On 24 September 2025, the United States Commodity Futures Trading Commission (US CFTC) issued a Notice of Proposed Rulemaking to revise specific business conduct and documentation requirements for swap dealers and major swap participants. The proposal aims to codify long-standing no-action relief issued by the US CFTC’s Market Participants Division and to harmonise United States regulations with parallel frameworks of the United States Securities and Exchange Commission (US SEC) and the Municipal Securities Rulemaking Board (MSRB). The amendments, if finalised, would alter obligations under 17 CFR Part 23 by eliminating certain disclosure requirements, introducing new definitional clarity, and revising swap trading relationship documentation rules. The US CFTC is inviting public comment on the proposal, with submissions due within thirty days of publication on the US CFTC’s website.
Understanding the US CFTC Proposal
The Federal Register Notice of Proposed Rulemaking: Revisions to Business Conduct and Swap Documentation Requirements for Swap Dealers and Major Swap Participants sets out amendments that address compliance challenges raised by swap entities over more than a decade. The proposal would:
- Provide exceptions to compliance when swaps are cleared contemporaneously with execution or executed under qualifying prime brokerage arrangements.
- Eliminate the Pre-Trade Mid-Market Mark (PTMMM) disclosure requirement in § 23.431(a)(3), with the CFTC noting it offers “no utility to counterparties and may delay execution.”
- Eliminate the Scenario Analysis Requirement in § 23.431(b), finding it “provides no utility to counterparties” and is not required by the Dodd-Frank Act.
- Amend the daily mark disclosure requirement in § 23.431(d)(2) to harmonise valuation methods across daily marks, swap data reporting, and variation margin calculations.
- Replace references to “swap dealer and major swap participant” with the consolidated term “swap entity” in § 23.401 for clarity.
The US CFTC proposes that upon adoption of final rules, related Market Participants Division no-action letters, including US CFTC Staff Letters 12-58, 13-11, 13-12, 19-06, 23-01, and 25-09, will be withdrawn.
Purpose of the Proposed Amendments
The amendments are designed to resolve long-standing operational barriers created by external business conduct standards and swap documentation rules adopted under the US Dodd-Frank Wall Street Reform and US Consumer Protection Act. Market participants argued these standards hampered efficient clearing and prime brokerage execution. The US CFTC acknowledged that staff relief had successfully addressed these issues without adverse consequences and therefore seeks to formalise such relief in binding regulations.
Chronological Developments of the Decision
- 2012–2013: External business conduct standards adopted; immediate compliance challenges led to US CFTC Staff Letters granting no-action relief.
- 2017: Market participants under “Project KISS” urged elimination of PTMMM and Scenario Analysis requirements.
- 2023–2025: Revised staff no-action positions issued, including Staff Letter 25-09 on PTMMM.
- 24 September 2025: US CFTC approved publication of the proposal, inviting public comment for 30 days.
The timeline reflects the US CFTC’s gradual shift from ad hoc no-action relief to codified regulatory amendments.
Legal Reasoning
The US CFTC’s reliance on section 4s(h) and section 4s(i) of the United States Commodity Exchange Act provides statutory authority to adopt, amend, or eliminate business conduct and documentation standards. The US CFTC observed that requirements like PTMMM and Scenario Analysis were discretionary rather than mandated by the United States Dodd-Frank Act and eliminating them aligns US CFTC rules with United States SEC standards for security-based swap dealers, promoting regulatory consistency.
(Source: https://www.cftc.gov/PressRoom/PressReleases/9132-25)
