly Form 
X-17A-5 FOCUS Report Part IIC with the SEC pursuant to 17 CFR 240.18a-
7,\95\ to file such Form X-17A-5 FOCUS Report Part IIC with the 
Commission in lieu of the Call Report.\96\ Such a dual-registrant would 
be required to file the form with the Commission when it files the form 
with the SEC, but no later than 30 calendar days from the date the 
report is made.
---------------------------------------------------------------------------

    \94\ 17 CFR 23.105(p)(7).
    \95\ 17 CFR 240.18a-7.
    \96\ The Proposal, 89 FR 2558.
---------------------------------------------------------------------------

    The Commission requested comment on the proposed amendment to 
Commission regulation 23.105(p)(7) to require such dual-registered bank 
SD or bank MSP to file Form X-17A-5 FOCUS Report Part IIC with the 
Commission in lieu of the Call Report when it files the form with the 
SEC, but no later than 30 calendar days from the date the report is 
made.\97\ One commenter stated that the 30-day deadline is inconsistent 
with the Commission's alignment of the deadline for U.S. bank SDs that 
are not also SBSDs to submit the Call Report when required by the 
prudential regulators.\98\ This commenter further stated that the SEC 
aligned its deadline for all bank SBSDs to submit FOCUS Report Part IIC 
to the same 35-day deadline \99\ and that the commenter believed that 
the Commission intended to align its deadline, along with the form of 
required reports, with those required by prudential regulators and the 
SEC.\100\ The commenter further suggested that the Commission should 
amend the rule text to reflect that intention and to make clear that 
the Commission requires bank SDs that are also SBSDs to submit to the 
Commission the same reports on the same day as they do to the SEC.\101\ 
After considering the comments, the Commission is adopting the 
amendment as proposed, with the exception of replacing the 30 calendar 
day requirement with 35 calendar days.
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    \97\ Id. at 2558-2559.
    \98\ IIB/ISDA/SIFMA Letter at 5.
    \99\ Id. See SEC, Division of Trading and Markets letter on 
Financial Reporting requirements for Security-Based Swap Dealers and 
Major Security-Based Swap Participants (Oct. 27, 2021) and Order 
Specifying the Manner and Format of Filing Unaudited Financial and 
Operational Information by Security-Based Swap Dealers and Major 
Security-Based Swap Participants That Are Not U.S. Persons and Are 
Relying on Substituted Compliance Determinations With Respect to 
Rule 18a-7, 86 FR 59208 (Oct. 26, 2021) at 59210.
    \100\ Id.
    \101\ Id.
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    The Commission believes providing an additional five days will not 
have any negative impact on the Commission's use of bank SD financial 
reporting, as the information will still be timely, and agrees with the 
commenter that aligning the time period to 35 calendar days after the 
report date in practical effect will allow dual-registrants to submit 
the reports to the Commission on the same day as they do to the SEC, 
which comports with the Commission's intent.\102\ The Commission, 
however, is not adopting the specific regulatory text suggested by the 
commenter, because adopting such text would eliminate any specific 
timeframe other than by reference to as permitted by the SEC. Although 
the Commission intends to allow dual-registrants to submit reports on 
the same day, the Commission believes this approach will permit the 
Commission to evaluate any potential longer reporting time periods that 
may be prospectively adopted by the SEC. As such, the Commission is 
adopting the amendment as proposed, with the revision discussed above.
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    \102\ The Proposal, 89 FR 2560.
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3. Amendments Regarding Financial Reporting and Other Requirements of 
SDs
a. Amendments to Schedules in Financial Reporting
    The Commission proposed to amend the scope of Commission regulation 
23.105(k) \103\ and the heading and scope of Commission regulation 
23.105(l),\104\ as well as the titles of certain schedules included in 
Appendix B,\105\ to further clarify that these reporting obligations 
are applicable to all nonbank SDs and nonbank MSPs.\106\ Commission 
regulation 23.105(k) \107\ lists both model-specific information that 
nonbank SDs must report as well as a description of the same type of 
exposure information as reflected in the schedules to Appendix B.\108\ 
Commission regulation 23.105(l),\109\ however, requires all nonbank 
SDs, including those not approved to use models, to complete the 
Appendix B schedules on a monthly basis.\110\ This has resulted in 
several nonbank SDs filing each of the schedules to Appendix B without 
having received capital model approval.\111\ Hence, in current form, 
Commission regulations 23.105(k) and (l),\112\ as well as the titles of 
Schedules 2-4 of Appendix B, could more explicitly indicate that all of 
the information within the schedules included in Appendix B is required 
of all nonbank SDs, including those not authorized to use models.\113\
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    \103\ 17 CFR 23.105(k).
    \104\ 17 CFR 23.105(l).
    \105\ Appendix B is comprised of 4 individual schedules: 
SCHEDULE 1--AGGREGATE SECURITIES, COMMODITIES AND SWAPS POSITIONS; 
SCHEDULE 2--CREDIT CONCENTRATION REPORT FOR FIFTEEN LARGEST 
EXPOSURES IN DERIVATIVES; SCHEDULE 3--PORTFOLIO SUMMARY OF 
DERIVATIVES EXPOSURES BY INTERNAL CREDIT RATING; and SCHEDULE 4--
GEOGRAPHIC DISTRIBUTION OF DERIVATIVES EXPOSURES FOR TEN LARGEST 
COUNTRIES.
    \106\ The Proposal, 89 FR 2559.
    \107\ 17 CFR 23.105(k).
    \108\ The Proposal, 89 FR 2559.
    \109\ 17 CFR 23.105(l).
    \110\ The Proposal, 89 FR 2559.
    \111\ Id.
    \112\ 17 CFR 23.105(k) and (l).
    \113\ The Proposal, 89 FR 2559. To further complicate matters, 
the heading and first paragraph to Commission regulation 23.105(k) 
(17 CFR 23.105(k)) both indicate that this provision only applies to 
SDs approved to use internal models to calculate market risk and 
credit risk for calculating capital under Commission regulation 
23.102(d) (17 CFR 23.102(d)).
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    The Appendix B schedules are identical to corresponding schedules 
found in SEC's FOCUS Report required to be completed by both SBSDs and 
certain broker dealers (``BDs'').\114\ To the extent practicable, the 
Commission intends to align financial reporting requirements, including 
those listed in textual form in Commission regulation 23.105(k) \115\ 
and in the finalized schedules part of Appendix B, with the reporting 
requirements finalized by the SEC pertaining to SBSDs, MSBSPs, and 
BDs.\116\ This is also consistent with the Commission's general 
approach permitting dually-registered BDs and SBSDs to file SEC Form 
FOCUS Report Part II in lieu of their requirements under Commission 
regulations 23.105(d) and (e),\117\ and for those dually-registered 
SBSDs subject to the capital rules of a prudential regulator under 
Commission regulation 23.105(p).\118\
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    \114\ See FOCUS Report Amendments.
    \115\ 17 CFR 23.105(k).
    \116\ See Final Rules, 85 FR 57519.
    \117\ 17 CFR 23.105(d) and (e).
    \118\ 17 CFR 23.105(p). As indicated in the Final Rule, the 
Commission has a long history of permitting SEC registrants to meet 
their financial statement filing obligations with the Commission by 
submitting required SEC forms in lieu of the CFTC's forms, which 
reduces the burden on dually-registered firms by not requiring two 
separate financial reporting requirements. See Final Rules, 85 FR 
57515.
---------------------------------------------------------------------------

    NFA has also adopted nearly identical capital and financial 
reporting requirements for its member nonbank SDs and nonbank 
MSPs.\119\ The finalized NFA rules mandate the use of comprehensive 
standardized forms for financial reporting by member nonbank SDs and 
nonbank MSPs that are not otherwise able to file an SEC Form

[[Page 45575]]

FOCUS Report Part II.\120\ These new NFA forms, FR-CSE-NLA and FR-CSE-
BHC, include each of the required schedules found in Appendix B. All 
the information listed in textual form in paragraph (k)(1)(v) of 
Commission regulation 23.105 \121\ can be found in specific schedules 
found in Appendix B.\122\ The Commission proposed Appendix B, which is 
now part of NFA's adopted forms, to be the primary mechanism for firms 
to provide the required information listed in Commission regulation 
23.105(k).\123\ The amendment to Commission regulation 23.105(k) \124\ 
clarifies that Appendix B schedules are required to be completed by all 
nonbank SDs and nonbank MSPs as intended by the Final Rule, and is 
consistent with that required by the SEC and NFA.\125\ Further, the 
Commission's proposed amendment to Commission regulation 23.105(l) 
\126\ and the headings of certain schedules in Appendix B would make 
clear that these schedules must be reported at the same periodicity as 
the financial reporting of each respective nonbank SD, either monthly 
or quarterly as applicable, and that all of the schedules are required 
for all nonbank SDs, not just those authorized to use models.\127\
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    \119\ NFA section 18.
    \120\ NFA section 18(e).
    \121\ 17 CFR 23.105(k)(1)(v).
    \122\ For example, Commission regulation 23.105(k)(1)(v)(B) (17 
CFR 23.105(k)(1)(v)(B)) requires that all model-approved SDs file 
the ``Current exposure (including commitments) listed by 
counterparty for the 15 largest exposures,'' which is also found in 
Schedule 2 to Appendix B. Similarly, the information listed in 
textual form in Commission regulations 23.105(k)(1)(i)-(v) (17 CFR 
23.105(k)(1)(i)-(v)) corresponds verbatim to the textual 
requirements found in SEC rule 18a-7(a)(3). See 17 CFR 240.18a-
7(a)(3).
    \123\ 17 CFR 23.105(k). As discussed in the Final Rule, the 
Commission may (and subsequently has) approved additional procedures 
developed by an RFA, which could include standard forms or 
procedures necessary to carry out the Commission's filing 
requirements. See Final Rules, 85 FR 57518.
    \124\ 17 CFR 23.105(k).
    \125\ The Proposal, 89 FR 2560.
    \126\ 17 CFR 23.105(l).
    \127\ The Proposal, 89 FR 2559.
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    The Commission requested comment on the proposed amendments to 
revise the scope of Commission regulation 23.105(k) \128\ and the 
heading and scope of Commission regulation 23.105(l),\129\ as well as 
the titles of certain schedules included in Appendix B.\130\ In 
response, the Commission received comments generally supporting the 
amendments.\131\ The Commission believes, as discussed above, that 
these amendments will make clear that these reporting obligations apply 
to all nonbank SDs and nonbank MSPs, as intended in the Final Rule. As 
such, the Commission is adopting the amendments as proposed.
---------------------------------------------------------------------------

    \128\ 17 CFR 23.105(k).
    \129\ 17 CFR 23.105(l).
    \130\ The Proposal, 89 FR 2559-2560.
    \131\ See IIB/ISDA/SIFMA Letter; Shell Letter; Barnard Letter; 
Ravnitzky Letter.
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b. Changes to Public Disclosure Requirements
    The Commission proposed to amend Commission regulation 23.105(i) 
\132\ to align the public disclosure of unaudited financial information 
with the periodicity permitted by routine financial filings in 
Commission regulation 23.105(d),\133\ and to remove reference to a 
statement in both the unaudited and audited information disclosing the 
amounts of minimum regulatory capital and the amount of its minimum 
regulatory capital requirement computed in accordance with Commission 
regulation 23.101.\134\ Currently, paragraphs (i)(l)(ii) and (i)(2)(ii) 
of Commission regulation 23.105 require a nonbank SD or nonbank MSP to 
publicly disclose on its website a statement of the amount of the 
nonbank SD's or nonbank MSP's regulatory capital and its minimum 
capital requirement.\135\ This information is required to be disclosed 
as of the nonbank SD's or nonbank MSP's fiscal year-end, and as of six 
months after the firm's fiscal year-end.
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    \132\ 17 CFR 23.105(i).
    \133\ 17 CFR 23.105(d).
    \134\ The Proposal, 89 FR 2560; 17 CFR 23.101.
    \135\ 17 CFR 23.105(i)(1)(ii) and (i)(2)(ii).
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    The Commission proposed to revise Commission regulation 
23.105(i)(1)(i) \136\ to include the footnotes to the unaudited 
Statement of Financial Condition in the required disclosures.\137\ The 
Commission also proposed to revise Commission regulations 
23.105(i)(1)(ii) and (i)(2)(ii) \138\ to replace the word ``statement'' 
with ``amounts'' to indicate that required capital information does not 
need to exist in a standalone statement or form.\139\ To the extent 
practicable, the Commission indicated its intention was to align its 
requirements with those required of BDs and SBSDs by the SEC \140\ and 
determined that the information, regardless of its format, contained in 
the footnotes accompanying the financial statements should ordinarily 
satisfy the requirements for disclosing minimum regulatory 
capital.\141\
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    \136\ 17 CFR 23.105(i)(1)(i).
    \137\ The Proposal, 89 FR 2560.
    \138\ 17 CFR 23.105(i)(1)(ii) and (i)(2)(ii).
    \139\ The Proposal, 89 FR 2560.
    \140\ See 17 CFR 240.18a-7(b).
    \141\ The Proposal, 89 FR 2560.
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    The Commission requested comment on the proposed amendments to 
Commission regulation 23.105(i) \142\ to align the public disclosure of 
unaudited financial information with the periodicity permitted by 
routine financial filings in Commission regulation 23.105(d),\143\ and 
to remove reference to a statement in both the unaudited and audited 
information disclosing the amounts of minimum regulatory capital and 
the amount of its minimum regulatory capital requirement computed in 
accordance with Commission regulation 23.101.\144\ In response, the 
Commission received comments generally supporting the amendments.\145\ 
The Commission believes, as discussed above, that these amendments will 
align the periodicity of different financial reporting requirements of 
nonbank SDs and create flexibility as to the format for disclosing 
minimum regulatory capital. As such, the Commission is adopting the 
amendments as proposed.
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    \142\ 17 CFR 23.105(i).
    \143\ 17 CFR 23.105(d).
    \144\ The Proposal, 89 FR 2560; 17 CFR 23.101.
    \145\ See IIB/ISDA/SIFMA Letter; Shell Letter; Barnard Letter; 
Ravnitzky Letter.
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c. Changes to Form 1-FR-FCM
    The Commission proposed to amend Form 1-FR-FCM to add new lines 
22.A.vi through vii. to the Statement of the Computation of the Minimum 
Capital Requirements schedule (``Statement of Minimum Capital 
Schedule'') to include the 2 percent of uncleared swap margin capital 
requirement under Commission regulation 1.17(a)(1)(i)(B)(2).\146\ The 
Commission also proposed to amend Form 1-FR-FCM to add the specific 
market risk charges for swaps and security-based swaps as new lines 
16.D. of the Statement of Minimum Capital Schedule.\147\
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    \146\ The Proposal, 89 FR 2560; 17 CFR 1.17(a)(1)(i)(B)(2).
    \147\ Id.
---------------------------------------------------------------------------

    Commission regulation 1.10 requires all FCMs to submit a Form 1-FR-
FCM when they file for registration as an FCM and periodically 
following registration.\148\ Form 1-FR-FCM includes, among other 
things, the Statement of Minimum Capital Schedule as a supplementary 
schedule.\149\ In the Final Rule, the Commission added a 2 percent of 
uncleared swap margin capital requirement to the risk-based net capital 
requirement for FCMs that are also registered as SDs (``FCM-SDs''), and 
adopted specific market risk charges for

[[Page 45576]]

uncleared swaps in the FCM net capital requirements in Commission 
regulation 1.17.\150\ Further, FCMs dually-registered as BDs are 
permitted to file the SEC's FOCUS Report Part II in lieu of the 
Commission's Form 1-FR-FCM in reporting net capital.\151\ On March 22, 
2023, the SEC proposed to amend its FOCUS Report Part II to include the 
Commission's net capital changes adopted for FCM-SDs, including the 
addition of the 2 percent uncleared swap margin to the risk-based net 
capital requirement of FCM-SDs.\152\ The Commission proposed the 
amendments to Form 1-FR-FCM to more explicitly require disclosure of 
the 2 percent amount and conform with the SEC's proposal as well as to 
provide important information to assist the Commission in monitoring 
compliance of FCM-SD with the capital requirements adopted in the Final 
Rule.\153\ This information is important to the Commission in 
monitoring the Final Rules, as reporting the 2 percent amount enables 
the Commission to confirm that the FCM-SD is complying with its capital 
requirement.\154\
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    \148\ 17 CFR 1.10.
    \149\ CFTC Form 1-FR-FCM at 6-8.
    \150\ 17 CFR 1.17(a)(1)(i)(B)(2) and (c)(5)(iii). See generally 
Final Rules, 85 FR 57473-57476 and 57562.
    \151\ 17 CFR 1.10(h).
    \152\ See generally FOCUS Report Amendments.
    \153\ The Proposal, 89 FR 2561.
    \154\ Id.
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    The Commission requested comment on the proposed amendments to Form 
1-FR-FCM to add new lines to the form to include the 2 percent of 
uncleared swap margin capital requirement under Commission regulation 
1.17(a)(1)(i)(B)(2) \155\ and to add specific disclosure of the 
haircuts for swaps and security-based swaps in the computation of net 
capital on the form.\156\ In response, the Commission received comments 
generally supporting the amendments.\157\ The Commission believes, as 
discussed above, that these amendments will ensure the collection of 
information that is important to the Commission in monitoring the Final 
Rules and will align the specific items within the Form 1-FR-FCM 
Statement of Minimum Capital Schedule with comparable schedules within 
the FOCUS Report Part II utilized by dual-registered BD or SBSDs. As 
such, the Commission is adopting the amendments to the Form 1-FR-FCM as 
proposed.
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    \155\ 17 CFR 1.17(a)(1)(i)(B)(2).
    \156\ The Proposal, 89 FR 2560-2561.
    \157\ See IIB/ISDA/SIFMA Letter; Shell Letter; Barnard Letter; 
Ravnitzky Letter.
---------------------------------------------------------------------------

d. Additional Cross References To Clarify Applicable Market and Credit 
Risk Charges
    The Commission proposed to add new language to Commission 
regulations 23.103(a)(1) and (c)(1) \158\ to clarify that the same 
standardized market and credit risk charges are applicable to nonbank 
SDs electing the Tangible Net Worth Capital Approach as are applicable 
to all other nonbank SDs not approved to use models.\159\ Commission 
regulation 23.103(b) \160\ provides that nonbank SDs electing the 
Tangible Net Worth Capital Approach or Net Liquid Assets Capital 
Approach are required to compute standardized market risk charges 
contained in SEC Rule 18a-1 \161\ and Commission regulation 1.17,\162\ 
as applicable. Commission regulation 23.103(c) \163\ also provides that 
a nonbank SD electing the Net Liquid Assets Capital Approach must 
compute its standardized credit risk charge in accordance with SEC Rule 
18a-1 \164\ or Commission regulation 1.17,\165\ as applicable, but 
fails to provide a reference for nonbank SDs electing the Tangible Net 
Worth Capital Approach.\166\ Because standardized credit risk charges 
were intended to be the same for nonbank SDs using the Tangible Net 
Worth Capital Approach or the Net Liquid Assets Capital Approach, the 
Commission proposed to amend Commission regulations 23.103(a)(1) and 
(c)(1) \167\ to correct this omission by directing nonbank SDs electing 
the Tangible Net Worth Capital Approach to compute standardized credit 
risk charges in accordance with SEC Rule 18a-1 \168\ or Commission 
regulation 1.17,\169\ as applicable.\170\
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    \158\ 17 CFR 23.103(a)(1) and (c)(1).
    \159\ The Proposal, 89 FR 2560.
    \160\ 17 CFR 23.103(b).
    \161\ 17 CFR 240.18a-1.
    \162\ 17 CFR 1.17.
    \163\ 17 CFR 23.103(c).
    \164\ 17 CFR 240.18a-1.
    \165\ 17 CFR 1.17.
    \166\ SDs electing to use the Tangible Net Worth Capital 
Approach are required to meet a minimum capital requirement which 
includes, among other things, $20 million plus the amount of the 
SD's market risk exposure requirement and its credit risk exposure 
requirement associated with the SD's swap and related hedge 
positions that are part of the SD's swap dealing activities. 17 CFR 
23.101(a)(2)(ii)(A).
    \167\ 17 CFR 23.103(a)(1) and (c)(1).
    \168\ 17 CFR 240.18a-1.
    \169\ 17 CFR 1.17.
    \170\ The Proposal, 89 FR 2561.
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    Similarly, the Commission proposed to amend Commission regulation 
23.102(d) \171\ to correct the applicable cross reference in order to 
make it clearer that either 12 CFR part 217 or Appendix A to subpart E 
of part 23 (``Appendix A'') \172\ should be utilized as applicable by 
the nonbank SD depending on the respective capital approach 
elected.\173\
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    \171\ 17 CFR 23.102(d).
    \172\ Appendix A to subpart E of part 23.
    \173\ The Proposal, 89 FR 2561; Final Rules, 85 FR 57506.
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    The Commission requested comment on the proposed amendments to 
Commission regulations 23.103(a)(1) and (c)(1) \174\ to clarify that 
the same standardized market and credit risk charges are applicable to 
nonbank SDs electing the Tangible Net Worth Capital Approach as are 
applicable to all other nonbank SDs not approved to use models, as well 
as the amendments to Commission regulation 23.102(d) \175\ to correct 
the applicable cross reference in order to make it clearer that either 
12 CFR part 217 or Appendix A should be utilized as applicable by the 
nonbank SD depending on the respective capital approach elected.\176\ 
In response, the Commission received comments generally supporting the 
amendments.\177\ The Commission believes, as discussed above, that 
these amendments will provide clarity on the applicable market and 
credit risk charges as well as which regulatory reference (12 CFR part 
217 or Appendix A) should be utilized depending on the elected capital 
approach by the SD, as intended by the Final Rule. As such, the 
Commission is adopting the amendments as proposed.
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    \174\ 17 CFR 23.103(a)(1) and (c)(1).
    \175\ 17 CFR 23.102(d).
    \176\ The Proposal, 89 FR 2561.
    \177\ See IIB/ISDA/SIFMA Letter; Shell Letter; Barnard Letter; 
Ravnitzky Letter.
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B. Other Amendments

1. Notice of Substantial Reduction in Capital
    The Commission proposed to amend Commission regulation 23.105(c)(4) 
\178\ to add a two-business day reporting timeframe to the requirement 
for a nonbank SD to file notice of a substantial reduction in 
capital.\179\ Currently, Commission regulation 23.105(c)(4), which 
requires nonbank SDs and nonbank MSPs to provide notice of a 
substantial reduction in capital as compared to the last reported in a 
financial report, does not specify a timeframe for the notice 
filing.\180\
---------------------------------------------------------------------------

    \178\ 17 CFR 23.105(c)(4).
    \179\ The Proposal, 89 FR 2561.
    \180\ 17 CFR 23.105(c)(4).
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    The Commission requested comment on the proposed amendment to 
Commission regulation 23.105(c)(4) \181\ to add a two-business day 
reporting

[[Page 45577]]

timeframe to the requirement for a nonbank SD to file notice of a 
substantial reduction in capital.\182\ In response, the Commission 
received comments generally supporting the amendments.\183\ One 
commenter stated that the addition of a concrete reporting timeframe 
will provide regulatory certainty regarding when such a filing is due 
and align it with current FCM capital reduction notification timing 
requirements.\184\ The Commission agrees with commenters and believes 
that the amendment will align with the two-business day reporting 
timeframe applied to FCMs and provide regulatory certainty as to when 
the notification is required, while still making the notice timely. As 
such, the Commission is adopting the amendment as proposed.
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    \181\ 17 CFR 23.105(c)(4).
    \182\ The Proposal, 89 FR 2561.
    \183\ See IIB/ISDA/SIFMA Letter; Shell Letter; Barnard Letter; 
Ravnitzky Letter.
    \184\ Ravnitzky Letter at 2.
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2. Subordinated Debt Approval
    The Commission proposed to amend Commission regulations 
23.101(a)(1)(i)(B) and add 23.101(a)(1)(ii)(D) \185\ to establish that 
using subordinated debt as regulatory capital is subject to the 
approval of either an RFA of which the nonbank SD is a member or the 
Commission.\186\ The nonbank SD capital requirements for both the Bank-
Based Capital Approach and the Net Liquid Assets Capital Approach 
permit the use of subordinated debt as capital in order to align with 
the permitted use of subordinated debt under the FCM net capital 
requirements.\187\ The requirements for qualifying subordinated debt 
were adopted by the SEC in its capital rule for SBSDs and were included 
by reference by the Commission for other nonbank SDs in the Bank-Based 
Capital Approach.\188\ Commission staff received questions regarding 
the process for approving subordinated debt for nonbank SDs not also 
registered with the SEC because the Final Rule did not articulate a 
process.\189\ To address this omission, NFA adopted Financial 
Requirements Rule Section 18(d).\190\ Under the existing framework, NFA 
already approves subordinated loan agreements for net capital 
agreements for nonbank SDs that are not dually-registered with the SEC. 
Similarly, although nonbank SDs that are dually-registered with the SEC 
are able to obtain SEC approval on subordinated debt,\191\ nonbank SDs 
that elect either the Bank-Based Capital Approach or the Net Liquid 
Assets Capital Approach but are not registered with the SEC, do not 
have an approval process for the use of subordinated debt under the 
Commission's rules. As discussed in the Final Rule,\192\ when adopting 
the permissive use of subordinated debt in establishing minimum 
regulatory capital, the Commission has long approved a process for FCMs 
to obtain subordinated debt approval from their Designated Self-
Regulatory Organizations (``DSROs''), including the NFA.\193\
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    \185\ 17 CFR 23.101(a)(1)(i)(B) and (a)(1)(ii)(D).
    \186\ The Proposal, 89 FR 2561-2562.
    \187\ 17 CFR 1.17(h).
    \188\ 17 CFR 23.101(a)(1).
    \189\ The Proposal, 89 FR 2561-2562.
    \190\ See generally NFA Interpretative Notice 9078 (Feb. 18, 
2021), available at https://www.nfa.futures.org/rulebooksql/
rules.aspx?Section=9&RuleID=9078#:~:text=In%20order%20to%20permit%20t
hese%20non-SEC%20registered%20SD,NFA%27s%20pre-
approval%20of%20the%20subordinated%20debt%20loan%20agreement.
    \191\ Nonbanks SDs that are duly-registered as SBSDs typically 
elect under Commission regulation 23.101(a)(1)(ii) (17 CFR 
23.101(a)(1)(ii)) to maintain net capital by complying with Sec.  
240.18a-1d, and are independently subject to such requirements, 
including the subordinated-debt approval process, by their 
registration as a SBSD with the SEC. 17 CFR 240.18a-1d.
    \192\ Final Rules, 85 FR 57495.
    \193\ See Miscellaneous Rule Deletions, Amendments or 
Clarifications, 57 FR 20633, 20634 (May 14, 1992). The subordinated 
debt approval program for FCMs administered by NFA has been in place 
for over 30 years. In addition, the NFA, as the only registered 
futures association under the CEA, is specifically required to adopt 
capital requirements on its members, including SDs, and to implement 
a program to audit and enforce the compliance with such requirements 
in accordance with section 17(p)(2) of the CEA, 7 U.S.C. 21(p)(2).
---------------------------------------------------------------------------

    The Commission proposed to permit NFA to administer the approval 
process for nonbank SDs because of the NFA's extensive history and 
experience as a DSRO administering a subordinated debt approval program 
for FCMs.\194\ The Commission requested comment on the proposed 
amendment to Commission regulations 23.101(a)(1)(i)(B) and addition of 
23.101(a)(1)(ii)(D) \195\ to establish that using subordinated debt as 
regulatory capital is subject to the approval of either an RFA of which 
the nonbank SD is a member or the Commission.\196\ In response, the 
Commission received comments generally supporting the amendments.\197\ 
The Commission believes that this amendment will address the omission 
discussed above and that NFA has the history, experience and resources 
to adequately perform the review, approval and ongoing assessment of 
nonbank SDs' permitted use of subordinated debt. As such, the 
Commission is adopting the amendment as proposed.
---------------------------------------------------------------------------

    \194\ The Proposal, 89 FR 2562.
    \195\ 17 CFR 23.101(a)(1)(i)(B) and (a)(1)(ii)(D).
    \196\ The Proposal, 89 FR 2561-2562.
    \197\ See IIB/ISDA/SIFMA Letter; Shell Letter; Barnard Letter; 
Ravnitzky Letter.
---------------------------------------------------------------------------

3. Statement of No Material Difference
    The Commission proposed to amend Commission regulation 
23.105(e)(4)(v) \198\ for nonbank SDs and nonbank MSPs to explicitly 
require a statement, if applicable, that there are no material 
differences between the audited annual report and the unaudited annual 
report of the same date.\199\ The Commission also proposed to amend 
Commission regulation 23.105(e)(6),\200\ to more explicitly require 
nonbank SDs and nonbank MSPs also registered as FCMs to fully comply 
with the requirements of Commission regulation 1.16.\201\ Commission 
regulation 23.105(e) \202\ requires nonbank SDs and nonbank MSPs to 
submit an annual audited financial report with the Commission and with 
NFA.\203\ Included with the financial report is, among other things, a 
reconciliation of any material differences from the unaudited financial 
reports prepared as of the nonbank SD's or nonbank MSP's year-end date.
---------------------------------------------------------------------------

    \198\ 17 CFR 23.105(e)(4)(v).
    \199\ The Proposal, 89 FR 2562.
    \200\ 17 CFR 23.105(e)(6).
    \201\ 17 CFR 1.16.
    \202\ 17 CFR 23.105(e).
    \203\ 17 CFR 23.105(e).
---------------------------------------------------------------------------

    For instances in which no material differences exist between the 
unaudited and audited year-end financial statements, however, 
Commission regulation 1.10(d)(2)(vi) \204\ requires FCMs to include a 
statement indicating that no such differences exist. Currently, 
Commission regulation 23.105(e) \205\ does not provide for such a 
statement in this parallel provision for audits of nonbank SDs or 
nonbank MSPs. The Commission proposed to amend Commission regulation 
23.105(e)(4)(v) \206\ so that when nonbank SDs and nonbank MSPs file 
their audited annual report, a statement that there are no material 
differences between the audited annual report and the unaudited annual 
report is included, if no such differences exist.\207\
---------------------------------------------------------------------------

    \204\ 17 CFR 1.10(d)(2)(vi).
    \205\ 17 CFR 23.105(e).
    \206\ 17 CFR 23.105(e)(4)(v).
    \207\ The Proposal, 89 FR 2562.
---------------------------------------------------------------------------

    The Commission requested comment on the proposed amendment to 
Commission regulation 23.105(e)(4)(v) \208\ to require nonbank SDs and 
nonbank MSPs to explicitly provide a statement, if applicable, that 
there are no material differences between the audited annual report and 
the unaudited annual report of the same

[[Page 45578]]

date.\209\ In response, the Commission received comments generally 
supporting the amendments.\210\ One commenter stated that requiring a 
specific statement that no material differences exist when none are 
otherwise reported will provide more complete and meaningful 
information to users of the financial reports and align the filing 
approach for auditors of nonbank SDs and nonbank MSPs with that of 
FCMs.\211\ The Commission agrees with commenters and believes that 
these amendments will enhance the reliability of the annual reports by 
ensuring auditors assess the materiality of any discovered audit 
differences, and that nonbank SDs and nonbank MSPs also registered as 
FCMs fully comply with FCM annual report requirements. As such, the 
Commission is adopting the amendments to Commission regulation 
23.105(e) \212\ as proposed.
---------------------------------------------------------------------------

    \208\ 17 CFR 23.105(e)(4)(v).
    \209\ The Proposal, 89 FR 2562.
    \210\ See IIB/ISDA/SIFMA Letter; Shell Letter; Barnard Letter; 
Ravnitzky Letter.
    \211\ Barnard Letter at 2.
    \212\ 17 CFR 23.105(e).
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III. Related Matters

A. Regulatory Flexibility Act

    The Regulatory Flexibility Act (``RF Act'') requires that Federal 
agencies consider whether the regulations they propose will have a 
significant economic impact on a substantial number of small entities, 
and if so, provide a regulatory flexibility analysis respecting the 
impact.\213\ This rulemaking would affect the obligations of SDs, MSPs, 
and FCMs. The Commission has previously determined that SDs, MSPs, and 
FCMs are not small entities for purposes of the RF Act.\214\ Therefore, 
the requirements of the RF Act do not apply to those entities.
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    \213\ 5 U.S.C. 601 et seq.
    \214\ Policy Statement and Establishment of Definitions of 
``Small Entities'' for Purposes of the Regulatory Flexibility Act, 
47 FR 18618 (Apr. 30, 1982) (FCMs) and Registration of Swap Dealers 
and Major Swap Participants, 77 FR 2613, 2620 (Jan. 19, 2012) (SDs 
and MSPs).
---------------------------------------------------------------------------

    Accordingly, for the reasons stated above, the Commission has 
determined that this rulemaking will not have a significant economic 
impact on a substantial number of small entities. Therefore, the 
Chairman, on behalf of the Commission, hereby certifies, pursuant to 5 
U.S.C. 605(b), that the Commission regulations being published today by 
this Federal Register release will not have a significant economic 
impact on a substantial number of small entities.

B. Paperwork Reduction Act

1. Background
    The Paperwork Reduction Act of 1995 (``PRA'') \215\ imposes certain 
requirements on Federal agencies, including the Commission, in 
connection with conducting or sponsoring any ``collection of 
information'' as defined by the PRA. Under the PRA, an agency may not 
conduct or sponsor, and a person is not required to respond to, a 
collection of information unless it displays a currently valid control 
number from the Office of Management and Budget (``OMB''). The PRA is 
intended, in part, to minimize the paperwork burden created for 
individuals, businesses, and other persons as a result of the 
collection of information by federal agencies, and to ensure the 
greatest possible benefit and utility of information created, 
collected, maintained, used, shared, and disseminated by or for the 
federal government. The PRA applies to all information, regardless of 
form or format, whenever the federal government is obtaining, causing 
to be obtained, or soliciting information, and includes required 
disclosure to third parties or the public, of facts or opinions, when 
the information collection calls for answers to identical questions 
posed to, or identical reporting or recordkeeping requirements imposed 
on, ten or more persons.
---------------------------------------------------------------------------

    \215\ 44 U.S.C. 3501 et seq.
---------------------------------------------------------------------------

    The final rulemaking modifies an existing collection of information 
previously approved by OMB and for which the Commission has received an 
OMB control number: OMB control number 3038-0024, ``Regulations and 
Forms Pertaining to Financial Integrity of the Market Place; Margin 
Requirements for SDs/MSPs'' (OMB Collection 3038-0024).\216\ The 
responses to this collection of information are mandatory. The 
Commission does not believe the Final Rule as adopted imposes any other 
new collections of information that require approval of OMB under the 
PRA.
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    \216\ For the previously approved estimates, see ICR Reference 
No. 202207-3038-001, available at https://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=202207-3038-001.
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    The Commission did not receive any comments regarding its PRA 
burden analysis in the preamble to the Proposal. The Commission is 
revising collection number 3038-0024 to reflect the adoption of 
amendments to parts 1 and 23 of its regulations, as discussed below.
2. OMB Collection 3038-0024--Regulations and Forms Pertaining to 
Financial Integrity of the Market Place; Margin Requirements for SDs/
MSPs
    As of March 2024, there are approximately 107 SDs and no MSPs 
registered with the Commission that may be impacted by this rulemaking 
and, in particular, the collection of information discussed below.
    Commission regulation 23.105 \217\ requires that each SD and MSP 
maintain certain specified records, report certain financial 
information, and notify or request permission from the Commission under 
certain specified circumstances, in each case, as provided in the 
Commission regulation. For example, the Commission regulation requires 
generally that SDs and MSPs maintain current books and records, provide 
notice to the Commission of regulatory capital deficiencies and related 
documentation, provide notice of certain other events specified in the 
rule, and file financial reports and related materials with the 
Commission (including the information in Appendices B and C, as 
applicable). Commission regulation 23.105 \218\ also requires the SD or 
MSP to furnish information about its custodians that hold margin for 
uncleared swap transactions and the amounts of margin so held, and for 
SDs approved to use models (as discussed above), provide additional 
information regarding such models, as further described in Commission 
regulation 23.105(k).\219\
---------------------------------------------------------------------------

    \217\ 17 CFR 23.105.
    \218\ Id.
    \219\ 17 CFR 23.105(k).
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    The Commission estimates that there are 31 SD firms required to 
fulfill their financial reporting, recordkeeping, and notification 
obligations under Commission regulations 23.105(a)-(n) \220\ because 
they are not subject to a prudential regulator, not already registered 
as an FCM, and not dually-registered as a SBSD. The Commission does not 
anticipate that its estimates of burden associated with these 
obligations will change as a result of any of the amendments to 
Commission regulation 23.105 \221\ adopted herein.
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    \220\ 17 CFR 23.105(a)-(n).
    \221\ 17 CFR 23.105.
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    Commission regulation 23.105(p) \222\ and its accompanying Appendix 
C impose quarterly financial reporting and notification obligations on 
SDs subject to a prudential regulator. Approximately 55 of the 107 
registered SDs are subject to a prudential regulator. The Commission 
has previously estimated that these reporting and notification

[[Page 45579]]

requirements impose an ongoing burden of 33 hours annually. This 
results in a total aggregate burden of 1,815 hours annually. The 
Commission estimates this burden will remain unchanged by the 
amendments to Commission regulation 23.105(p) \223\ adopted herein, as 
the burden associated with requirements to file quarterly financial 
reporting and notifications previously were based on these entities 
filing their existing information contained in Call Reports along with 
Schedule 1 information. Under the amendments adopted herein, these 
obligations will remain the same for bank SDs, except for Non-U.S. bank 
SDs who will also still file existing financial reporting information 
as reported to their home country supervisor, along with Appendix C 
Schedule 1 information.
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    \222\ 17 CFR 23.105(p).
    \223\ Id.
---------------------------------------------------------------------------

C. Section 15(b) Antitrust Laws

    Section 15(b) of the CEA requires the Commission to take into 
consideration the public interest to be protected by the antitrust laws 
and endeavor to take the least anticompetitive means of achieving the 
purposes of the CEA, in issuing any order or adopting any Commission 
rule or regulation (including any exemption under section 4(c) or 
4c(b)), or in requiring or approving any bylaw, rule, or regulation of 
a contract market or registered futures association established 
pursuant to section 17 of the CEA.\224\
---------------------------------------------------------------------------

    \224\ 7 U.S.C. 19(b).
---------------------------------------------------------------------------

    The Commission believes that the public interest to be protected by 
the antitrust laws is generally to protect competition. The Commission 
has considered the rule to determine whether it is anticompetitive and 
has identified no anticompetitive effects. The Commission requested and 
received no comments on whether the proposed rule is anticompetitive 
and, if it is, what the anticompetitive effects are. Further, the 
Commission requested and received no comments on whether there are less 
anticompetitive means of achieving the relevant purposes of the Act 
that would otherwise be served by adopting the rule. Finally, the 
Commission requested and received no comments on whether the proposed 
rule implicates any other specific public interest to be protected by 
the antitrust laws. The Commission has determined that the rule is not 
anticompetitive and has no anticompetitive effects, and it has not 
identified any less anticompetitive means of achieving the purposes of 
the Act. As such, the Commission is adopting the rule as proposed 
subject to the modifications discussed herein.

IV. Cost Benefit Considerations

A. Background

    Section 15(a) of the CEA requires the Commission to consider the 
costs and benefits of its discretionary actions before promulgating a 
regulation under the CEA or issuing certain orders.\225\ Section 15(a) 
further specifies that the costs and benefits shall be evaluated in 
light of five broad areas of market and public concern: (1) protection 
of market participants and the public; (2) efficiency, competitiveness, 
and financial integrity of futures markets; (3) price discovery; (4) 
sound risk management practices; and (5) other public interest 
considerations (collectively, the ``Section 15(a) Factors''). In this 
cost benefit section, the Commission discusses the costs and benefits 
resulting from its discretionary determinations with respect to the 
Section 15(a) Factors.\226\
---------------------------------------------------------------------------

    \225\ 7 U.S.C. 19(a).
    \226\ The Commission notes that the costs and benefits 
considered in this proposed rulemaking, and highlighted below, have 
informed the policy choices described throughout this release.
---------------------------------------------------------------------------

    Section 4s(e) of the CEA, added by section 731 of the Dodd-Frank 
Act, provides the Commission with mandatory and discretionary 
rulemaking authority to adopt capital requirements for nonbank SDs and 
nonbank MSPs,\227\ as well as financial reporting requirements for SDs 
and MSPs.\228\ Section 4s(e) of the CEA requires the Commission to 
adopt minimum capital requirements for nonbank SDs and nonbank MSPs 
that are designed to help ensure their safety and soundness and are 
appropriate for the risk associated with the uncleared swaps held by 
such nonbank SD or nonbank MSP. In addition, section 4s(e)(2)(C) of the 
CEA, requires the Commission to establish capital requirements for 
nonbank SDs or nonbank MSPs that account for the risks associated with 
their entire swaps portfolio and all other activities conducted. 
Lastly, section 4s(e)(3)(D) of the CEA provides that the Commission, 
the prudential regulators, and the SEC, must ``to the maximum extent 
practicable'' establish and maintain comparable capital rules. 
Accordingly, this rulemaking includes certain capital and financial 
reporting requirements related to SDs and MSPs.
---------------------------------------------------------------------------

    \227\ Section 4s(e)(2)(B) of the CEA, 7 U.S.C. 6s(e)(2)(B).
    \228\ Section 4s(f) of the CEA, 7 U.S.C. 6s(f).
---------------------------------------------------------------------------

    The baseline for the Commission's consideration of the costs and 
benefits of this rulemaking is the existing statutory and regulatory 
framework applicable to SDs and MSPs, including the capital and margin 
requirements for SDs and MSPs under subpart E of part 23. The 
Commission recognizes, however, that to the extent that SDs \229\ have 
arranged their business in reliance on Division interpretations and no-
action positions in CFTC Staff Letters No. 21-15 and 21-18, as extended 
under CFTC Staff Letter No. 23-11, the actual costs and benefits of 
this rulemaking may be mitigated.
---------------------------------------------------------------------------

    \229\ Currently, there are no MSPs registered with the 
Commission and there have not been any MSPs registered with the 
Commission for several years. Thus, this section regarding the 
Commission's consideration of the costs and benefits of this 
proposed rulemaking will only refer to SDs that may have relied on 
CFTC Staff Letters No. 21-15 and 21-18 and may benefit from the 
compliance exceptions set forth herein.
---------------------------------------------------------------------------

    The Commission recognizes that the amendments adopted herein may 
impose costs. The Commission has endeavored to assess the expected 
costs and benefits of the amendments in quantitative terms, including 
PRA-related costs, where possible. In situations where the Commission 
is unable to quantify the costs and benefits, the Commission identifies 
and considers the costs and benefits of the rules in qualitative terms. 
The lack of data and information to estimate those costs and benefits 
is attributable in part to the nature of the amendments, which are 
tailored financial reporting requirements based on the specific 
businesses and types of SDs registered with the Commission. Further, 
SDs represent a wide diversity of business models catering towards 
different swap counterparties, from financial end users to commercial 
enterprises. As a result, the Commission expects each SD to have 
developed its corporate entity in a unique manner by employing 
different corporate cost structures, making it particularly difficult 
to estimate the quantitative impacts of both costs and benefits on each 
SD.
    As previously discussed, the Commission received four substantive 
comments expressing support for the Proposal.\230\ Commenters generally 
noted that the proposed amendments are beneficial for market 
participants and characterized them as helpful and practical 
accommodations that reflect the realities of the marketplace and 
facilitate compliance with the CFTC financial reporting 
requirements.\231\ Several commenters elaborated on specific benefits 
of the amendments, noting for instance that the proposed amendments 
would reduce regulatory burden and costs for some SDs, including those 
that are predominantly

[[Page 45580]]

engaged in non-financial activities and have a high level of tangible 
net worth.\232\
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    \230\ See IIB/ISDA/SIFMA Letter; Shell Letter; Barnard Letter; 
Ravnitzky Letter.
    \231\ See id.
    \232\ Ravnitzky Letter at 1.
---------------------------------------------------------------------------

B. CFTC Staff Letters and Other Amendments

    The Commission is adopting technical amendments to its definitions 
in Commission regulation 23.100 \233\ for ``predominantly engaged in 
non-financial activities'' and ``tangible net worth.'' Further, the 
Commission is adopting amendments to Commission regulation 23.105(p) 
\234\ to add exceptions to the financial reporting requirements for 
Non-U.S. bank SDs, and permitting bank SDs to file the relevant 
schedules under the Call Report (Schedule RC and Schedule RC-R) instead 
of as required by Appendix C. In addition, the Commission is making a 
number of clarifying amendments including: (1) amending the heading and 
scope provisions of Commission regulation 23.105(k) \235\ and the 
titles of certain schedules included in Appendix B; (2) changing public 
disclosure requirements under Commission regulation 23.105(i); \236\ 
(3) amending Form 1-FR-FCM to more accurately address net capital 
changes; (4) adding language to Commission regulations 23.103(a) and 
(c)(1) \237\ to clarify that standardized charges are the same as 
applicable to all SDs not using the Bank-Based Capital Approach; and 
(5) amending the cross reference in Commission regulation 23.102(d) 
\238\ to make clear that either 12 CFR part 217 or Appendix A should be 
utilized as applicable by the nonbank SD depending on the respective 
capital approach elected.
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    \233\ 17 CFR 23.100.
    \234\ 17 CFR 23.105(p).
    \235\ 17 CFR 23.105(k).
    \236\ 17 CFR 23.105(i).
    \237\ 17 CFR 23.103(a) and (c)(1).
    \238\ 17 CFR 23.102(d).
---------------------------------------------------------------------------

1. Benefits
    The amendments to definitions of ``predominantly engaged in non-
financial activities'' and ``tangible net worth'' aligning the 
regulatory text with the terms of CFTC Staff Letter No. 21-15 are 
intended to ensure that the Tangible Net Worth Capital Approach can be 
utilized by certain nonbank SDs as was originally intended in the Final 
Rule. These amendments are expected to benefit certain nonbank SDs by 
ensuring clear and effective compliance with regulatory requirements 
under the Tangible Net Worth Capital Approach as amended, ultimately 
reducing operational costs for such nonbank SDs. In particular, nonbank 
SDs would no longer be required to calculate asset and revenue tests 
separately between the entity and the ultimate parent level or compute 
such tests under U.S. GAAP even if such entity was permitted to use 
IFRS. Further, these amendments would allow nonbank SDs meeting such 
qualifications to file their supplemental position reports at the same 
time as routine financial reporting for all nonbank SDs set forth 
within Commission regulation 23.105(d).\239\
---------------------------------------------------------------------------

    \239\ 17 CFR 23.105(d).
---------------------------------------------------------------------------

    Similarly, the amendments to Commission regulation 23.105(p) \240\ 
that are consistent with the terms of CFTC Staff Letter No. 21-18, as 
extended under CFTC Staff Letter No. 23-11, are expected to benefit 
bank SDs by permitting: (1) Non-U.S. bank SDs to file reports by their 
home country regulators subject to certain conditions; (2) bank SDs to 
file comparable Call Report schedules in accordance with, and within 
the timeframe permitted by, the prudential regulators; (3) Non-U.S. 
bank SDs to file balance sheet and statement of regulatory capital 
information in accordance with home country requirements provided they 
are in English, converted to U.S. dollars and filed within 90 calendar 
days following quarter-end; and (4) dually-registered Non-U.S. bank SDs 
to file comparable SEC-approved financial reports and schedules. The 
Commission anticipates that these amendments will eliminate duplicative 
and superfluous reporting and streamline financial reporting for both 
Non-U.S. and dually-registered bank SDs.
---------------------------------------------------------------------------

    \240\ 17 CFR 23.105(p).
---------------------------------------------------------------------------

    Lastly, the amendments regarding financial reporting and 
computation include: (1) amendments to the heading and scope provision 
of Commission regulations 23.105(k) and (l); \241\ (2) titles of 
certain schedules included in Appendix B; (3) alignment of the public 
disclosure of unaudited financial information with the periodicity 
permitted by routine financial filings in Commission regulation 
23.105(d),\242\ and to remove reference to a statement disclosing the 
amounts of minimum regulatory capital; (4) amending Form 1-FR-FCM to 
add the 2 percent of uncleared swap margin capital requirement and 
swaps and security-based swaps haircuts; and (5) addition of clarifying 
language to Commission regulations 23.103(a)(1) and (c)(1) \243\ to 
provide additional clarity to registrants that the same standardized 
market and credit risk charges are applicable to nonbank SDs utilizing 
the Tangible Net Worth Capital Approach as are applicable to all other 
nonbank SDs if not approved to use models. These amendments are meant 
to clarify what was originally intended in the Final Rule or what is 
already included within the existing Commission regulations, as well as 
align the schedules as currently required by the SEC and the NFA. The 
Commission anticipates that these amendments will remove uncertainty 
amongst SDs about the type of form and the extent of detail that they 
should be reporting.
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    \241\ 17 CFR 23.105(k) and (l).
    \242\ 17 CFR 23.105(d).
    \243\ 17 CFR 23.103(a)(1) and (c)(1).
---------------------------------------------------------------------------

2. Costs
    The Commission generally does not anticipate any costs associated 
with the above amendments as they are intended to streamline and 
clarify existing financial reporting and capital requirements. Of the 
above, only the amendments to Commission regulation 23.105(l) \244\ 
would impose additional financial reporting requirements on nonbank SDs 
and nonbank MSPs not approved to use models to file Schedules 2-4 of 
Appendix B.
---------------------------------------------------------------------------

    \244\ 17 CFR 23.105(l).
---------------------------------------------------------------------------

    Currently, there are 8 nonbank SDs not approved to use models that 
are not currently filing Schedules 2-4 of Appendix B, but that would be 
required to do so under the amendments to Commission regulation 
23.105(l).\245\ The information required under Appendix B is nearly 
identical in all material respects to corresponding forms found in the 
SEC Form FOCUS Report Part II, as well as the capital and financial 
reporting requirements by the NFA for its member nonbank SDs and 
nonbank MSPs. Thus, the Commission has determined that these nonbank 
SDs already have developed policies, procedures, and systems to 
aggregate, monitor, and track their swap activities and risks as is 
required under Schedules 2-4 of Appendix B, which should mitigate some 
of the burdens of the additional reporting and recordkeeping 
requirements. Finally, the amendments to Commission regulation 
23.105(k) \246\ clarify that nonbank SDs and nonbank MSPs approved to 
use models may comply with the requirements to provide specific 
financial information required by Commission regulation 23.105(k) \247\ 
by filing Appendix B. Such nonbank SDs and nonbank MSPs have already 
been filing Appendix B with the Commission, and thus the Commission has 
determined that the amendments to

[[Page 45581]]

Commission regulation 23.105(k) \248\ would not impose any additional 
burden for such nonbank SDs and nonbank MSPs.
---------------------------------------------------------------------------

    \245\ Id.
    \246\ 17 CFR 23.105(k).
    \247\ Id.
    \248\ Id.
---------------------------------------------------------------------------

3. Section 15(a) Factors
    The following is a discussion of the cost and benefit 
considerations of this rulemaking, as it relates to the five broad 
areas of market and public concern identified in section 15(a) of the 
CEA: (1) protection of market participants and the public; (2) 
efficiency, competitiveness, and financial integrity of swaps markets; 
(3) price discovery; (4) sound risk management practices; and (5) other 
public interest considerations.
a. Protection of Market Participants and the Public
    The rules adopted herein are intended to enhance the clarity of 
financial reporting and computation requirements by revising the 
language of the regulations with respect to the type of forms and the 
tests that SDs should be using as part of their financial reporting 
process. The changes to the computation of tangible net worth are 
anticipated to benefit the public by allowing investors to monitor 
tangible net worth at the consolidated parent's level, and the 
financial reporting requirements for both bank SDs and nonbank SDs set 
out in this rulemaking should help the Commission and market 
participants monitor and assess the financial condition of such SDs 
more accurately and as was intended in the Final Rule. These amendments 
are also intended to harmonize financial reporting requirements with 
those of the prudential regulators, and the SEC, through which market 
participants and the Commission can gain a clearer and more directly 
comparable understanding of the financial reports received. Clarifying 
rules should safeguard both market participants and the public by 
improving transparency and reducing ambiguity.
b. Efficiency, Competitiveness, and Financial Integrity of Swaps 
Markets
    In this rulemaking, the Commission seeks to promote efficiency and 
financial integrity of the swaps market by streamlining many of the 
financial reporting requirements. For example, the amendments to 
Commission regulation 23.105(p) \249\ permit certain bank SDs to file 
with the Commission comparable Call Report schedules in accordance 
with, and within the timeframe permitted by, the prudential regulators 
that they currently file with the prudential regulators, or comparable 
SEC-approved financial reports and schedules, as applicable. The 
amendments to Commission regulation 23.105(p) \250\ would also allow 
certain Non-U.S. bank SDs to file with the Commission what they 
currently file with their respective home country regulators, subject 
to certain conditions. In addition, the amendments to Commission 
regulation 23.105(k) \251\ are meant to ensure that the information 
listed in Appendix B is completed by all nonbank SDs and nonbank MSPs 
as was intended, and is consistent with that required by the SEC and 
NFA, and the amendments to Form 1-FR-FCM are meant to harmonize with 
the SEC's requirements in its FOCUS Report Part II. Harmonizing 
requirements should foster a more level playing field, ultimately 
promoting trust and integrity within the market.
---------------------------------------------------------------------------

    \249\ 17 CFR 23.105(p).
    \250\ Id.
    \251\ 17 CFR 23.105(k).
---------------------------------------------------------------------------

    The Commission anticipates that these amendments will promote 
greater operational efficiencies for both bank and nonbank SDs that are 
already regulated, either prudentially or through comparable foreign 
regulators, as they may be able to avoid creating duplicative 
compliance and operational infrastructures. The amendments should allow 
the Commission to monitor the financial integrity of swaps markets more 
clearly and efficiently, including in the case of any default or 
financial contagion.
    Lastly, the Commission is amending the definition of 
``predominantly engaged in non-financial activities'' as used in the 
Tangible Net Worth Capital Approach by permitting entities to determine 
whether they are predominantly engaged in non-financial activities at 
either the parent or subsidiary level to be consistent with the 
Commission's intention in the Final Rule.\252\ As discussed above, this 
amendment properly calibrates the wording of the definition in 
establishing eligibility for the Tangible Net Worth Capital Approach by 
assessing non-financial activities at a consolidated parent level. In 
doing so, it clarifies the Commission's intention to permit more 
entities that are predominately engaged in non-financial activities to 
be eligible for the Tangible Net Worth Capital Approach, thereby 
creating greater market efficiency.
---------------------------------------------------------------------------

    \252\ Final Rules, 85 FR 57502.
---------------------------------------------------------------------------

c. Price Discovery
    The Commission anticipates that the amendments adopted herein may 
enhance price discovery. By clarifying financial reporting and 
computation requirements and harmonizing reporting practices, a more 
efficient operating environment would be created for SDs, which are 
important intermediaries within the swaps markets. This improved data 
quality reported to regulators has the potential to enhance 
supervision, leading to improved market quality. Consequently, this 
could lead to a more effective and accurate price discovery process.
d. Sound Risk Management Practices
    The Commission has determined that, as a result of the adopted 
reporting and recordkeeping requirements, SDs may more effectively 
track their trading and risk exposure in swaps and other financial 
activities. To the extent that these SDs can better monitor and track 
their risks, the Commission anticipates that this should help them 
better manage risk within the entity.
e. Other Public Interest Considerations
    The Commission has not identified any additional public interest 
considerations related to the costs and benefits of the rule.

C. Other Amendments

    The Commission is adopting a number of clarifying amendments 
intended to align with existing Commission regulations, including: (1) 
amending Commission regulation 23.105(c)(4) \253\ to add a two-business 
days reporting timeframe to the requirement for nonbank SD notice 
filing of a substantial reduction in capital; (2) amending Commission 
regulations 23.101(a)(1)(i)(B) and 23.101(a)(1)(ii)(C) \254\ to 
establish that the use of subordinated debt as regulatory capital is 
subject to the approval of either an RFA of which the nonbank SD is a 
member, or the Commission; and (3) amending Commission regulation 
23.105(e)(4)(v) \255\ for SDs and MSPs to include an explicit 
statement, if applicable, that there are no material differences 
between the audited annual report and the unaudited annual report of 
the same date.
---------------------------------------------------------------------------

    \253\ 17 CFR 23.105(c)(4).
    \254\ 17 CFR 23.101(a)(1)(i)(B) and (a)(1)(ii)(C).
    \255\ 17 CFR 23.105(e)(4)(v).
---------------------------------------------------------------------------

1. Benefits
    The amendments to the notice requirements in Commission regulation 
23.105(c)(4) \256\ would add a two-business day requirement for nonbank 
SDs filing a notice of substantial

[[Page 45582]]

reduction in capital. The Commission has determined that adding a 
reporting timeframe to the notice requirement will enhance compliance 
by providing regulatory certainty to nonbank SDs of when such a filing 
is due.
---------------------------------------------------------------------------

    \256\ 17 CFR 23.105(c)(4).
---------------------------------------------------------------------------

    The amendments to Commission regulation 23.101(a)(1)(i)(B) \257\ 
would establish that the use of subordinated debt as regulatory capital 
is subject to the approval of either an RFA of which the nonbank SD is 
a member, or the Commission. The amendments should further provide 
regulatory clarity by establishing the process for approving 
subordinated debt for nonbank SDs, which was not explicitly articulated 
in the Final Rule and had led to uncertainty among nonbank SDs.
---------------------------------------------------------------------------

    \257\ 17 CFR 23.101(a)(1)(i)(B).
---------------------------------------------------------------------------

    Lastly, the amendments to Commission regulation 23.105(e)(4)(v) 
\258\ would require that the SDs and MSPs include an explicit 
statement, if applicable, of no material differences between the 
audited and the unaudited annual report of the same date. Doing so 
should not only align the filing approach for auditors of SDs with that 
of FCMs, but also enhance the reliability of such annual reports by 
encouraging auditors to more rigorously assess the materiality of 
reporting any discovered audit findings.
---------------------------------------------------------------------------

    \258\ 17 CFR 23.105(e)(4)(v).
---------------------------------------------------------------------------

2. Costs
    The Commission does not anticipate that compliance with the above 
amendments will lead to any significant costs. The amendments to 
Commission regulations 23.105(c)(4) and 23.105(e)(4)(v) \259\ are meant 
to align the financial reporting requirements of SDs with that of FCMs. 
Based on the Commission's experience with existing filings and 
discussions with registered SDs, the Commission has determined that the 
registrants will be able to file necessary information within the 
timeframe provided. The amendments to Commission regulation 
23.101(a)(1)(i)(B) \260\ are meant to establish a process of approving 
subordinated debt for nonbank SDs, and as such they would not levy any 
additional costs to the nonbank SDs.
---------------------------------------------------------------------------

    \259\ 17 CFR 23.105(c)(4) and (e)(4)(v).
    \260\ 17 CFR 23.101(a)(1)(i)(B).
---------------------------------------------------------------------------

3. Section 15(a) Factors
    The following is a discussion of the cost and benefit 
considerations of the rulemaking as it relates to the aforementioned 
five broad areas of market and public concern identified in section 
15(a) of the CEA.
a. Protection of Market Participants and the Public
    The Commission anticipates that the amendment to Commission 
regulation 23.105(c)(4) \261\ adopted herein should protect market 
participants and the public against possible market disruption by 
requiring that all SDs file a notice of a substantial reduction in 
capital within two business days after such an incident has occurred. 
Similarly, the amendments to Commission regulation 23.101(a)(1)(i)(B) 
\262\ should provide market clarity on how subordinated debt is 
approved for consideration as capital, and the amendments to Commission 
regulation 23.105(e)(4)(v) \263\ should allow the Commission and the 
public to effectively monitor cases where there are no material 
differences between the audited and unaudited annual report of the same 
date filed by nonbank SDs and nonbank MSPs. These amendments should 
enable market participants to have better insights into SD's capital 
and financial positions. This, in turn, should enhance the protection 
of both market participants and the public.
---------------------------------------------------------------------------

    \261\ 17 CFR 23.105(c)(4).
    \262\ 17 CFR 23.101(a)(1)(i)(B).
    \263\ 17 CFR 23.105(e)(4)(v).
---------------------------------------------------------------------------

b. Efficiency, Competitiveness, and Financial Integrity of Swaps 
Markets
    The amendments adopted herein should improve the accuracy and 
completeness of nonbank SDs' and nonbank MSPs' financial reporting by 
imposing a two-business day deadline for notice of substantial 
reduction in capital, and an affirmative statement of no material 
differences between the audited and unaudited annual financial 
statement, as applicable. The establishment of a process for approving 
subordinated debt should lead to increased efficiency in how such 
subordinated debt is monitored. Further, these amendments are also 
intended to harmonize financial reporting requirements with those of 
the prudential regulators, as well as the Commission's existing 
framework regarding FCMs. Harmonizing requirements should foster a more 
level playing field, ultimately promoting trust and integrity within 
the market.
c. Price Discovery
    The Commission anticipates that the amendments adopted herein will 
enhance price discovery. By improving financial reporting requirements 
for nonbank SDs and nonbank MSPs, a more efficient operating 
environment should be created for SDs, which are important 
intermediaries within the swaps markets. This improved data quality 
reported to regulators has the potential to enhance supervision, 
leading to improved market quality. Consequently, this could lead to a 
more effective and accurate price discovery process.
d. Sound Risk Management Practices
    The Commission anticipates that the above amendments will lead to 
better risk management practices among SDs and MSPs, particularly by 
requiring them to monitor for potential reduction in capital and 
material differences between the audited and the unaudited annual 
financial statements.
e. Other Public Interest Considerations
    The Commission has not identified any additional public interest 
considerations related to the costs and benefits of the rule.

    Note: The following appendix to this preamble pertains to a form 
that does not appear in the Code of Federal Regulations.

Appendix to the Preamble--Adopted Revisions to Selected Section of Form 
1-FR-FCM: Statement of the Computation of the Minimum Capital 
Requirements

BILLING CODE 6351-01-P

[[Page 45583]]

[GRAPHIC] [TIFF OMITTED] TR23MY24.000


[[Page 45584]]


[GRAPHIC] [TIFF OMITTED] TR23MY24.001


[[Page 45585]]


[GRAPHIC] [TIFF OMITTED] TR23MY24.002

BILLING CODE 6351-01-C

List of Subjects in 17 CFR Part 23

    Reporting and recordkeeping requirements, Swaps.

    For the reasons stated in the preamble, the Commodity Futures 
Trading Commission amends 17 CFR part 23 as follows:

PART 23--SWAP DEALERS AND MAJOR SWAP PARTICIPANTS

0
1. The authority citation for part 23 continues to read as follows:

    Authority:  7 U.S.C. 1a, 2, 6, 6a, 6b, 6b-1, 6c, 6p, 6r, 6s, 6t, 
9, 9a, 12, 12a, 13b, 13c, 16a, 18, 19, 21. Section 23.160 also 
issued under 7 U.S.C. 2(i); Sec. 721(b), Pub. L. 111-203, 124 Stat. 
1641 (2010).


0
2. Amend Sec.  23.100 by adding, in alphabetical order, a definition of 
the term ``Call Report'' and revising the definitions of the terms 
``Predominantly engaged in non-financial activities'' and ``Tangible 
net worth'' to read as follows:


Sec.  23.100  Definitions applicable to capital requirements.

* * * * *
    Call Report. This term means the Federal Financial Institutions 
Examination Council Form 031 that a swap dealer or major swap 
participant for which there is a prudential regulator is required to 
file with its applicable prudential regulator.
* * * * *
    Predominantly engaged in non-financial activities. A swap dealer is 
predominantly engaged in non-financial activities if:
    (1) The swap dealer's consolidated annual gross financial revenues, 
or if the swap dealer is a wholly owned subsidiary, then the swap 
dealer's consolidated parent's annual gross financial revenues, in 
either of its two most recently completed fiscal years represents less 
than 15 percent of the swap dealer's or the swap dealer's consolidated 
parent's consolidated gross

[[Page 45586]]

revenue in that fiscal year (``15% revenue test''), and
    (2) The consolidated total financial assets of the swap dealer, or 
if the swap dealer is wholly owned subsidiary, then the consolidated 
total financial assets of the swap dealer's parent, at the end of its 
two most recently completed fiscal years represents less than 15 
percent of the swap dealer's or the swap dealer's consolidated parent's 
consolidated total assets as of the end of the fiscal year (``15% asset 
test'').
    (3) For purpose of computing the 15% revenue test or the 15% asset 
test, a swap dealer's activities or swap dealer's parent's activities 
shall be deemed financial activities if such activities are defined as 
financial activities under 12 CFR 242.3 and appendix A to 12 CFR part 
242, including lending, investing for others, safeguarding money or 
securities for others, providing financial or investment advisory 
services, underwriting or making markets in securities, providing 
securities brokerage services, and engaging as principal in investing 
and trading activities; provided, however, a swap dealer or a swap 
dealer's consolidated parent may exclude from its financial activities 
accounts receivable resulting from non-financial activities.
* * * * *
    Tangible net worth. This term means the net worth of a swap dealer 
or major swap participant as determined in accordance with U.S. 
generally accepted accounting principles, or International Financial 
Reporting Standards issued by the International Accounting Standards 
Board if the swap dealer or major swap participant is permitted under 
Sec.  23.105(b) to prepare and maintain books and records in accordance 
with such standards, but in either case, excluding goodwill and other 
intangible assets. In determining net worth, all long and short 
positions in swaps, security-based swaps and related positions must be 
marked to their market value. A swap dealer or major swap participant 
must include in its computation of tangible net worth all liabilities 
or obligations of a subsidiary or affiliate that the swap dealer or 
major swap participant guarantees, endorses, or assumes either directly 
or indirectly.
* * * * *

0
3. Amend Sec.  23.101 by revising paragraphs (a)(1)(i)(B), 
(a)(1)(ii)(B) and (C), and adding paragraph (a)(1)(ii)(D) to read as 
follows:


Sec.  23.101   Minimum financial requirements for swap dealers and 
major swap participants.

    (a)(1) * * *
    (i) * * *
    (B) An aggregate of common equity tier 1 capital, additional tier 1 
capital, and tier 2 capital, all as defined under the bank holding 
company regulations in 12 CFR 217.20, equal to or greater than eight 
percent of the swap dealer's BHC equivalent risk-weighted assets; 
provided, however, that the swap dealer must maintain a minimum of 
common equity tier 1 capital equal to six point five percent of its BHC 
equivalent risk-weighted assets; provided further, that any capital 
that is subordinated debt under 12 CFR 217.20 and that is included in 
the swap dealer's capital for purposes of this paragraph (a)(1)(i)(B) 
must qualify as subordinated debt under Sec.  240.18a-1d of this title 
in accordance with a qualification determination of the Commission or a 
registered futures association of which the swap dealer is a member;
* * * * *
    (ii) * * *
    (B) A swap dealer that uses internal models to compute market risk 
for its proprietary positions under Sec.  240.18a-1(d) of this title 
must calculate the total market risk as the sum of the VaR measure, 
stressed VaR measure, specific risk measure, comprehensive risk 
measure, and incremental risk measure of the portfolio of proprietary 
positions in accordance with Sec.  23.102 and appendix A to subpart E 
of this part;
    (C) A swap dealer may recognize as a current asset, receivables 
from third-party custodians that maintain the swap dealer's initial 
margin deposits associated with uncleared swap and security-based swap 
transactions pursuant to the margin rules of the Commission, the 
Securities and Exchange Commission, a prudential regulator, as defined 
in section 1a(39) of the Act, or a foreign jurisdiction that has 
received a margin Comparability Determination under Sec.  23.160; and
    (D) The qualification of any subordinated debt used to meet any 
capital requirements shall be as determined by the Commission or a 
registered futures association of which the swap dealer is a member.
* * * * *

0
4. In Sec.  23.102, revise paragraph (d) to read as follows:


Sec.  23.102  Calculation of market risk exposure requirement and 
credit risk exposure requirement using internal models.

* * * * *
    (d) The Commission, or registered futures association upon 
obtaining the Commission's determination that its requirements and 
model approval process are comparable to the Commission's requirements 
and process, may approve or deny the application, or approve or deny an 
amendment to the application, in whole or in part, subject to any 
conditions or limitations the Commission or registered futures 
association may require, if the Commission or registered futures 
association finds the approval to be appropriate in the public 
interest, after determining, among other things, whether the applicant 
has met the requirements of this section. A swap dealer that has 
received Commission or registered futures association approval to 
compute market risk exposure requirements and credit risk exposure 
requirements pursuant to internal models must compute such charges in 
accordance with paragraph (c) of this section.
* * * * *

0
5. In Sec.  23.103, revise paragraphs (a)(1) and (c)(1) to read as 
follows:


Sec.  23.103  Calculation of market risk exposure requirement and 
credit risk requirement when models are not approved.

    (a) * * *
    (1) Computes its regulatory capital requirements under Sec.  
23.101(a)(1)(ii) or (a)(2), and
* * * * *
    (c) * * *
    (1) A swap dealer that computes regulatory capital under Sec.  
23.101(a)(1)(ii) or (a)(2) shall compute counterparty credit risk 
charges using the applicable standardized credit risk charges set forth 
in Sec.  240.18a-1 of this title and Sec.  1.17 of this chapter for 
such positions.
* * * * *

0
6. In Sec.  23.105, revise paragraphs (c)(2) and (4), (d)(2) through 
(4), (e)(4)(v), (e)(6), (i)(1)(i) and (ii), (i)(2)(ii), (k)(1) 
introductory text, (l), and (p)(2) and (7) to read as follows:


Sec.  23.105  Financial recordkeeping, reporting and notification 
requirements for swap dealers and major swap participants.

* * * * *
    (c) * * *
    (2) A swap dealer or major swap participant who knows or should 
have known that its regulatory capital at any time is less than 120 
percent of its minimum regulatory capital requirement as determined 
under Sec.  23.101, or less than the amounts identified in Sec.  
1.12(b) of this chapter for a swap dealer or major swap participant 
that is also a futures commission merchant, must provide written notice 
to the Commission and to the registered futures association of which it 
is a

[[Page 45587]]

member to that effect within 24 hours of such event.
* * * * *
    (4) A swap dealer or major swap participant must provide written 
notice within two business days to the Commission and to the registered 
futures association of which it is a member of a substantial reduction 
in capital as compared to that last reported in a financial report 
filed with the Commission pursuant to this section. The notice shall be 
provided if the swap dealer or major swap participant experiences a 30 
percent or more decrease in the amount of capital that the swap dealer 
or major swap participant holds in excess of its regulatory capital 
requirement as computed under Sec.  23.101.
* * * * *
    (d) * * *
    (2) The financial reports required by this section must be prepared 
in the English language and be denominated in United States dollars. 
The financial reports shall include a statement of financial condition, 
a statement of income/loss, a statement of changes in liabilities 
subordinated to the claims of general creditors, a statement of changes 
in ownership equity, a statement demonstrating compliance with and 
calculation of the applicable regulatory capital requirement under 
Sec.  23.101, and such further material information as may be necessary 
to make the required statements not misleading. The monthly or 
quarterly report and schedules must be prepared in accordance with 
generally accepted accounting principles as established in the United 
States; provided, however, that a swap dealer or major swap participant 
that is not otherwise required to prepare financial statements in 
accordance with U.S. generally accepted accounting principles, may 
prepare the monthly or quarterly report and schedules required by this 
section in accordance with International Financial Reporting Standards 
issued by the International Accounting Standards Board.
    (3) A swap dealer or major swap participant that is also registered 
with the Securities and Exchange Commission as a broker or dealer, 
security-based swap dealer, or a major security-based swap participant 
and files a monthly Form X-17A-5 FOCUS Report Part II with the 
Securities and Exchange Commission pursuant to Sec.  240.18a-7 or 
240.17a-5 of this title, as applicable, must file such Form X-17A-5 
FOCUS Report Part II with the Commission and with the registered 
futures association in lieu of the financial reports required under 
paragraphs (d)(1) and (2) of this section. The swap dealer or major 
swap participant must file the form with the Commission and registered 
futures association when it files the Form X-17A-5 FOCUS Report Part II 
with the Securities and Exchange Commission; provided, however, that 
the swap dealer or major swap participant must file the Form X-17A-5 
FOCUS Report Part II with the Commission and registered futures 
association no later than 17 business days after the end of each month.
    (4) A swap dealer or major swap participant that is also registered 
with the Commission as a futures commission merchant must file a Form 
1-FR-FCM or such other form as the futures commission merchant is 
permitted to file under Sec.  1.10 of this chapter, in lieu of the 
monthly financial reports required under paragraphs (d)(1) and (2) of 
this section.
    (e) * * *
    (4) * * *
    (v) A reconciliation of any material differences from the unaudited 
financial report prepared as of the swap dealer's or major swap 
participant's year-end date under paragraph (d) of this section and the 
swap dealer's or major swap participant's annual financial report 
prepared under this paragraph (e) or, if no material differences exist, 
a statement so indicating; and
* * * * *
    (6) A swap dealer or major swap participant that is also registered 
with the Commission as a futures commission merchant must file an 
audited Form 1-FR-FCM or such other form as the futures commission 
merchant is permitted to file under Sec.  1.10 of this chapter, and 
must comply with the requirements of Sec.  1.16 of this chapter, 
including filing a supplemental accountant's report on material 
inadequacies concurrently with the audited annual report, in lieu of 
the annual financial report required under this paragraph (e).
* * * * *
    (i) * * *
    (1) * * *
    (i) The statement of financial condition including applicable 
footnotes; and
    (ii) The amounts of the swap dealer's or major swap participant's 
regulatory capital and minimum regulatory capital requirement, computed 
in accordance with Sec.  23.101.
* * * * *
    (2) * * *
    (ii) The amounts of the swap dealer's or major swap participant's 
regulatory capital as of the fiscal year-end and its minimum regulatory 
capital requirement, computed in accordance with Sec.  23.101.
* * * * *
    (k) * * *
    (1) A swap dealer that has received approval or filed an 
application for provisional approval under Sec.  23.102(d) from the 
Commission, or from a registered futures association of which the swap 
dealer is a member, to use internal models to compute its market risk 
exposure requirement and credit risk exposure requirement in computing 
its regulatory capital under Sec.  23.101 must file with the Commission 
and with the registered futures association of which the swap dealer is 
a member the specific information contained in appendix B to subpart E 
of this part and the following information within 17 business days of 
the end of each month or quarter as applicable:
* * * * *
    (l) Additional position and counterparty reporting requirements for 
swap dealers and major swap participants not approved to use models. A 
swap dealer or major swap participant which is not subject to paragraph 
(k) of this section must provide the Commission and the registered 
futures association of which the swap dealer or major swap participant 
is a member, the additional specific information contained in appendix 
B to subpart E of this part on a monthly or quarterly basis as 
applicable to its required frequency of financial reporting under 
paragraph (d) of this section.
* * * * *
    (p) * * *
    (2) Financial report and position information. (i) A swap dealer or 
major swap participant that files a Call Report with its applicable 
prudential regulator shall file Schedule RC--Balance Sheet and Schedule 
RC--R Regulatory Capital from its Call Report filed with the prudential 
regulator, and schedule 1 of appendix C to subpart E of this part, with 
the Commission on a quarterly basis. The swap dealer or major swap 
participant shall file the schedules with the Commission on the date 
the Call Report is due to be filed with the swap dealer's or major swap 
participant's prudential regulator.
    (ii) A swap dealer or major swap participant domiciled in a non-
U.S. jurisdiction that is not required to file a Call Report by its 
applicable prudential regulator shall file a statement of financial 
condition and regulatory capital information containing comparable 
financial information as required by Schedule RC--Balance

[[Page 45588]]

Sheet and Schedule RC--R Regulatory Capital of the Call Report, and 
shall file schedule 1 of appendix C to subpart E of this part, with the 
Commission on a quarterly basis. The statement of financial condition, 
regulatory capital information, and schedule 1 of appendix C to subpart 
E of this part shall be prepared and presented in accordance with the 
accounting standards permitted by the swap dealer's or major swap 
participant's home country regulatory authorities; provided, however, 
that the schedules and information must be in the English language with 
balances converted to U.S. dollars. The swap dealer or major swap 
participant shall file the statement of financial condition, regulatory 
capital information, and schedule 1 of appendix C to subpart E of this 
part with the Commission no later than 90 calendar days after the end 
of the swap dealer's or major swap participant's fiscal quarter.
* * * * *
    (7) A swap dealer or major swap participant that is subject to the 
capital requirements of a prudential regulator and is also registered 
with the Securities and Exchange Commission as a security-based swap 
dealer or a major security-based swap participant and files a quarterly 
Form X-17A-5 FOCUS Report Part IIC with the Securities and Exchange 
Commission pursuant to Sec.  240.18a-7 of this title, must file such 
Form X-17A-5 FOCUS Report Part IIC with the Commission in lieu of the 
financial reports required under paragraph (p)(2) of this section. The 
swap dealer or major swap participant must file the form with the 
Commission when it files the Form X-17A-5 FOCUS Report Part IIC with 
the Securities and Exchange Commission; provided, however, that the 
swap dealer or major swap participant must file the Form X-17A-5 FOCUS 
Report Part IIC with the Commission no later than 35 calendar days from 
the date the report is made.

0
7. In appendix B to subpart E of part 23, revise the schedule headings 
of schedules 1, 2, 3, and 4, and republish the schedules, to read as 
follows:

Appendix B to Subpart E of Part 23--Swap Dealer and Major Swap 
Participant Position Information

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0
8. Revise appendix C to subpart E of part 23 to read as follows:

Appendix C to Supbart E of Subpart of 23--Specific Position Information 
for Swap Dealers and Major Swap Participants Subjects to the Capital 
Requirements of a Prudential Regulator
[GRAPHIC] [TIFF OMITTED] TR23MY24.007

BILLING CODE 6351-01-C

    Issued in Washington, DC, on May 8, 2024, by the Commission.
Christopher Kirkpatrick,
Secretary of the Commission.

    NOTE: The following appendices will not appear in the Code of 
Federal Regulations.

Appendices to Capital and Financial Reporting Requirements for Swap 
Dealers and Major Swap Participants--Commission Voting Summary, 
Chairman's Statement, and Commissioners' Statements

Appendix 1--Commission Voting Summary

    On this matter, Chairman Behnam and Commissioners Johnson, 
Goldsmith Romero, Mersinger, and Pham voted in the affirmative. No 
Commissioner voted in the negative.

Appendix 2--Statement of Support of Chairman Rostin Behnam

    I support the final rule to amend certain requirements in part 
23 of the Commission's regulations to facilitate compliance by swap 
dealers (SDs) and major swap participants (MSPs) with the CFTC's 
financial reporting obligations and demonstrate compliance with the 
minimum capital requirements. The changes are intended to address 
specific issues identified during the implementation of the 
Commission's 2020 final rule on capital and financial reporting 
requirements for SDs and MSPs,\1\ which serve as the cornerstone of 
the post-Dodd Frank Act reforms to ensure SDs and MSPs remain 
sufficiently capitalized. Although the amendments do not change the 
Commission's capital framework for SDs and MSPs, these amendments 
serve as an important step to ensure the Commission's capital rule 
is strong, comprehensive, and clear.
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    \1\ Capital Requirements of Swap Dealers and Major Swap 
Participants, 85 FR 57462 (Sept. 15, 2020).
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    I thank the public for their comments on the proposal and staff 
in the Market Participants Division, Office of the General Counsel, 
and the Office of the Chief Economist for their work on the final 
rule.

Appendix 3--Statement of Commissioner Kristin N. Johnson

    Today [April 29, 2024], the Commodity Futures Trading Commission 
(Commission or CFTC) adopts a final rule to amend certain of the 
Commission's part 23 regulations. The Commission introduces updates 
that underscore the critical importance of capital and reporting 
rules in maintaining the integrity and stability of swaps markets 
and broader domestic and global derivatives markets. These 
regulations aim to mitigate known systemic risk concerns.
    These well-tailored regulations update capital requirements and 
financial reporting obligations for swap dealers (SDs) and major

[[Page 45594]]

swap participants (MSPs) (Final Rule).\1\ The Final Rule ensures 
compliance with the Dodd-Frank Wall Street Reform and Consumer 
Protection Act (Dodd-Frank Act). The Final Rule aligns with the 
statutory mandate established in the Dodd-Frank Act that requires 
the Commission to adopt and implement robust capital and reporting 
requirements in swaps markets. The Final Rule includes several 
technical corrections improved by consultation with the prudential 
regulators and the Securities and Exchange Commission (SEC) on the 
adoption and implementation of the Commission's capital rules. 
Consequently, I support the Final Rule.\2\
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    \1\ Since no MSP is currently registered with the Commission, in 
this statement, I will refer to SDs only.
    \2\ Kristin N. Johnson, Commissioner, CFTC, Statement Regarding 
Notice of Proposed Rulemaking to Amend Capital and Financial 
Reporting Requirements for Swap Dealers and Major Swap Participants 
(Dec. 15, 2023), https://www.cftc.gov/PressRoom/SpeechesTestimony/johnsonstatement121523b.
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CFTC Dodd-Frank Act Capital Adequacy Reforms

    The Commission introduced new capital and financial reporting 
requirements for SDs in 2020, as mandated by the Dodd-Frank Act.\3\ 
Section 4s(e) of the CEA introduced minimum capital requirements for 
SDs,\4\ and section 4s(f) of the CEA created financial reporting and 
recordkeeping requirements for all SDs.\5\ Bank SDs subject to 
regulation by a prudential regulator are required to comply with the 
minimum capital requirements adopted by the applicable prudential 
regulator, while non-bank SDs and security-based swap dealers not 
subject to regulation by a prudential regulator are required to meet 
the minimum capital requirements of the Commission and SEC, 
respectively. Banking regulators and the SEC have adopted capital 
rules for swaps and security-based swaps activities.
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    \3\ Capital Requirements of Swap Dealers and Major Swap 
Participants, 85 FR 57462 (Sept. 15, 2020).
    \4\ 7 U.S.C. 6s(e).
    \5\ 7 U.S.C. 6s(f).
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    Given the complexities of our markets, the Commission regulates 
SDs that may also be regulated by prudential regulators and the SEC. 
The Commission's overall capital approach permits SDs to select one 
of three methods to calculate their capital requirements, as 
permitted under the rule: the net liquid assets capital approach; 
the bank-based capital requirements; or the tangible net worth 
capital approach. The Commission's capital approach evidences the 
Commission's recognition of the complexity and interconnectedness of 
the derivatives markets.

Final Rule's Codification of No-Action Letters

    The Commission published a Notice of Proposed Rulemaking 
(Proposed Rule) on January 16, 2024.\6\ The comment period for the 
proposal closed on February 13, 2024, and the Commission received 4 
substantive comment letters, all of which expressed general support 
for the Proposed Rule. Other than two revisions to the timing for 
the submission of reports, the proposed amendments were adopted as 
proposed.
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    \6\ Capital and Financial Reporting Requirements for Swap 
Dealers and Major Swap Participants, 89 FR 2554 (Jan. 16, 2024).
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    My statement in support of the Proposed Rule details the 
amendments adopted today. The Commission is primarily codifying 
Interpretive Letter 21-15, which applies to commercial non-bank SDs, 
and No-Action Letter (NAL) 21-18, which was extended under NAL 23-11 
and applies to bank SDs, including non-U.S. bank SDs. The Final 
Rule, which also addresses several other recommended amendments, is 
a result of collaboration with the banking regulators and the SEC. 
The Final Rule aims to harmonize processes, procedures, and forms 
for financial reports and notifications.
    Importantly, the amendments do not change the substantive 
capital requirements, ``which serve as a cushion during times of 
severe market stress to ensure our registrants' safety and 
soundness, protect the financial stability of our financial system, 
and prevent a run on our financial institutions.'' \7\ The 
amendments buttress the financial condition reporting requirements, 
as the Commission retains ``visibility and insight into the business 
and financial health of our registrants and enables us to require 
corrective action and prevent a failure of a single entity or group 
of entities or segment of the derivatives market, which could raise 
system risk concerns.'' \8\ These are important policy 
considerations I mentioned in my statement supporting the Proposed 
Rule.
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    \7\ Johnson, supra note 2.
    \8\ Id.
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Conclusion

    It is the Commission's duty to ensure that the implementation of 
the capital reforms under the Dodd-Frank Act is effective yet 
sensible and practical, and the Final Rule does just that. I want to 
thank the Market Participants Division for the excellent work 
bringing forth this final rulemaking, in particular Joshua Beale, 
Jennifer Bauer, Maria Aguilar-Rocha, Andrew Pai, and Christine 
McKeveny.

Appendix 4--Statement of Support of Commissioner Caroline D. Pham

    I support the Capital and Financial Reporting Requirements for 
Swap Dealers (SD) and Major Swap Participants (MSP) Final Rule (SD 
Financial Reporting Rule Amendments) because it aligns the timing of 
financial reporting for entities that have a bank regulator or are 
registered with the Securities and Exchange Commission (SEC). This 
simplifies the filing process for these reports to minimize 
unnecessary costs and administrative burdens. I would like to thank 
Jennifer Bauer, Andrew Pai, Maria Aguilar-Rocha, Christine McKeveny, 
Josh Beale, Tom Smith, and Amanda Olear in the Market Participants 
Division for their work on the SD Financial Reporting Rule 
Amendments. I truly appreciate the time staff took to discuss my 
questions and concerns.
    However, I believe that the Commission should have taken an 
evergreen approach to SEC harmonization of the filing time period. 
The Commission proposed to amend Regulation 23.105(p)(7) \1\ to 
include a 30-day deadline for dually-registered non-U.S. bank swap 
dealers and major swap participants to file comparable SEC-approved 
financial reports and schedules with the CFTC following the date on 
which the report is made.\2\ One comment letter pointed out that the 
30-day deadline is inconsistent with the Commission's alignment of 
the deadline for U.S. bank swap dealers and major swap participants 
that are not dually registered to submit the report when required by 
the prudential regulators, and that the SEC had aligned its deadline 
for all bank security-based swap dealers to submit such reports to 
the same 35-day deadline.\3\
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    \1\ Existing Regulation 23.105(p)(7) allows swap dealers or 
major swap participants that are subject to rules of a prudential 
regulator and are also registered with the SEC as a security-based 
swap dealer or a major security-based swap participant, and files a 
quarterly Form X-17A-5 FOCUS Report Part IIC with the SEC pursuant 
to 17 CFR 240.18a-7, to file such Form X-17A-5 FOCUS Report Part IIC 
with the CFTC in lieu of the financial reports required under 
Regulation 23.105(p)(2). The swap dealer or major swap participant 
must file the form with the Commission when it files the Form X-17A-
5 FOCUS Report Part IIC with the SEC, provided, however, that the 
swap dealer or major swap participant must file the Form X-17A-5 
FOCUS Report Part IIC with the CFTC no later than 30 calendar days 
from the date the report is made. See 17 CFR 23.105(p)(7).
    \2\ See Proposed Rule, Capital and Financial Reporting 
Requirements for Swap Dealers and Major Swap Participants, 89 FR 
2554, 2558 (Jan. 16, 2024), https://www.govinfo.gov/content/pkg/FR-2024-01-16/pdf/2023-28649.pdf.
    \3\ See Comment Letter, Institute of International Bankers 
(IIB), the International Swaps and Derivatives Association (ISDA), 
and the Securities Industry and Financial Markets Association 
(SIFMA), Capital Requirements for Swap Dealers and Major Swap 
Participants (RIN 3038-AD54), 5 (Feb. 13, 2024), https://comments.cftc.gov/Handlers/PdfHandler.ashx?id=35181.
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    While the Commission agreed with the comment letter and extended 
the deadline to 35 days to allow dual registrants to submit the 
reports on the same day as they do with the SEC, the Commission 
should have made the deadline ``on the date Form X-17A-5 FOCUS 
Report Part IIC is due to be filed with the [SEC].'' \4\ This would 
avoid the Commission having to do another rulemaking to harmonize if 
the SEC updates its FOCUS report filing deadlines in the future. 
This would have anticipated a future problem and adopted a forward-
looking solution, rather than setting up an issue we may have to 
react to in the future.
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    \4\ Id. at 7.

[FR Doc. 2024-10342 Filed 5-22-24; 8:45 am]
BILLING CODE 6351-01-P