Who's in and who's out? CFTC and SEC finalize the swap entity definitions

Purpose - The purpose of this paper is to explain a final rule adopted by the SEC and the CFTC that clarifies Dodd-Frank Act definitions for the new terms "swap dealer," "security-based swap dealer," "major swap participant" and "major security-based swap participa...

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Bibliographic Details
Published in:The journal of investment compliance 2012-12, Vol.13 (4), p.25-36
Main Authors: Nolan, Anthony R.G, Gault-Brown, Susan I, Patent, Lawrence B
Format: Article
Language:English
Subjects:
Commodity futures
Conflicts of interest
Credit default swaps
Derivatives
Federal regulation
Futures trading
Hedging
Interest rate swaps
Regulation of financial institutions
Securities regulations
Swap arrangements
Wall Street Reform & Consumer Protection Act 2010-US
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Description
Summary:Purpose - The purpose of this paper is to explain a final rule adopted by the SEC and the CFTC that clarifies Dodd-Frank Act definitions for the new terms "swap dealer," "security-based swap dealer," "major swap participant" and "major security-based swap participant (together "regulated swap entities"), and an amended definition of the term "eligible contract participant," and the implications of those definitions.Design methodology approach - The paper explains the definitions of "swap dealer," "security-based swap dealer," "major swap participant" and "major security-based swap participant" and how those definitions affect market participants; extraterritorial reach of regulated swap entity regulation; and the amended definition of the term "eligible contract participant."Findings - The adoption of the Final Rule is important to swap market participants because it provides firm definitional guidance on the criteria that make one a regulated swap entity subject to registration with the CFTC and or the SEC and the many responsibilities, obligations, and restrictions that come with substantive regulation, including capital and margin requirements, business conduct rules, conflict of interest rules, chief compliance officer requirements, reporting obligations, and recordkeeping requirements.Originality value - The paper provides practical guidance from experienced financial services lawyers.
ISSN:1528-5812
1758-7476
DOI:10.1108/15285811211284100