Swap Dealer/MSP Capital Requirements Proposal
Summary
SIFMA, the Futures Industry Association (FIA), and the International Swaps and Derivatives Association (ISDA) provide comments to the Commodity Futures Trading Commission (CFTC) on the CFTC’s capital requirement proposal for swap dealers and major swap participants (MSPs) as required under Sections 731 and 764 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act).
This letter encourages the CFTC to reconsider certain elements of the Proposal, including the level of the minimum capital requirements, the conditions under which Swap Entities can use models to calculate capital requirements and the methodologies employed for capital calculations when models are not allowed.
Excerpt
Mr. David A. Stawick
Secretary
Commodity Futures Trading Commission
Three Lafayette Centre
1155 21st Street, N.W.
Washington, D.C. 20581
Dear Mr. Stawick:
The Futures Industry Association (the “FIA”)1 , the International Swaps and Derivatives Association (“ISDA”)2 and the Securities Industry and Financial Markets Association3 (“SIFMA” and, together with the FIA and ISDA, the “Associations”) appreciate the opportunity to provide the Commodity Futures Trading Commission (the “Commission”) with comments on
the Commission’s capital requirement proposal (the “Proposal”)4 for swap dealers and major swap participants (collectively, “Swap Entities”) as required under Sections 731 and 764 of the
Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”). The Associations represent many financial institutions that will become Swap Entities under DoddFrank and that, as a result, will need to comply with the Commission’s capital rules.
The Associations generally support those aspects of the Proposal that incorporate the Commission’s existing regulations and the existing regulations of the Securities and Exchange Commission (“SEC”) and the Federal Reserve Board (“FRB”). By doing so, the Commission avoids duplicative capital regulation and ensures consistent treatment across complex financial
institutions. For example, the Proposal does not apply additional capital requirements to those entities already subject to capital requirements of a prudential regulator or to those entities that become systemically important financial institutions (“SIFIs”) subject to capital regulation by the FRB. In addition, the application of bank holding company (“BHC”) capital requirements for Swap Entities that are not prudentially regulated and are not futures commission merchants (“FCMs”), but are subsidiaries of BHCs, promotes consistent capital treatment across these complex institutions and avoids complicated entity restructuring for capital purposes.