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

Abstract

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.

Citation

Nolan, A.R.G., Gault‐Brown, S.I. and Patent, L.B. (2012), "Who's in and who's out? CFTC and SEC finalize the swap entity definitions", Journal of Investment Compliance, Vol. 13 No. 4, pp. 25-36. https://doi.org/10.1108/15285811211284100