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Vol. 77 Thursday,
No. 134 July 12, 2012
Part II
Commodities Futures Trading Commission
17 CFR Part 1
Cross-Border Application of Certain Swaps Provisions of the Commodity
Exchange Act; Proposed Rule
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COMMODITY FUTURES TRADING • Federal eRulemaking Portal: http:// A. The Dodd-Frank Wall Street Reform and
COMMISSION www.regulations.gov. Follow the Consumer Protection Act
instructions for submitting comments. B. Scope of the Proposed Interpretive
17 CFR Chapter I Guidance and Policy Statement
Please submit your comments using II. Consideration of Whether a Non-U.S.
RIN 3038–AD57 only one method. Person Is a Swap Dealer or Major Swap
All comments must be submitted in Participant
Cross-Border Application of Certain English, or if not, accompanied by an A. Analysis of Section 2(i)
Swaps Provisions of the Commodity English translation. Comments will be B. Interpretation of the Term ‘‘U.S. Person’’
Exchange Act C. Definitions and Registration Thresholds
posted as received to www.cftc.gov. You
1. Background
should submit only information that 2. Swap Dealer
AGENCY: Commodity Futures Trading you wish to make available publicly. If
Commission. i. Aggregation of Swaps
you wish the Commodity Futures ii. Regular Business
ACTION: Proposed interpretive guidance Trading Commission to consider 3. Major Swap Participant
and policy statement. information that you believe is exempt i. Aggregation of Positions
from disclosure under the Freedom of 4. Relevance of Guarantees
SUMMARY: The Commodity Futures 5. Summary
Information Act, a petition for
Trading Commission (‘‘Commission’’ or D. Branches, Agencies, Affiliates and
confidential treatment of the exempt
‘‘CFTC) is publishing for public Subsidiaries of U.S. Swap Dealers and
information may be submitted according U.S. Branches, Agencies, Affiliates, and
comment this proposed interpretive
to the procedures established in § 145.9 Subsidiaries of Non-U.S. Swap Dealers
guidance and policy statement regarding
of the Commission’s regulations.1 III. Cross-Border Application of the CEA’s
the cross-border application of the
Throughout this proposed interpretive Swap Provisions
swaps provisions of the Commodity
guidance, the Commission requests A. Principles of International Comity
Exchange Act (‘‘CEA’’) that were B. Application of Swap Provisions to Non-
comment in response to specific
enacted by Title VII of the Dodd-Frank U.S. Swap Dealers and Foreign Branches,
questions set out herein. For
Wall Street Reform and Consumer Agencies, Subsidiaries and Affiliates of
convenience, the Commission has
Protection Act, and the Commission’s U.S. Swap Dealers
numbered each of these requests for
regulations promulgated thereunder. 1. Regulatory Categories
comment. The Commission asks that, in 2. Entity-Level Requirements
Specifically, this proposed interpretive
submitting responses to these requests i. Capital Requirements
guidance and policy statement describes
for comment, commenters kindly ii. Chief Compliance Officer
the following: The general manner in
identify the specific number of each iii. Risk Management
which the Commission will consider
request to which their comments are iv. Swap Data Recordkeeping
whether a person’s swap dealing v. Swap Data Reporting
responsive.
activities or swap positions may require The Commission reserves the right, vi. Physical Commodity Swaps Reporting
registration as a swap dealer or major but shall have no obligation, to review, 3. Transaction-Level Requirements
swap participant, respectively, and the pre-screen, filter, redact, refuse or i. Clearing and Swap Processing
application of the related requirements remove any or all of your submission ii. Margin and Segregation Requirements
under the CEA to swaps involving such for Uncleared Swaps
from www.cftc.gov that it may deem to iii. Mandatory Trade Execution
persons; and the application of the be inappropriate for publication, such as
clearing, trade execution, and certain iv. Swap Trading Relationship
obscene language. All submissions that Documentation
reporting and recordkeeping provisions have been redacted or removed that v. Portfolio Reconciliation and
under the CEA, to cross-border swaps contain comments on the merits of the Compression
involving one or more counterparties proposal will be retained in the public vi. Real-Time Public Reporting
that are not swap dealers or major swap comment file and will be considered as vii. Trade Confirmation
participants. This proposed interpretive required under the Administrative viii. Daily Trading Records
guidance and policy statement also Procedure Act 2 and other applicable ix. External Business Conduct Standards
generally describes the policy and 4. Application of the Entity-Level
laws, and may be accessible under the Requirements
procedural framework under which the Freedom of Information Act.3
Commission may permit compliance 5. Application of the Transaction-Level
FOR FURTHER INFORMATION CONTACT: Requirements
with a comparable regulatory
Carlene S. Kim, Assistant General i. Clearing and Swap Processing, Margin
requirement of a foreign jurisdiction to (and Segregation), Trade Execution,
substitute for compliance with the Counsel, Office of General Counsel,
(202) 418–5613, ckim@cftc.gov; Gary Swap Trading Relationship
requirements of the CEA. Documentation, Portfolio Reconciliation
Barnett, Director, Division of Swap
DATES: Comments must be received on and Compression, Real-Time Public
Dealer and Intermediary Oversight, Reporting, Trade Confirmation, and
or before August 27, 2012. (202) 418–5977, gbarnett@cftc.gov; Daily Trading Records
ADDRESSES: You may submit comments, Jacqueline H. Mesa, Director, Office of ii. External Business Conduct Standards
identified by RIN number 3038–AD57, International Affairs, (202) 418–5386, C. Substituted Compliance
by any of the following methods: jmesa@cftc.gov; Commodity Futures 1. Entity-Level Requirements
• The agency’s Web site: at http:// Trading Commission, Three Lafayette 2. Transaction-Level Requirements
comments.cftc.gov. Follow the Centre, 1155 21st Street NW., D. Application of Entity-Level and
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instructions for submitting comments Washington, DC 20581. Transaction-Level Requirements to
through the Web site. Branches, Agencies, Affiliates, and
SUPPLEMENTARY INFORMATION:
• Mail: David A. Stawick, Secretary of Subsidiaries of U.S. Swap Dealers
Table of Contents 1. Foreign Branches and Agencies of U.S.
the Commission, Commodity Futures
Swap Dealers
Trading Commission, Three Lafayette I. Background 2. Foreign Affiliates and Subsidiaries of
Centre, 1155 21st Street NW., U.S. Swap Dealers
Washington, DC 20581. 1 17 CFR 145.9. IV. Process for Comparability Determinations
• Hand Delivery/Courier: Same as 25 U.S.C. 551, et seq. A. Overview
mail above. 3 5 U.S.C. 552. 1. Scope of Review
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2. Process on certain underlying securities, which, through liquidity puts, a form of a
3. Clearing because AIGFP’s performance on such guarantee. When the SIVs’ funding was
V. Cross-Border Application of the CEA’s credit default swaps had been exhausted, Citigroup ultimately
Swap Provisions to Transactions
guaranteed by its parent, caused credit assumed approximately $49 billion of
Involving Other (Non-Swap Dealer and
Non-MSP) Market Participants agencies to downgrade the credit rating debt directly onto its balance sheet.10
A. Cross-Border Transactions With U.S. of the entire AIG corporation. The Similarly, in 2007, Bear Stearns found
Persons downgrade triggered collateral calls and itself exposed to the failings of two
B. Clearing, Trade Execution, Real-Time resulted in a liquidity crisis at AIG, overseas hedge funds, Bear Stearns
Public Reporting, Large-Trader which ultimately necessitated over $85 High-Grade Structured Credit Strategies
Reporting, SDR Reporting, and Swap billion of indirect assistance from the Master Fund, Ltd. and Bear Stearns
Data Recordkeeping Federal Reserve Bank of New York to High-Grade Structured Credit Strategies
I. Background prevent AIG’s default. Enhanced Leverage Master Fund, Ltd.11
The Lehman Brothers Holding Inc. The funds were incorporated in the
A. The Dodd-Frank Wall Street Reform (‘‘LBHI’’) bankruptcy offers another Cayman Islands as exempted liability
and Consumer Protection Act stark lesson on how risks can spread companies, with registered offices in the
In the fall of 2008 a series of large quickly across the affiliated entities of a Cayman Islands. However, when the
financial institution failures triggered a multinational financial institution, funds collapsed under the weight of
financial and economic crisis that ultimately causing the collapse of the their significant investments in
threatened to freeze U.S. and global entire financial institution. LBHI was a subprime mortgages, Bear Stearns bailed
credit markets. As a result, U.S.-based multinational corporation, out the funds.
unprecedented governmental with various affiliates and subsidiaries A decade before the AIG and Lehman
intervention was required to ensure the operating globally, including Lehman collapses, a hedge fund advised by
stability of the U.S. financial system.4 Brothers International (Europe) Long-Term Capital Management L.P.
These failures revealed the vulnerability (‘‘LBIE’’). (‘‘LTCM’’) nearly failed, leading a
of the U.S. financial system and The Lehman global business and number of creditors to provide LTCM
economy to wide-spread systemic risk operations relied on ‘‘highly integrated, substantial financial assistance under
resulting from, among other things, poor trading and non-trading relationships the supervision of the Federal Reserve
risk management practices of financial across the group.’’ 7 The affiliates and Bank of New York. LTCM was based in
firms, the lack of supervisory oversight subsidiaries within the group provided Greenwich, Connecticut but managed
for certain financial institutions as a each other with more than equity trades in Long-Term Capital Portfolio
whole, and the interconnectedness of investments and capital. They provided LP, a partnership registered in the
the global swap business.5 each other with treasury functions, Cayman Islands. This hedge fund, with
American International Group custodial arrangements, depository approximately $4 billion in capital and
(‘‘AIG’’) is a prime example of how the functions, trading facilitation, swaps, a balance sheet of just over $100 billion,
stability of a large financial institution funding, management, information had a swap book in excess of $1 trillion
could be undermined by its activities technology and other operational notional. More recently, J.P. Morgan
abroad and how the entire U.S. financial services. Most notably, many of LBIE’s Chase & Co. (‘‘J.P. Morgan’’), the largest
system could be threatened as a result.6 obligations under its swaps with certain U.S. bank, has disclosed a multi-billion
AIG was a regulated U.S. insurance counterparties were guaranteed by the dollar trading loss stemming from its
company nearly undone by its collateral ultimate holding company, LBHI. In Chief Investment Office located in
posting obligations under swaps entered fact, at the time of default, LBIE had an London.12 The significant reported
into by its subsidiary, AIG Financial estimated 130,000 OTC derivatives losses at J.P. Morgan are a reminder of
Products (‘‘AIGFP’’). AIGFP was trades outstanding, most of which were a key lesson from the failures of AIG
headquartered in Connecticut and had guaranteed by LBHI.8 and Lehman: A regulatory gap or lapse
major operations in London, with trades There are other parallels. In the many within any part of a financial institution
routed through Banque AIG, a French events leading up to the 2008 crisis, can lead to the failure of the entire
bank. AIGFP suffered enormous losses Citigroup, like many other financial institution.
from credit default swaps that it issued institutions, utilized numerous As these examples illustrate,
structured investment vehicles (‘‘SIVs’’) corporate structures and inter-affiliate
4 On October 3, 2008, President Bush signed the to shift certain activities off balance obligations may cause the activity,
Emergency Economic Stabilization Act of 2008, sheets and manage both capital regardless of where that activity takes
which was principally designed to allow the U.S. requirements and reported accounting.9 place, to have a direct and significant
Treasury and other government agencies to take
action to restore liquidity and stability to the U.S. Citigroup stood behind these vehicles connection with activities in, or effect
financial system (e.g., the Troubled Asset Relief
Program—also known as TARP—under which the 7 ‘‘The global nature of the Lehman business with 10 See, e.g., Financial Times, Citi launches $49bn
U.S. Treasury was authorized to purchase up to highly integrated, trading and non-trading SIV rescue (Dec. 14, 2007), available at http://
$700 billion of troubled assets that weighed down relationships across the group led to a complex www.ft.com/intl/cms/s/0/6626b45e-a9dd-11dc-
the balance sheets of U.S. financial institutions). series of inter-company positions being outstanding aa8b-0000779fd2ac.html#axzz1yMOOB81b
See Public Law 110–343, 122 Stat. 3765 (2008). at the date of Administration. There are over 300 MarketWatch. Citigroup says it will absorb SIV
5 See Financial Crisis Inquiry Commission, ‘‘The debtor and creditor balances between LBIE and its assets (Dec. 14, 2007), available at http://
Financial Crisis Inquiry Report: Final Report of the affiliates representing $10.5B of receivables and articles.marketwatch.com/2007-12-14/news/
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National Commission on the Causes of the $11.0B of payables as at September 15 2008.’’ See 30679845_1_sivs-citigroup-ceo-vikram-pandit.
Financial and Economic Crisis in the United Lehman Brothers International (Europe) in 11 See In Re: Bear Sterns High-Grade Structured
States,’’ Jan. 2011, at xxvii, available at http:// Administration, Joint Administrators’ Progress Credit Strategies Master Funds, LTC, 374 B.R. 122
www.gpo.gov/fdsys/pkg/GPO-FCIC/pdf/GPO- Report for the Period 15 September 2008 to 14 (Bankr. S.D.N.Y. 2007), available at http://
FCIC.pdf. March 2009, available at: http://www.pwc.co.uk/ www.nysb.uscourts.gov/opinions/brl/
6 See, e.g., Gretchen Morgenson, ‘‘Behind assets/pdf/Ibie-progress-report-14049.pdf. 158971_25_opinion.pdf.
8 Id.
Insurer’s Crisis, Blind Eye to a Web of Risk,’’ N.Y. 12 See ‘‘Lehman Brothers International (Europe)
Times, Sept. 27, 2008. Corrected version published 9 See, e.g., Andrew Bary, ‘‘Of Citi and SIVs: Can in Administration, Joint Administrators’ Progress
Sept. 30, 2008, available at http:// Banks Plug the Leak?,’’ Barron’s, Oct. 22, 2007, Report for the Period 15 September 2008 to 14
www.nytimes.com/2008/09/28/business/ available at http://online.barrons.com/article/ March 2009,’’ available at: http://www.pwc.co.uk/
28melt.html?pagewanted=all. SB119284238641065650.html. assets/pdf/Ibie-progress-report-14049.pdf.
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on, commerce in the U.S. In many of the financial and operational stresses that B. The Scope of the Proposed
largest financial institutions, the overall contributed to the 2008 financial crisis. Interpretative Guidance and Policy
business operates as a tightly integrated Efforts to regulate the swaps market Statement
network of business lines and services are underway not only in the United In light of the global nature of the
conducted through various branches or States, but also abroad in the wake of swap market, the extent to which the
affiliated legal entities which are under the 2008 financial crisis. In 2009, Dodd-Frank Act’s requirements will
the unified management of the parent leaders of the Group of 20 (‘‘G20’’) apply to cross-border activities is
entity.13 These large financial whose membership includes the critically important. U.S. market
institutions effectively operate their European Union (‘‘EU’’), the United participants regularly enter into swaps
businesses as a single business, by States, and 18 other countries—agreed with other market participants that are
virtue of the relationship with the that: (i) OTC derivatives contracts domiciled outside of the U.S. or
parent company and to each other, with should be reported to trade repositories; incorporated in non-U.S. jurisdictions.18
the constituent parts inextricably linked (ii) all standardized OTC derivatives Many U.S. and non-U.S. domiciled or
to each other. The interconnected nature contracts should be cleared through incorporated financial institutions
of the relationships among the affiliated central counterparties and traded on conduct their swaps business across
entities within a corporate group means exchanges or electronic trading multiple jurisdictions, with swaps that
that a risk in any part of this group, platforms, where appropriate, by the are negotiated and executed by a branch
whether in the United States or abroad, end of 2012; and (iii) non-centrally or affiliate in one jurisdiction while the
can quickly spread throughout the cleared contracts should be subject to actual counterparty to the swap is an
organization and jeopardize the higher capital requirements. In line with entity in another jurisdiction.
financial integrity of the entire group. the G20 commitment, much progress The Commission received numerous
Congress sought to address the has been made to coordinate and comments during the Dodd-Frank Act
deficiencies in the regulatory system harmonize international reform efforts, rulemaking process from interested
that contributed to the financial crisis but the pace of reform varies among parties concerning the application of
through the enactment of the Dodd- jurisdictions and disparities in Title VII of the Dodd-Frank Act and the
Frank Wall Street Reform and Consumer regulations remain due to differences in Commission’s implementing regulations
Protection Act (‘‘Dodd-Frank Act’’), cultures, legal and political traditions, thereunder to the cross-border activities
which was signed by President Obama and financial systems.17 of non-U.S. and U.S. market
on July 21, 2010.14 Title VII of the Dodd- 17 Legislatures and regulators in a number of
participants.19 The key issues raised by
Frank Act amended the CEA 15 to foreign jurisdictions are undertaking significant
overhaul the structure and oversight of regulatory reforms over the swaps market and its (‘‘FIEA’’) in May 2010. See Outline of the bill for
the over-the-counter derivatives market participants. See CFTC and SEC, Joint Report on amendment of the Financial Instruments and
International Swap Regulation Required by Section Exchange Act, May 2010, available at http://
that previously had been subject to little www.fsa.go.jp/en/refer/diet/174/01.pdf.
719(c) of the Dodd-Frank Wall Street Reform and
or no oversight. One of the cornerstones Consumer Protection Act, Jan. 31, 2012, at 23, 18 See Bank of International Settlements (BIS),
of this legislation is the establishment of available at http://www.cftc.gov/ucm/groups/ Committee on the Global Financial System, No. 46,
a new statutory framework for public/@swaps/documents/file/ The macro financial implications of alternative
dfstudy_isr_013112.pdf. configurations for access to central counterparties
comprehensive regulation of financial in OTC derivatives markets, Nov. 2011, at 1,
For example, the European Parliament adopted
institutions that participate in the swaps the substance of the European Market Infrastructure available at http://www.bis.org/publ/cgfs46.pdf
market as swap dealers or major swap Regulation (‘‘EMIR’’) on March 29, 2012. See (‘‘The configuration of access must take account of
Proposal for a Regulation of the European the globalized nature of the market, in which a
participants (‘‘MSPs’’), which must significant proportion of OTC derivatives trading is
Parliament and of the Council on OTC derivatives,
register and are subject to greater central counterparties and trade repositories— undertaken across borders.’’).
oversight and regulation.16 A key goal of Outcome of the European Parliament’s first reading 19 See, e.g., Institute of International Bankers
this new framework for swap dealers (Brussels, 28 to 29 March 2012), available at (‘‘IIB’’) (Jan. 10, 2011); International Swaps and
http://register.consilium.europa.eu/pdf/en/12/st06/ Derivatives Association (‘‘ISDA’’) (Feb. 22, 2011),
and MSPs is to minimize the potential Securities Industry and Financial Markets
st06399.en12.pdf.
for the recurrence of the type of In December 2010, the European Commission Association (‘‘SIFMA’’) (Feb. 3, 2011), Cleary
released a public consultation on revising the Gottlieb Steen & Hamilton LLP (‘‘Cleary’’) (Sept. 20,
13 Typically, the various business lines and Markets in Financial Instruments Directive 2011), and Barclays Bank PLC, BNP Paribas S.A.,
services—while conducted out of separate legal (‘‘MiFID’’). See ‘‘European Commission Public Credit Suisse AG, Deutsche Bank AG, HSBC,
entities—are highly integrated and inter-dependent. Consultation: Review of the Markets in Financial Nomura Securities International, Inc., Rabobank
Instruments Directive,’’ Dec. 8, 2010, available at Nederland, Royal Bank of Canada, The Royal Bank
Key strategic and operational decisions are
http://ec.europa.eu/internal_market/consultations/ of Scotland Group PLC, Société Générale, The
centralized and informed by the firm’s global,
docs/2010/mifid/consultation_paper_en.pdf. Toronto-Dominion Bank, and UBS AG (‘‘Twelve
group-wide perspective. The individual legal
In October 2011, the European Commission Foreign Banks’’) (Feb. 17, 2011). In total, the
entities affiliates and subsidiaries share common
released two public consultations, one to revise Commission received approximately 120 comment
corporate support functions, such as treasury,
MiFID and the other for creating a new regulation letters (submitted in response to various proposed
custodial, brokerage and depository services and
entitled the Markets in Financial Instruments rules implementing the Dodd-Frank Act) that
related infrastructures. The affiliated entities within
Regulation (‘‘MiFIR’’). See ‘‘European Commission addressed or raised issues related to cross-border
the corporate group may also provide funding or
Proposal for a Directive of the European Parliament swap activities. These letters, received by the
credit support for each other and enter into trades
and of the Council on markets in financial Commission in response to various Commission
with each other. In large part, this consolidated rulemakings, may be found on the Commission’s
structure is necessary to allow the firm to address instruments repealing Directive 2004/39/EC of the
European Parliament and of the Council,’’ COM Web site at http://www.cftc.gov/LawRegulation/
and manage customer needs, funding opportunities, DoddFrankAct/Rulemakings/index.htm.
(2011) 656 final (Oct. 20, 2011), available at
capital and other regulatory requirements, financial
http://ec.europa.eu/internal_market/securities/ In addition, the Commission and the Securities
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accounting and tax planning, among other things.
14 Public Law 111–203, 124 Stat. 1376 (2010). The
docs/isd/mifid/COM_2011_656_en.pdf; ‘‘European and Exchange Commission (‘‘SEC’’) held a joint
Commission Proposal for a Regulation of the public roundtable on August 1, 2011 on
text of the Dodd-Frank Act may be accessed at European Parliament and of the Council on markets international issues relating to the implementation
http://www.cftc.gov/ucm/groups/public/@swaps/ in financial instruments and amending regulation of Title VII of the Dodd-Frank Act (‘‘Roundtable’’).
documents/file/hr4173_enrolledbill.pdf. [EMIR] on OTC derivatives, central counterparties During the Roundtable, commenters discussed the
15 7 U.S.C. 1, et seq.
and trade repositories,’’ COM (2011) 652 final (Oct. impact of the various requirements on their cross-
16 In this proposed interpretative guidance and 20, 2011), available at http://ec.europa.eu/ border activities. A copy of the transcript from the
policy statement, the provisions of the CEA relating internal_market/securities/docs/isd/mifid/ Roundtable can be found on the Commission’s Web
to swaps that were enacted by Title VII of the Dodd- COM_2011_652_en.pdf. site at http://www.cftc.gov/ucm/groups/public/
Frank Act are also referred to herein as ‘‘the Dodd- The Japanese legislature passed the Amendment @swaps/documents/dfsubmission/
Frank requirements.’’ to the Financial Instruments and Exchange Act dfsubmission21_080111-trans.pdf.
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the commenters include (i) the nature of In this proposed interpretive guidance applicable statutory and regulatory
the connections to the United States that and policy statement (‘‘proposed requirements under Title VII of the
would require a non-U.S. person to interpretive guidance’’), the Dodd-Frank Act.25 In section IV, the
register as a swap dealer or MSP under Commission addresses the key issues Commission generally describes a
the CEA and the Commission’s raised by the commenters with respect process by which a non-U.S. applicant
regulations; 20 (ii) which Dodd-Frank to the application of Title VII of the for swap dealer or MSP registration may
Act requirements apply to the swap Dodd-Frank Act and the Commission’s seek the Commission’s recognition of
activities of non-U.S. persons, U.S. rules promulgated thereunder to cross- substituted compliance with a
persons, and their branches, agencies, border swaps and activities. Following comparable foreign regulatory
subsidiaries and affiliates outside of the the background discussion in Section I, requirement and the general scope of
United States; 21 and (iii) to the extent the Commission sets out its proposed Commission review in making the
that Title VII of the Dodd-Frank interpretive guidance in the subsequent requisite comparability finding. Section
requirements would apply, the three sections. Section II sets forth the V sets forth the manner in which the
circumstances under which the Commission’s proposed interpretation Commission proposes to interpret
Commission would consider permitting of its authority to apply the Dodd-Frank section 2(i) of the CEA as it applies to
a non-U.S. person to comply with the Act and its regulations extraterritorially the clearing, trading, and certain
regulatory regime of its foreign under section 2(i) of the CEA.23 Section reporting requirements under the Dodd-
jurisdiction instead of complying with II also describes the general manner in Frank Act with respect to swaps
the Dodd-Frank Act and the which the Commission proposes to between counterparties that are not
Commission’s regulations promulgated consider the following: (i) Whether a swap dealers or MSPs.
thereunder.22 non-U.S. person’s swap dealing The Commission clarifies that this
activities are sufficient to require proposed interpretive guidance does not
20 Commenters agreed generally that non-U.S. registration as a ‘‘swap dealer,’’ as establish or modify any person’s rights
persons engaged in swap dealing activity directly further defined in a joint release
with U.S. counterparties should be registered with
and obligations under the CEA or the
the Commission as swap dealers. See, e.g., Cleary
adopted by the Commission and the Commission’s regulations promulgated
(Sept. 20, 2011). On the other hand, according to SEC (collectively, the ‘‘Commissions’’); thereunder. The Commission notes that
commenters, swap dealing conducted outside of the (ii) whether a non-U.S. person’s swap the proposed interpretive guidance does
U.S. between non-U.S. persons is not sufficiently positions are sufficient to require
connected to the U.S. to warrant swap dealer not limit the applicability of any CEA
registration. See, e.g., Twelve Foreign Banks (Feb. registration as a ‘‘major swap provision or Commission regulation to
17, 2011); SIFMA (Feb. 3, 2011). Commenters also participant,’’ as further defined in a any person, entity or transaction except
said that a non-U.S. person that limits its U.S. swap joint release adopted by the as provided herein.
activity to U.S. persons that are registered as swap Commissions; and (iii) the treatment for
dealers should not have to register, because II. Consideration of Whether a Non-U.S.
regulation of the U.S. registered swap dealer is registration purposes of foreign
sufficient. See Bank of Tokyo-Mitsubishi UFJ Ltd., branches, agencies, affiliates, and Person Is a Swap Dealer or Major Swap
Mizuho Corporate Bank Ltd., Sumitomo Mitsui subsidiaries of U.S. swap dealers and of Participant
Banking Corporation (‘‘Japanese Banks’’) (May 5, U.S. branches of non-U.S. swap
2011) and Twelve Foreign Banks (Feb. 17, 2011). A. Section 2(i) of the CEA
21 See, e.g., Cleary (Sept. 20, 2011) IIB (Jan. 10, dealers.24
Section III sets forth the manner in Section 722(d) of the Dodd-Frank Act
2011) and SIFMA (Feb. 3, 2011). Generally
speaking, these commenters urged that the which the Commission proposes to amends section 2 of the CEA 26 to add
Commission adopt a framework that preserves the interpret section 2(i) of the CEA as it a new paragraph (i) entitled
strengths of existing market practices and home
applies to the requirements under Title ‘‘Applicability,’’ which consists of two
country supervision, while avoiding regulatory subsections. Specifically, section 2(i)
duplication, unrealistic extraterritorial supervisory VII of the Dodd-Frank Act and the
responsibilities, and fragmentation of the swap Commission’s regulations promulgated states that the provisions added to the
markets. See, e.g., IIB (Jan. 10, 2011) and SIFMA thereunder to swaps and activities of CEA by Title VII of the Dodd-Frank Act
(Feb. 3, 2011). According to these commenters, shall not apply to activities outside the
entities outside the United States should comply non-U.S. swap dealers, non-U.S. MSPs
with rules adopted under the Dodd-Frank Act with and foreign branches, agencies, United States unless those activities—
respect to requirements applicable to specific affiliates, and subsidiaries of U.S. swap (1) have a direct and significant
swaps, but should be subject to home country dealers. In section III, the Commission connection with activities in, or effect
supervision by their home country regulators with on, commerce of the United States; or
respect to requirements applicable at the entity also proposes to permit a non-U.S. swap
level. On the other hand, other commenters said dealer or non-U.S. MSP to comply with (2) contravene such rules or
that a U.S. entity must not be able to conduct swap comparable foreign regulatory regulations as the Commission may
business with non-U.S. persons free from regulation
requirements in order to satisfy prescribe or promulgate as are necessary
under the Dodd-Frank Act by establishing a non- or appropriate to prevent the evasion of
U.S. affiliate and conducting the swap business
through the affiliate. See Better Markets, Inc. (Jan. Frank Act requirements that potentially apply to all any provision of this Act that was
24, 2011). swap market participants, not just registered swap enacted by the Wall Street Transparency
22 See, e.g., Seven Foreign Banks (Jan. 11, 2011) dealers and MSPs. For instance, commenters said and Accountability Act of 2010.27
and Hess (Jan. 24, 2011). Commenters stated that that when a non-U.S. person executes or clears a
swap on a U.S.-registered facility, the non-U.S. Section 2(i) provides the Commission
deference to comparable home country regulation
accords with principles of international comity and person should be subject to the Commission’s swap with express authority over activities
is consistent with the approach taken by U.S. position limit requirements. See US Banks (Feb. 22, outside the United States when such
banking regulators with respect to non-U.S. banks. 2011). Commenters said that clearing requirements swaps and activities have a ‘‘direct and
pmangrum on DSK3VPTVN1PROD with PROPOSALS2
See, e.g., FSR (Feb. 22, 2011), IIB (April 11, 2011), should not apply to swaps between two non-U.S.
persons, and that the regulators in various countries significant’’ connection with activities
Cleary (Sept. 20, 2011). Numerous commenters also
recommended that comparability should be should work together to recognize comparably-
regulated clearinghouses. See SIFMA (Feb. 3, 2011) 25 This proposed interpretative release does not
determined based on whether the home country
entity-level requirements are reasonably designed to and Seven Foreign Banks (Jan. 11, 2011). address the scope of the Commission’s authority
achieve the same policy objectives as the 23 7 U.S.C. 2(i). under CEA section 2(i) over non-swap agreements,
corresponding requirements under the Dodd-Frank 24 See Further Definition of ‘‘Swap Dealer,’’ contracts, transactions or markets within the
Act. See Cleary (Sept. 20, 2011). Commenters said ‘‘Security-Based Swap Dealer,’’ ‘‘Major Swap Commission’s jurisdiction or persons who
that the Commission should defer to the home Participant,’’ ‘‘Major Security-Based Swap participate in or operate those markets.
26 7 U.S.C. 2.
country, entity-level requirements only when they Participant’’ and ‘‘Eligible Contract Participant’’;
are comparable. Commenters also discussed Dodd- Final Rule, 77 FR 30596, May 23, 2012. 27 7 U.S.C. 2(i).
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in, or effect on, commerce of the United transaction-level requirements should transferred to or incurred by the U.S.
States or when they contravene such apply to swap transactions. person. Or stated differently, the risk of
rules as the Commission may Specifically, as proposed, the term the affiliate’s swap transactions have a
promulgate to prevent evasion of the ‘‘U.S. person’’ would include, but not be direct and significant connection to, or
provisions of Title VII of the Dodd- limited to: (i) Any natural person who effect on, the U.S. person that is the
Frank Act.28 Section 2(i) does not, is a resident of the United States; (ii) guarantor. Under these circumstances,
however, require the Commission to any corporation, partnership, limited notwithstanding that the U.S. person
extend its reach to the outer bounds of liability company, business or other may be subject to a robust regulatory
that authorization. Rather, in exercising trust, association, joint-stock company, regime, its financial stability may be put
its authority with respect to swap fund, or any form of enterprise similar at risk by activities outside the firm.
activities outside the United States, the to any of the foregoing, in each case that Accordingly, the Commission is
Commission will be guided by is either (A) organized or incorporated considering, and seeks comments on,
consideration of international comity under the laws of the United States or whether the term ‘‘U.S. person’’ should
principles. The subsections that follow having its principal place of business in be interpreted to include a foreign
address the general manner in which the United States 29 (‘‘legal entity’’) or affiliate or subsidiary guaranteed by a
the Commission will determine the (B) in which the direct or indirect U.S. person.
cross-border application of the CEA’s owners thereof are responsible for the Q1b.Several commenters have
swap provisions, consistent with section liabilities of such entity and one or more suggested that the Commission adopt
2(i) of the CEA. of such owners is a U.S. person; (iii) any the definition of ‘‘U.S. person’’ in the
individual account (discretionary or SEC’s Regulation S.30 Should the
B. Proposed Interpretation of the Term not) where the beneficial owner is a U.S. Commission interpret the term ‘‘U.S.
‘‘U.S. Person’’ person; (iv) any commodity pool, person’’ in a similar manner
pooled account, or collective investment notwithstanding that Regulation S has a
For purposes of this interpretive vehicle (whether or not it is organized different focus?
guidance, the Commission proposes to or incorporated in the United States) of Q1c. As an alternative to the proposed
interpret the term ‘‘U.S. person’’ by which a majority ownership is held, interpretation of the term ‘‘U.S. person,’’
reference to the extent to which swap directly or indirectly, by a U.S. should the Commission interpret the
activities or transactions involving one person(s); (v) any commodity pool, term to include a concept of control
or more such person have the relevant pooled account, or collective investment under which a non-U.S. person who is
effect on U.S. commerce. For example, vehicle the operator of which would be controlled by or under common control
this interpretation would help required to register as a commodity pool with a U.S. person would also be
determine whether non-U.S. persons operator under the CEA; (vi) a pension considered a U.S. person? If so, how
engaging in swap dealing transactions plan for the employees, officers, or should the Commission define the term
with ‘‘U.S. persons’’ in excess of the de principals of a legal entity with its ‘‘controlled by or under common
minimis level would be required to principal place of business inside the control?’’
register and regulated as a swap dealer. United States; and (vii) an estate or Q1d. Are there other examples of
In addition, for the same reasons, the trust, the income of which is subject to persons or interests that should be
term ‘‘U.S. person’’ can be helpful in United States income tax regardless of specifically identified as a ‘‘U.S.
determining the level of U.S. interest for source. person’’ in the final interpretive
purposes of analyzing and applying Under this interpretation, the term guidance?
principles of international comity when ‘‘U.S. person’’ generally means that a
considering the extent to which U.S. C. The Definitions and Registration
foreign branch or agency of a U.S. Thresholds
person would be covered by virtue of
28 A primary purpose of Title VII of the Dodd- the fact that it is a part, or an extension, 1. Background
Frank Act is to address risk to the U.S. financial of a U.S. person. By contrast, a foreign
system created by interconnections in the swaps The Commission adopted its final
market. Senator Blanche Lincoln, then Chairman of
affiliate or subsidiary of a U.S. person rulemaking further defining the terms
the Senate Agriculture Committee, noted: ‘‘In 2008, would be considered a non-U.S. person, ‘‘swap dealer’’ and ‘‘major swap
our Nation’s economy was on the brink of collapse. even where such an affiliate or participant’’ jointly with the SEC on
America was being held captive by a financial subsidiary has certain or all of its swap-
system that was so interconnected, so large, and so
April 18, 2012 (‘‘Final Entities
irresponsible that our economy and our way of life
related obligations guaranteed by the Rulemaking’’).31 In the Final Entities
were about to be destroyed.’’ Congressional Record U.S. person. Rulemaking, the Commissions, among
S5818, July 14, 2010, available at http:// other things, adopted final rules and
www.gpo.gov/fdsys/pkg/CREC-2010-07-14/pdf/
Request for Comment
CREC-2010-07-14.pdf. Senator Jeanne Shaheen
interpretive guidance implementing the
Q1. Please provide specific comments statutory definitions of the terms ‘‘swap
stated: ‘‘We need to put in place reforms to stop
Wall Street firms from growing so big and so
regarding the Commission’s proposed dealer’’ and ‘‘major swap participant’’ in
interconnected that they can threaten our entire interpretation of the term ‘‘U.S. person.’’ CEA sections 1a(49) and 1a(33).32 The
economy.’’ Congressional Record S5888, July 15, Q1a. In the Commission’s view, the
final rules and interpretive guidance
2010, available at http://www.gpo.gov/fdsys/pkg/ concerns regarding risks associated with
CREC-2010-07-15/pdf/CREC-2010-07-15-senate.pdf. delineate the activities that cause a
the affiliate group structure are
Senator Debbie Stabenow opined: ‘‘For too long the person to be a swap dealer and the level
heightened where a U.S. person
over-the-counter derivatives market has been of swap positions that cause a person to
pmangrum on DSK3VPTVN1PROD with PROPOSALS2
unregulated, transferring risk between firms and guarantees (or provides similar support)
be an MSP. In addition, the
creating a web of fragility in a system where entities to a foreign affiliate or subsidiary. In
became too interconnected to fail.’’ Congressional such situations, the risk of the swaps 30 See 17 CFR 230.902(k); SEC Release No. 33–
Record S5905, July 15, 2010, available at http://
www.gpo.gov/fdsys/pkg/CREC-2010-07-15/pdf/ executed abroad are effectively 6863, 55 FR 18306, May 2, 1990.
31 Further Definition of ‘‘Swap Dealer,’’
CREC-2010-07-15-senate.pdf. As these legislative
records indicate, Congress sought to ensure that the 29 The term ‘‘United States’’ means the United ‘‘Security-Based Swap Dealer,’’ ‘‘Major Swap
Commission would be able to effectively regulate States, its states, the District of Columbia, Puerto Participant,’’ ‘‘Major Security-Based Swap
activities in the swaps marketplace, wherever those Rico, the U.S. Virgin Islands, and any other Participant’’ and ‘‘Eligible Contract Participant;’’
activities may occur, that are significantly territories or possessions of the United States Final Rule, 77 FR 30596, May 23, 2012.
connected with or affect the U.S. financial system. government, its agencies or instrumentalities. 32 7 U.S.C. 1a(49) and 1a(33).
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Commissions adopted rules concerning The statutory definitions of swap interpretation and the Commission’s
the statutory exceptions from the dealer and MSP do not contain any Final Entities Rulemaking, the
definition of swap dealer, including a de geographic limitations and do not Commission proposes that non-U.S.
minimis exception.33 distinguish between U.S. and non-U.S. persons who engage in more than a de
Section 1.3(ggg)(4) of the swap dealers or non-U.S. MSPs.41 minimis level of swap dealing with U.S.
Commission’s regulations sets forth a de Similarly, the Final Entities Rulemaking persons would be required to register as
minimis threshold of swap dealing, does not contain any such limitations or swap dealers.43
which takes into account the notional distinctions. In this proposed The Commission does not propose,
amount of a person’s swap dealing interpretive guidance, the Commission however, that a non-U.S. person should
activity over the prior 12 months.34 interprets section 2(i) of the CEA as it include, in determining whether the de
When a person engages in swap dealing applies to the provisions in the CEA minimis threshold is met, the notional
transactions above that threshold, such related to swap dealers and MSPs and, value of dealing transactions with
person meets the definition of a swap accordingly, proposes the general foreign branches of registered U.S. swap
dealer under section 1a(49) of the manner in which the swap dealer and dealers. This is intended to address the
CEA,35 and is required to register as a MSP registration and related concerns of non-U.S. persons who may
swap dealer with the Commission under requirements apply to the activities of be required to register as a swap dealer,
CEA section 4s(b).36 Sections 1.3(jjj)(1) non-U.S. persons, and to the foreign notwithstanding the fact that their
and 1.3(lll)(1) of the Commission’s branches, agencies, subsidiaries and dealing activities with U.S. persons as
regulations set forth swap position affiliates of U.S. persons and U.S. counterparties are limited to foreign
thresholds for the MSP definition.37 branches of non-U.S. persons. branches of registered U.S. swap
When a person holds swap positions 2. Swap Dealer dealers. In such cases, the Dodd-Frank
above those thresholds, such person Act transactional requirements (or
meets the definition of an MSP under In enacting the swap dealer definition comparable requirement) would
section 1a(33) of the CEA,38 and is and the associated requirements for nevertheless apply to swaps with those
required to register as an MSP with the swap dealers Congress sought to ensure foreign branches and, thus, there is little
Commission under CEA section 4s(b).39 that those entities that engage in more concern that this exclusion could be
Once required to register as a swap than a de minimis level of swap dealing used to engage in swap activities
dealer or MSP, the person becomes be considered swap dealers, register, outside of the Dodd-Frank Act
subject to all of the requirements and be regulated as swap dealers.42 In (comparable) requirements.
the Final Entities Rulemaking, the
imposed on swap dealers or MSPs Accordingly, the Commission believes
Commission established a notional
under Title VII, respectively, including that it would be appropriate and
threshold for determining whether a
but not limited to sections 2(a)(13), 4r, consistent with section 2(i) to allow
person engages in more than a de
and 4s of the CEA,40 which require non-U.S. persons to conduct swap
minimis level of swap dealing and
swap dealers and MSPs to comply with dealing activities with registered U.S.
therefore must register as a swap dealer.
various prudential, business conduct, swap dealers outside the United States
The Commission proposes that the level
reporting, clearing, and trading (through their foreign branches),
of swap dealing that is substantial
requirements. Unless a swap dealer or without triggering registration as a swap
enough to require a person to register as
MSP applies for and is granted a limited dealer as a result.
a swap dealer when conducted by a U.S.
designation, all of the swap dealer’s or person also constitutes a ‘‘direct and i. Aggregation of Swaps
MSP’s swap activities are subject to significant connection’’ within the
such requirements, not only the swap The Commission notes that section
meaning of section 2(i)(1) of the CEA
activities that trigger the registration 1.3(ggg)(4) of the Commission’s
when such dealing activities are
requirement. regulations requires that a person
conducted by a non-U.S. person with
include, in determining whether its
U.S. persons as counterparties.
33 Section 1a(49)(D) of the CEA (7 U.S.C. swap dealing activities exceed the de
Accordingly, consistent with this
1a(49)(D)) provides that ‘‘[t]he Commission shall minimis threshold, the aggregate
exempt from designation as a swap dealer an entity notional value of swap dealing
41 The statutory definition of MSP in CEA section
that engages in a de minimis quantity of swap
dealing in connection with transactions with or on 1a(33)(B) (7 U.S.C. 1a(33)(B)) does state, however, transactions entered into by its affiliates
behalf of its customers. The Commission shall that the Commission should consider the impact on under common control. It is the
promulgate regulations to establish factors with ‘‘the financial system of the United States’’ in Commission’s view that this provision
respect to the making of this determination to defining what constitutes a ‘‘substantial position’’
for purposes of the definition. The Commission
would require that a non-U.S. person, in
exempt.’’ This provision is implemented in section
1.3(ggg)(4) of the Commission’s regulations. believes that this proposed interpretative guidance, determining whether its swap dealing
34 The limitations associated with the de minimis which focuses on a non-U.S. person’s swap transactions exceed the de minimis
exception apply only in connection with a person’s positions with U.S. persons, is consistent with this threshold, include the aggregate
statutory directive.
dealing activities. See Final Entities Rulemaking at
42 The Commission does not believe it is
notional value of any swap dealing
Part II.D. As used in this release, the meaning of the transactions between U.S. persons and
term ‘‘swap dealing’’ is consistent with that used in necessary for purposes of this proposed interpretive
the Final Entities Rulemaking. guidance to determine whether such swaps or any of its non-U.S. affiliates under
35 7 U.S.C. 1a(49). activities between a non-U.S. person and a U.S. common control, and any swap dealing
36 7 U.S.C. 6s(b). See also Registration of Swap person are located within or outside of the United transactions of any of its non-U.S.
States. Regardless of whether the location of any
affiliates under common control where
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Dealers and Major Swap Participants, Final Rule 77
particular swap or activity is within or outside the
FR 2613, 2616, Jan. 19, 2012 (‘‘Final Registration
United States, the Commission proposes that it is
Rule’’).
37 See Final Entities Rulemaking at Parts IV.B.
the aggregate notional amount of such swap dealing 43 In the Final Entities Rulemaking, the
activities that is relevant for registration. Commissions codified exclusions from the dealer
and IV.E. Accordingly, the consideration of such swaps definition for swaps and security-based swaps
38 7 U.S.C. 1a(33).
within the meaning of CEA section 2(i) for the between majority-owned affiliates. The Commission
39 7 U.S.C. 6s(b). See also Final Registration Rule
purposes of this proposed guidance does not construes section 2(i) to apply such inter-affiliates
at 2616, Jan. 19, 2012, available at http:// necessarily mean that the Commission considers exclusion to swaps between a non-U.S. person and
www.cftc.gov/ucm/groups/public/ such activities to be outside of the United States. its U.S. affiliate or between two affiliated non-U.S.
@lrfederalregister/documents/file/2012-792a.pdf. See Final Entities Rulemaking at Part II.B.4. for persons. See section 1.3(ggg)(6)(i) of the
40 7 U.S.C. 2(a)(13), 6r, and 6s. what constitutes ‘‘swap dealing activities.’’ Commission’s regulations.
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the obligations of such non-U.S. engaged in swap dealing as part of ‘‘a the Commission’s Final Entities
affiliates are guaranteed by U.S. regular business’’ with respect to non- Rulemaking, a non-U.S. person who
persons.44 U.S. persons as counterparties. holds swap positions where a U.S.
The Commission is not proposing, The determination of whether a person is a counterparty above the
however, that a non-U.S. person should person is engaged in swap dealing specified MSP thresholds would qualify
include, in this determination, the activity involves application of the and register as an MSP.
notional value of dealing transactions in interpretive guidance in Part II.A.4. of
which its U.S. affiliates engage. Again, the Final Entities Rulemaking, which i. Aggregation of Positions
the Commission’s proposed provides for consideration of the In determining whether it is an MSP,
interpretation is that a direct and relevant facts and circumstances. a non-U.S. person would ‘‘count’’ all of
significant connection with activities in, Similarly, the Commission proposes its swap positions where its
or effect on, U.S. commerce, in these that the determination by a non-U.S. counterparty is a U.S. person, but would
circumstances, exists when non-U.S. person without a guarantee of whether not ‘‘count’’ any swap position where its
persons conduct more than a de it is engaged in swap dealing as part of counterparty is a non-U.S. person. As
minimis level of swap dealing activities ‘‘a regular business’’ with respect to U.S. with swap dealing transactions, a swap
with U.S. persons. In the case of an persons as counterparties (as opposed to between a non-U.S. person and a U.S.
affiliated group of non-U.S. persons its swap dealing activity with respect to person, or a swap between a non-U.S.
under common control, the Commission non-U.S. persons as counterparties) will person and another non-U.S. person
believes that all of the affiliated non- depend on consideration of the relevant under which the first non-U.S. person’s
U.S. persons should aggregate the facts and circumstances in light of the obligations are guaranteed by a U.S.
notional value of their swap dealing interpretive guidance in the Final person, in and of itself may have a
transactions with U.S. persons (and Entities Rulemaking. direct and significant connection with
their swap dealing transactions with activities in, or effect on, commerce of
non-U.S. persons in which such Request for Comment the United States within the meaning of
person’s obligations are guaranteed by Q2. Do commenters agree that in section 2(i) of the CEA. Similarly, for
U.S. persons), in order to determine, in determining whether it is a swap dealer, purposes of applying section 2(i) of the
effect, the level of swap dealing a non-U.S. person without a guarantee CEA to the MSP definition and
activities conducted by the affiliated from a U.S. person should consider associated requirements, the
group of non-U.S. persons in the whether it is engaged in swap dealing as Commission believes the appropriate
aggregate. However, since the focus is part of ‘‘a regular business’’ only with focus is on whether in the aggregate
on the level of activity conducted by respect to U.S. persons (as opposed to such swaps have a direct and significant
non-U.S. persons, swap dealing non-U.S. persons)? Why or why not? In connection with activities in, or effect
transactions of affiliated U.S. persons such an analysis, would it generally be on, U.S. commerce, rather than whether
should not be included.45 feasible for the non-U.S. person to each particular swap has such a
distinguish swap dealing activities with connection or effect.
ii. Regular Business
U.S. persons from swap dealing 4. Relevance of Guarantees
As stated in the Final Entities activities with non-U.S. persons and are
Rulemaking, a person is required to there any practical difficulties in this In the event of a default or insolvency
apply the de minimis test only if it approach? of a non-U.S. swap dealer with more
determines it is engaged in swap dealing than a de minimis level of swap dealing
activity under the rule further defining 3. Major Swap Participant with U.S. persons or a non-U.S. MSP
the term ‘‘swap dealer,’’ which excludes The MSP definition and associated with more than the threshold level of
swap activities that are not part of ‘‘a requirements for MSPs reflect Congress’ swap positions with U.S. persons, the
regular business.’’ A person that is not direction that any entity that holds swap swap dealer’s or MSP’s U.S.
engaged in swap dealing as part of ‘‘a positions above a level that could, counterparties could be adversely
regular business’’ is not required to among other things, ‘‘significantly affected. Such an event may adversely
apply the de minimis test and is not a impact the financial system of the affect numerous persons engaged in
swap dealer under the CEA. United States,’’ be considered an MSP commerce within the United States,
The Commission proposes that a non- and register and be regulated as an disrupt such commerce, and increase
U.S. person without a guarantee from a MSP.46 In the Final Entities risks of a widespread disruption to the
U.S. person applying the swap dealer Rulemaking, the Commission further financial system in the United States.
definition should determine first defined MSP to clarify when a person For that reason, the Commission has a
whether its swap activities with respect must register. The Commission believes significant regulatory interest in
to U.S. persons as counterparties qualify that the level of swap positions that is ensuring that the swap dealer or MSP is
as swap dealing activity under the rule substantial enough to require a person managing the risks of such swaps
further defining the term ‘‘swap dealer’’ to register as an MSP when held by a appropriately and ensuring that its U.S.
and the exclusion of swap activities that U.S. person, also constitutes a ‘‘direct counterparties receive the appropriate
are not part of ‘‘a regular business.’’ and significant connection’’ within the protections under the CEA.
Thus, for example, a non-U.S. person meaning of section 2(i) of the CEA when Similar effects on U.S. persons and on
without a guarantee that determines it is such positions reflect swaps between a the U.S. financial system may occur in
pmangrum on DSK3VPTVN1PROD with PROPOSALS2
not engaged in swap dealing as part of non-U.S. person and U.S. persons. the event of a default or insolvency of
‘‘a regular business’’ with respect to U.S. Consistent with this interpretation and a non-U.S. person with respect to a non-
persons as counterparties is not required de minimis level of swap dealing
to apply the de minimis test or to 46 CEA section 1a(33)(B), 7 U.S.C. 1a(33)(B). As is transactions, or swap positions above
register as a swap dealer. This would be the case with respect to swap dealers, the the MSP threshold, of the non-U.S.
Commission does not believe it is necessary, for person that are guaranteed by a U.S.
true even if the non-U.S. person were purposes of this proposed interpretative guidance,
to determine whether such swaps or activities
person. In these circumstances, and
44 See Final Entities Rulemaking at Part II.D.4. between a non-U.S. person and a U.S. person are regardless of whether the non-U.S.
45 See also 77 FR at 2616. located within or outside of the United States. person’s counterparty is a U.S. person or
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