Clifford Chance
CFTC and SEC Adopt Final Entity Defintion Rules for Swap Dealers, Major Swap Participants and Eligible Contract Participants
29 May 2012
In a key step in the implementation of OTC derivative regulations in the US, the Commodity Futures Trading Commission ("CFTC") and Securities and Exchange Commission ("SEC" and together, the "Commissions") adopted final rules ("Final Rules") adding further details to and guidance on the definitions of:
- swap dealer ("SD")
- security-based swap dealer ("SBSD"),
- major swap participant ("MSP"),
- major security-based swap participant ("MSBSP"), and
- eligible contract participant ("ECP")
as required under the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank Act").
While the CFTC and the SEC generally declined to create categorical exclusions from the entity definitions, they did establish de minimis thresholds for determination of SD and SBSD status and established thresholds for the tests determining MSP and MSBSP status. In this discussion we focus on each of the three main entity definitions adopted by the Commissions as well as the exclusions and safe harbours described in the Final rules and interpretive guidance that was included in the adopting release ("Interpretive Guidance").
The Final Rules will be effective 60 days after publication in the Federal Register. However, registration as an SD or MSP will not be required until the CFTC's final rule defining the term "swap", which has not yet been issued, becomes effective. Registration as an SBSD or MSBSP will not be required until a date to be specified in the SEC's registration rule, which has not yet been issued.
