Request for Comment on Application of Commission Regulations to Swaps Between Non-U.S. Swap Dealers and Non-U.S. Counterparties Involving Personnel or Agents of the Non-U.S. Swap Dealers Located in the United States, 1347-1349 [2014-00080]

Download as PDF Federal Register / Vol. 79, No. 5 / Wednesday, January 8, 2014 / Proposed Rules (202) 267–9677, to request a copy of Advisory Circular No. 11–2A, Notice of Proposed Rulemaking Distribution System, which describes the application procedure. mstockstill on DSK4VPTVN1PROD with PROPOSALS The Proposal This action proposes to amend Title 14, Code of Federal Regulations (14 CFR), Part 71 by establishing Class E airspace extending upward from 700 feet above the surface within a 6.3-mile radius to accommodate new standard instrument approach procedures at Warsaw Municipal Airport, Warsaw, MO. Controlled airspace is needed for the safety and management of IFR operations at the airport. Class E airspace areas are published in Paragraph 6005 of FAA Order 7400.9X, dated August 7, 2013 and effective September 15, 2013, which is incorporated by reference in 14 CFR 71.1. The Class E airspace designation listed in this document would be published subsequently in the Order. The FAA has determined that this proposed regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. It, therefore, (1) is not a ‘‘significant regulatory action’’ under Executive Order 12866; (2) is not a ‘‘significant rule’’ under DOT Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a Regulatory Evaluation as the anticipated impact is so minimal. Since this is a routine matter that will only affect air traffic procedures and air navigation, it is certified that this rule, when promulgated, will not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act. The FAA’s authority to issue rules regarding aviation safety is found in Title 49 of the U.S. Code. Subtitle 1, Section 106 describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency’s authority. This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it would establish controlled airspace at Warsaw Municipal Airport, Warsaw, MO. VerDate Mar<15>2010 16:18 Jan 07, 2014 Jkt 232001 Environmental Review This proposal will be subject to an environmental analysis in accordance with FAA Order 1050.1E, ‘‘Environmental Impacts: Policies and Procedures’’ prior to any FAA final regulatory action. List of Subjects in 14 CFR Part 71 Airspace, Incorporation by reference, Navigation (air). In consideration of the foregoing, the Federal Aviation Administration proposes to amend 14 CFR part 71 as follows: PART 71—DESIGNATION OF CLASS A, B, C, D, AND E AIRSPACE AREAS; AIR TRAFFIC SERVICE ROUTES; AND REPORTING POINTS 1. The authority citation for part 71 continues to read as follows: ■ Authority: 49 U.S.C. 106(g); 40103, 40113, 40120; E.O. 10854, 24 FR 9565, 3 CFR, 1959– 1963 Comp., p. 389. [Amended] 2. The incorporation by reference in 14 CFR 71.1 of FAA Order 7400.9X, Airspace Designations and Reporting Points, dated August 7, 2013, and effective September 15, 2013, is amended as follows: ■ Paragraph 6005 Class E Airspace areas extending upward from 700 feet or more above the surface of the earth. * * * ACE MO E5 * * Warsaw, MO [New] Warsaw Municipal Airport, MO (Lat. 38°20′52″ N., long. 93°20′43″ W.) That airspace extending upward from 700 feet above the surface within a 6.3-mile radius of Warsaw Municipal Airport Issued in Fort Worth, TX, on December 18, 2013. David P. Medina, Manager, Operations Support Group, ATO Central Service Center. [FR Doc. 2014–00113 Filed 1–7–14; 8:45 am] BILLING CODE 4910–13–P PO 00000 Frm 00014 Fmt 4702 Sfmt 4702 COMMODITY FUTURES TRADING COMMISSION 17 CFR Chapter I Request for Comment on Application of Commission Regulations to Swaps Between Non-U.S. Swap Dealers and Non-U.S. Counterparties Involving Personnel or Agents of the Non-U.S. Swap Dealers Located in the United States Commodity Futures Trading Commission. ACTION: Request for comment. AGENCY: The Proposed Amendment § 71.1 1347 The Commodity Futures Trading Commission (‘‘Commission’’) is requesting comment on an advisory issued by Commission staff on November 14, 2013 (the ‘‘Staff Advisory’’), regarding the applicability of certain Commission regulations to the activity in the United States of swap dealers (‘‘SDs’’) and major swap participants (‘‘MSPs’’) registered with the Commission that are established in jurisdictions other than the United States (whether an affiliate or not of a U.S. person, a ‘‘non-U.S. SD’’ or ‘‘nonU.S. MSP’’). DATES: Comments must be received on or before March 10, 2014. ADDRESSES: You may submit comments by any of the following methods: • The agency’s Web site, at http:// comments.cftc.gov. Follow the instructions for submitting comments through the Web site. • Mail: Melissa D. Jurgens, Secretary of the Commission, Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st Street NW., Washington, DC 20581. • Hand Delivery/Courier: Same as mail above. • Federal eRulemaking Portal: http:// www.regulations.gov. Follow the instructions for submitting comments. Please submit your comments using only one method. All comments must be submitted in English, or if not, accompanied by an English translation. Comments may be posted as received to http:// www.cftc.gov. You should submit only information that you wish to make available publicly. If you wish the Commission to consider information that may be exempt from disclosure under the Freedom of Information Act, a petition for confidential treatment of the exempt information may be submitted according to the established procedures in CFTC Regulation 145.9 (17 CFR 145.9). The Commission reserves the right, but shall have no obligation, to review, SUMMARY: E:\FR\FM\08JAP1.SGM 08JAP1 1348 Federal Register / Vol. 79, No. 5 / Wednesday, January 8, 2014 / Proposed Rules pre-screen, filter, redact, refuse, or remove any or all of your submission from www.cftc.gov that it may deem to be inappropriate for publication, such as obscene language. All submissions that have been redacted or removed that contain comments on the merits of the rulemaking will be retained in the public comment file and will be considered as required under the Administrative Procedure Act and other applicable laws, and may be accessible under the Freedom of Information Act. FOR FURTHER INFORMATION CONTACT: Gary Barnett, Director, 202–418–5977, gbarnett@cftc.gov, or Frank Fisanich, Chief Counsel, 202–418–5949, ffisanich@cftc.gov, Division of Swap Dealer and Intermediary Oversight, Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st Street NW., Washington, DC 20581. SUPPLEMENTARY INFORMATION: I. Background On July 21, 2010, President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act 1 (‘‘Dodd-Frank Act’’ or ‘‘Dodd-Frank’’), which, in Title VII, established a new regulatory framework for swaps. In the three years since the enactment of Dodd-Frank, the Commission has finalized 68 rules, orders, and guidance statements in the process of implementing Title VII of the DoddFrank Act. The finalized rules promulgated under section 4s of the CEA, added by the Dodd-Frank Act, address registration of SDs and MSPs and other substantive requirements applicable to SDs and MSPs, while guidance published by the Commission provided the Commission’s general views regarding the scope of the crossborder application of such rules.2 Among other things, the Guidance sets forth the Commission’s general views on how it ordinarily expects to apply, in accordance with section 2(i) of the CEA, the CEA and certain Commission regulations applicable on a transactionby-transaction basis (the ‘‘transactional requirements’’) to swaps between a nonU.S. SD and a non-U.S. person, including swaps involving guaranteed or conduit affiliates of U.S. persons.3 In mstockstill on DSK4VPTVN1PROD with PROPOSALS 1 Public Law 111–203, 124 Stat. 1376 (2010). Interpretive Guidance and Policy Statement Regarding Compliance with Certain Swap Regulations 78 FR 45292 (July 26, 2013) (hereinafter, the ‘‘Guidance’’). 3 For purposes of this notice, the Commission would generally interpret the terms ‘‘U.S. person,’’ ‘‘guaranteed affiliate,’’ and ‘‘affiliate conduit’’ in the same way as described in the Guidance, 78 FR at 45316–45317, 45350–45359. The Commission uses the term ‘‘non-U.S. person’’ to refer to any person outside its interpretation of the term ‘‘U.S. person.’’ 2 See VerDate Mar<15>2010 16:18 Jan 07, 2014 Jkt 232001 addition, the Guidance addressed the circumstances under which the transactional requirements could be satisfied through substituted compliance.4 With few exceptions, the delayed compliance dates for the Commission’s regulations implementing requirements of section 4s of the CEA have passed and SDs and MSPs are now required to be in full compliance with such regulations upon registration with the Commission.5 Subsequent to publication of the Guidance, swap market participants have raised questions with Commission staff regarding compliance by non-U.S. SDs with the transactional requirements when using personnel or agents located in the United States to enter into swaps with non-U.S. persons. In other words, swap market participants have asked whether the transactional requirements would apply to these swaps (and if so, whether substituted compliance may be available for these swaps) even though such swaps are between two non-U.S. persons, regardless of whether the activities of the non-U.S. SD that lead to such swaps take place in the United States. In response to these inquires, the Staff Advisory 6 was issued, stating that for swaps between a non-U.S. SD and a non-U.S. person, the transactional requirements either do not apply or, in some cases, may be subject to substituted compliance if the activities of the non-U.S. SD take place outside the United States. The Staff Advisory further stated that, for transactions arranged, executed, or negotiated by personnel or agents located in the United States of non-U.S. SDs (whether affiliates or not of a U.S. person) regularly using personnel or agents 4 The Guidance generally describes the policy and procedural framework under which the Commission would consider a substituted compliance program with respect to Commission regulations applicable to non-U.S. SDs. Specifically, the Commission described circumstances where it expected that compliance with a comparable regulatory requirement of a foreign jurisdiction would serve as a reasonable substitute for compliance with the attendant requirements of the CEA and the Commission’s regulations, 78 FR at 45342–45344. 5 The compliance dates are summarized on the Compliance Dates page of the Commission’s Web site. (http://www.cftc.gov/LawRegulation/ DoddFrankAct/ComplianceDates/index.htm.) 6 Division of Swap Dealer and Intermediary Oversight, Applicability of Transaction-Level Requirements to Activity in the United States, Nov. 14, 2013. Available at: http://www.cftc.gov/ucm/ groups/public/@1rlettergeneral/documents/letter/ 13-69.pdf. As stated in the Staff Advisory, the advisory, and the views expressed therein, represent the views of the Division of Swap Dealer and Intermediary Oversight only, and do not represent the position or view of the Commission or of any other office or division of the Commission. PO 00000 Frm 00015 Fmt 4702 Sfmt 4702 located in the U.S. to arrange, negotiate, or execute swaps with non-U.S. persons (the ‘‘Covered Transactions’’), the nonU.S. SD generally would be required to comply with the transactional requirements. The Staff Advisory further stated that this view would also apply to a Covered Transaction booked in a non-U.S. branch of the non-U.S. SD.7 The Commission notes that subsequent to the Staff Advisory, the Commission’s Divisions of Swap Dealer and Intermediary Oversight, Market Oversight, and Clearing and Risk provided non-U.S. SDs time-limited staff no-action relief from certain transactional requirements for Covered Transactions,8 and have recently extended such relief until September 15, 2014, subject to certain terms and conditions stated in such Divisions’ noaction letter.9 II. Request for Comment In view of the complex legal and policy issues involved with respect to the Staff Advisory, the Commission is soliciting comment from all interested parties to further inform the Commission’s and its staff’s deliberations regarding the subjects addressed in the Staff Advisory. Accordingly, the Commission requests comment on all aspects of the Staff Advisory, including but not limited to the following points. If a comment relates to one of the specific points noted below, please identify the point by number and provide a detailed rationale supporting the response. 1. The Commission invites comment on whether the Commission should adopt the Staff Advisory as Commission policy, in whole or in part. 2. The Commission invites commenters to provide their views on whether transactional requirements should apply to Covered Transactions with non-U.S. persons who are not guaranteed or conduit affiliates of U.S. persons. Please provide a detailed analysis of any such view and its effect on other aspects of the Commission’s cross-border policy, if any. 3. The Commission invites comment on whether there should be any differentiation in treatment of swaps with non-U.S. counterparties depending on the nature of the SD (i.e., whether it is a guaranteed affiliate or a conduit affiliate of a U.S. person). 7 See the Staff Advisory, supra note 6. CFTC Staff Letter 13–71, available on the Commission’s Web site: http://www.cftc.gov/ucm/ groups/public/@lrlettergeneral/documents/letter/ 13-71.pdf. 9 See CFTC Staff Letter 14–01, available on the Commission’s Web site. 8 See E:\FR\FM\08JAP1.SGM 08JAP1 Federal Register / Vol. 79, No. 5 / Wednesday, January 8, 2014 / Proposed Rules 4. To the extent a non-U.S. SD must comply with the transactional requirements when entering a Covered Transaction, should the non-U.S. SD be able to rely on a substituted compliance program for purposes of complying with the relevant transactional requirements? If so, should substituted compliance be available for all transactional requirements or only specific requirements? Which requirements? Would the response be different depending on the nature of the counterparty (i.e., whether the non-U.S. counterparty is a guaranteed affiliate or a conduit affiliate of a U.S. person)? 5. The Commission invites comment on the meaning of ‘‘regularly’’ in the phrase ‘‘persons regularly arranging, negotiating, or executing swaps for or on behalf of an SD’’ and whether such persons are performing core, front-office activities of that SD’s swap dealing business. If not, what specific activities would constitute the core, front-office activities of an SD’s swap dealing business? What characteristics or factors distinguish a ‘‘core, front-office’’ activity from other activities? Please be exhaustive in describing such activities. 6. The Commission invites comment on the scope and degree of ‘‘arranging, negotiating, or executing’’ swaps as used in this context. Issued in Washington, DC, on January 3, 2014, by the Commission. Melissa D. Jurgens, Secretary of the Commission. Appendices To Request for Comment on Application of Commission Regulations to Swaps Between NonU.S. Swap Dealers and Non-U.S. Counterparties Involving Personnel or Agents of the Non-U.S. Swap Dealers Located in the United States Appendix 1—Commission Voting Summary On this matter, Chairman Gensler and Commissioners Chilton and Wetjen voted in the affirmative. Commissioner O’Malia voted in the negative. mstockstill on DSK4VPTVN1PROD with PROPOSALS Appendix 2—Dissenting Statement of Commissioner Scott D. O’Malia If you thought that the Commission’s approach last year regarding cross-border issues resulted in an unsound rulemaking process, the start of 2014 is no better. Today’s announcement of the request for comment on a staff Advisory abrogates the Commission’s fundamental legal obligations under the Administrative Procedure Act (‘‘APA’’) and provides another example of the Commission’s unsound rule implementation process. Making matters worse, today’s request for comment is completely outside the scope of VerDate Mar<15>2010 16:18 Jan 07, 2014 Jkt 232001 the cross-border Guidance and the Exemptive Order as the Commission did not address the issue relating to swaps negotiated between non-U.S. swap dealers (‘‘SDs’’) and non-U.S. counterparties acting through agents of the non-U.S. SDs located in the United States. This is simply a strategic move by the Commission to try to duck blame for consistently circumventing the fundamental tenets of the APA and failing to adhere faithfully to the express congressional directive to limit the extraterritorial application of the Dodd-Frank Act to foreign transactions that ‘‘have a direct and significant connection with activities in, or effect on, commerce of the United States.’’ 1 Moreover, I question why the Commission has decided to request comment on a narrow issue of the extraterritorial application of Dodd-Frank, while essentially ignoring the dozens of comments already filed as part of the Commission’s cross-border Exemptive Order.2 Simply requesting comment on a staff Advisory does not endorse the validity of the cross-border Guidance or the staff Advisory issued based on the Guidance. Additionally, I have serious concerns with the evolving jurisdictional application of the Commission’s authority over cross-border trades. It appears based on the staff Advisory, that the Commission is applying a ‘‘territorial’’ jurisdiction test to elements of a trade between non-U.S. entities. To better understand the legal underpinnings of this position, I have included several additional questions to be considered as part of the overall comment file. It is my hope that public comments will provide greater clarity regarding our cross-border authority and identify areas where we must harmonize global rules with our international regulatory partners in the near future. It makes no sense to apply guidance or staff advisories that do not enjoy the full support and authority provided through rulemakings based on the Commodity Exchange Act (‘‘CEA’’). Looking forward into this year, the CFTC needs to do away with the reflexive rule implementation process via staff no-action and advisories that are not voted on by the Commission. It should be the goal of the Commission to develop rules that adhere to the APA and ensure proper regulatory oversight, transparency and promote competition in the derivatives space. In this regard, I would like to seek additional comment on the following points: 1. Please provide your views on whether Covered Transactions with non-U.S. persons who are not guaranteed or conduit affiliates of U.S. persons meet the direct and significant test under CEA section 2(i).3 Please provide a detailed analysis of any such view and its effect on other aspects of the Commission’s cross-border policy, if any. Would your view change depending on whether a non-U.S. SD is a guaranteed 17 U.S.C. 2(i). Statement of Dissent by Commissioner Scott D. O’Malia, Interpretive Guidance and Policy Statement Regarding Compliance With Certain Swap Regulations and Related Exemptive Order, July 12, 2013, http://www.cftc.gov/PressRoom/ SpeechesTestimony/omaliastatement071213b. 3 7 U.S.C. 2(i). 2 See PO 00000 Frm 00016 Fmt 4702 Sfmt 4702 1349 affiliate or a conduit affiliate of a U.S. person? 2. CEA section 2(a)(1) 4 provides for the general jurisidiction of the Commission. Please provide your views on whether Covered Transactions with non-U.S. persons who are not guaranteed or conduit affiliates of U.S. persons fall within the Commission’s jurisdiction under CEA section 2(a)(1) or any other provision of the CEA providing for Commission jurisdiction. Please provide a detailed analysis of any such view and its effect on other aspects of the Commission’s cross-border policy, if any. Would your view change depending on the nature of the nonU.S. SD (i.e., whether it is a guaranteed affiliate or a conduit affiliate of a U.S. person)? 3. To the extent that Covered Transactions fall within the Commission’s jurisdiction, should a non-U.S. SD be required to comply with all, or only certain, Transaction-Level Requirements? Please provide a detailed analysis of any such view and its effect on other aspects of the Commission’s crossborder policy, if any. Would your view change depending on the nature of the nonU.S. SD (i.e., whether it is a guaranteed affiliate or a conduit affiliate of a U.S. person)? 4. In the open meeting to consider the cross-border final guidance and cross-border phase-in exemptive order, I asked about the Commission’s enforcement and legal authority under the cross-border guidance. The Commission’s General Counsel replied, ‘‘[T]he guidance itself is not binding strictly. We couldn’t go into court and, in a count of the complaint, list a violation of the guidance as an actionable claim.’’ 5 If the Commission adopts the staff Advisory as Commission policy (and not through the rulemaking process), please provide your views on the Commission’s ability to enforce such policy. [FR Doc. 2014–00080 Filed 1–7–14; 8:45 am] BILLING CODE 6351–01–P ENVIRONMENTAL PROTECTION AGENCY 40 CFR Part 52 [EPA–R06–OAR–2010–0335; FRL–9905–04– Region 6] Approval and Promulgation of Implementation Plans; Texas; Procedures for Stringency Determinations and Minor Permit Revisions for Federal Operating Permits Environmental Protection Agency (EPA). ACTION: Withdrawal of proposed rule. AGENCY: On September 10, 2013, the Environmental Protection Agency (EPA) SUMMARY: 47 U.S.C. 2(a)(1). of Open Meeting to Consider CrossBorder Final Guidance and Cross-Border Phase-In Exemptive Order (July 12, 2013), page 79. 5 Transcript E:\FR\FM\08JAP1.SGM 08JAP1

Agencies

[Federal Register Volume 79, Number 5 (Wednesday, January 8, 2014)]
[Proposed Rules]
[Pages 1347-1349]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-00080]


=======================================================================
-----------------------------------------------------------------------

COMMODITY FUTURES TRADING COMMISSION

17 CFR Chapter I


Request for Comment on Application of Commission Regulations to 
Swaps Between Non-U.S. Swap Dealers and Non-U.S. Counterparties 
Involving Personnel or Agents of the Non-U.S. Swap Dealers Located in 
the United States

AGENCY: Commodity Futures Trading Commission.

ACTION: Request for comment.

-----------------------------------------------------------------------

SUMMARY: The Commodity Futures Trading Commission (``Commission'') is 
requesting comment on an advisory issued by Commission staff on 
November 14, 2013 (the ``Staff Advisory''), regarding the applicability 
of certain Commission regulations to the activity in the United States 
of swap dealers (``SDs'') and major swap participants (``MSPs'') 
registered with the Commission that are established in jurisdictions 
other than the United States (whether an affiliate or not of a U.S. 
person, a ``non-U.S. SD'' or ``non-U.S. MSP'').

DATES: Comments must be received on or before March 10, 2014.

ADDRESSES: You may submit comments by any of the following methods:
     The agency's Web site, at http://comments.cftc.gov. Follow 
the instructions for submitting comments through the Web site.
     Mail: Melissa D. Jurgens, Secretary of the Commission, 
Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st 
Street NW., Washington, DC 20581.
     Hand Delivery/Courier: Same as mail above.
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
    Please submit your comments using only one method.
    All comments must be submitted in English, or if not, accompanied 
by an English translation. Comments may be posted as received to http://www.cftc.gov. You should submit only information that you wish to make 
available publicly. If you wish the Commission to consider information 
that may be exempt from disclosure under the Freedom of Information 
Act, a petition for confidential treatment of the exempt information 
may be submitted according to the established procedures in CFTC 
Regulation 145.9 (17 CFR 145.9).
    The Commission reserves the right, but shall have no obligation, to 
review,

[[Page 1348]]

pre-screen, filter, redact, refuse, or remove any or all of your 
submission from www.cftc.gov that it may deem to be inappropriate for 
publication, such as obscene language. All submissions that have been 
redacted or removed that contain comments on the merits of the 
rulemaking will be retained in the public comment file and will be 
considered as required under the Administrative Procedure Act and other 
applicable laws, and may be accessible under the Freedom of Information 
Act.

FOR FURTHER INFORMATION CONTACT: Gary Barnett, Director, 202-418-5977, 
gbarnett@cftc.gov, or Frank Fisanich, Chief Counsel, 202-418-5949, 
ffisanich@cftc.gov, Division of Swap Dealer and Intermediary Oversight, 
Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st 
Street NW., Washington, DC 20581.

SUPPLEMENTARY INFORMATION:

I. Background

    On July 21, 2010, President Obama signed the Dodd-Frank Wall Street 
Reform and Consumer Protection Act \1\ (``Dodd-Frank Act'' or ``Dodd-
Frank''), which, in Title VII, established a new regulatory framework 
for swaps.
---------------------------------------------------------------------------

    \1\ Public Law 111-203, 124 Stat. 1376 (2010).
---------------------------------------------------------------------------

    In the three years since the enactment of Dodd-Frank, the 
Commission has finalized 68 rules, orders, and guidance statements in 
the process of implementing Title VII of the Dodd-Frank Act. The 
finalized rules promulgated under section 4s of the CEA, added by the 
Dodd-Frank Act, address registration of SDs and MSPs and other 
substantive requirements applicable to SDs and MSPs, while guidance 
published by the Commission provided the Commission's general views 
regarding the scope of the cross-border application of such rules.\2\ 
Among other things, the Guidance sets forth the Commission's general 
views on how it ordinarily expects to apply, in accordance with section 
2(i) of the CEA, the CEA and certain Commission regulations applicable 
on a transaction-by-transaction basis (the ``transactional 
requirements'') to swaps between a non-U.S. SD and a non-U.S. person, 
including swaps involving guaranteed or conduit affiliates of U.S. 
persons.\3\ In addition, the Guidance addressed the circumstances under 
which the transactional requirements could be satisfied through 
substituted compliance.\4\
---------------------------------------------------------------------------

    \2\ See Interpretive Guidance and Policy Statement Regarding 
Compliance with Certain Swap Regulations 78 FR 45292 (July 26, 2013) 
(hereinafter, the ``Guidance'').
    \3\ For purposes of this notice, the Commission would generally 
interpret the terms ``U.S. person,'' ``guaranteed affiliate,'' and 
``affiliate conduit'' in the same way as described in the Guidance, 
78 FR at 45316-45317, 45350-45359. The Commission uses the term 
``non-U.S. person'' to refer to any person outside its 
interpretation of the term ``U.S. person.''
    \4\ The Guidance generally describes the policy and procedural 
framework under which the Commission would consider a substituted 
compliance program with respect to Commission regulations applicable 
to non-U.S. SDs. Specifically, the Commission described 
circumstances where it expected that compliance with a comparable 
regulatory requirement of a foreign jurisdiction would serve as a 
reasonable substitute for compliance with the attendant requirements 
of the CEA and the Commission's regulations, 78 FR at 45342-45344.
---------------------------------------------------------------------------

    With few exceptions, the delayed compliance dates for the 
Commission's regulations implementing requirements of section 4s of the 
CEA have passed and SDs and MSPs are now required to be in full 
compliance with such regulations upon registration with the 
Commission.\5\
---------------------------------------------------------------------------

    \5\ The compliance dates are summarized on the Compliance Dates 
page of the Commission's Web site. (http://www.cftc.gov/LawRegulation/DoddFrankAct/ComplianceDates/index.htm.)
---------------------------------------------------------------------------

    Subsequent to publication of the Guidance, swap market participants 
have raised questions with Commission staff regarding compliance by 
non-U.S. SDs with the transactional requirements when using personnel 
or agents located in the United States to enter into swaps with non-
U.S. persons. In other words, swap market participants have asked 
whether the transactional requirements would apply to these swaps (and 
if so, whether substituted compliance may be available for these swaps) 
even though such swaps are between two non-U.S. persons, regardless of 
whether the activities of the non-U.S. SD that lead to such swaps take 
place in the United States.
    In response to these inquires, the Staff Advisory \6\ was issued, 
stating that for swaps between a non-U.S. SD and a non-U.S. person, the 
transactional requirements either do not apply or, in some cases, may 
be subject to substituted compliance if the activities of the non-U.S. 
SD take place outside the United States. The Staff Advisory further 
stated that, for transactions arranged, executed, or negotiated by 
personnel or agents located in the United States of non-U.S. SDs 
(whether affiliates or not of a U.S. person) regularly using personnel 
or agents located in the U.S. to arrange, negotiate, or execute swaps 
with non-U.S. persons (the ``Covered Transactions''), the non-U.S. SD 
generally would be required to comply with the transactional 
requirements. The Staff Advisory further stated that this view would 
also apply to a Covered Transaction booked in a non-U.S. branch of the 
non-U.S. SD.\7\
---------------------------------------------------------------------------

    \6\ Division of Swap Dealer and Intermediary Oversight, 
Applicability of Transaction-Level Requirements to Activity in the 
United States, Nov. 14, 2013. Available at: http://www.cftc.gov/ucm/groups/public/@1rlettergeneral/documents/letter/13-69.pdf. As stated 
in the Staff Advisory, the advisory, and the views expressed 
therein, represent the views of the Division of Swap Dealer and 
Intermediary Oversight only, and do not represent the position or 
view of the Commission or of any other office or division of the 
Commission.
    \7\ See the Staff Advisory, supra note 6.
---------------------------------------------------------------------------

    The Commission notes that subsequent to the Staff Advisory, the 
Commission's Divisions of Swap Dealer and Intermediary Oversight, 
Market Oversight, and Clearing and Risk provided non-U.S. SDs time-
limited staff no-action relief from certain transactional requirements 
for Covered Transactions,\8\ and have recently extended such relief 
until September 15, 2014, subject to certain terms and conditions 
stated in such Divisions' no-action letter.\9\
---------------------------------------------------------------------------

    \8\ See CFTC Staff Letter 13-71, available on the Commission's 
Web site: http://www.cftc.gov/ucm/groups/public/@lrlettergeneral/documents/letter/13-71.pdf.
    \9\ See CFTC Staff Letter 14-01, available on the Commission's 
Web site.
---------------------------------------------------------------------------

II. Request for Comment

    In view of the complex legal and policy issues involved with 
respect to the Staff Advisory, the Commission is soliciting comment 
from all interested parties to further inform the Commission's and its 
staff's deliberations regarding the subjects addressed in the Staff 
Advisory.
    Accordingly, the Commission requests comment on all aspects of the 
Staff Advisory, including but not limited to the following points. If a 
comment relates to one of the specific points noted below, please 
identify the point by number and provide a detailed rationale 
supporting the response.
    1. The Commission invites comment on whether the Commission should 
adopt the Staff Advisory as Commission policy, in whole or in part.
    2. The Commission invites commenters to provide their views on 
whether transactional requirements should apply to Covered Transactions 
with non-U.S. persons who are not guaranteed or conduit affiliates of 
U.S. persons. Please provide a detailed analysis of any such view and 
its effect on other aspects of the Commission's cross-border policy, if 
any.
    3. The Commission invites comment on whether there should be any 
differentiation in treatment of swaps with non-U.S. counterparties 
depending on the nature of the SD (i.e., whether it is a guaranteed 
affiliate or a conduit affiliate of a U.S. person).

[[Page 1349]]

    4. To the extent a non-U.S. SD must comply with the transactional 
requirements when entering a Covered Transaction, should the non-U.S. 
SD be able to rely on a substituted compliance program for purposes of 
complying with the relevant transactional requirements? If so, should 
substituted compliance be available for all transactional requirements 
or only specific requirements? Which requirements? Would the response 
be different depending on the nature of the counterparty (i.e., whether 
the non-U.S. counterparty is a guaranteed affiliate or a conduit 
affiliate of a U.S. person)?
    5. The Commission invites comment on the meaning of ``regularly'' 
in the phrase ``persons regularly arranging, negotiating, or executing 
swaps for or on behalf of an SD'' and whether such persons are 
performing core, front-office activities of that SD's swap dealing 
business. If not, what specific activities would constitute the core, 
front-office activities of an SD's swap dealing business? What 
characteristics or factors distinguish a ``core, front-office'' 
activity from other activities? Please be exhaustive in describing such 
activities.
    6. The Commission invites comment on the scope and degree of 
``arranging, negotiating, or executing'' swaps as used in this context.

    Issued in Washington, DC, on January 3, 2014, by the Commission.
Melissa D. Jurgens,
Secretary of the Commission.

Appendices To Request for Comment on Application of Commission 
Regulations to Swaps Between Non-U.S. Swap Dealers and Non-U.S. 
Counterparties Involving Personnel or Agents of the Non-U.S. Swap 
Dealers Located in the United States

Appendix 1--Commission Voting Summary

    On this matter, Chairman Gensler and Commissioners Chilton and 
Wetjen voted in the affirmative. Commissioner O'Malia voted in the 
negative.

Appendix 2--Dissenting Statement of Commissioner Scott D. O'Malia

    If you thought that the Commission's approach last year 
regarding cross-border issues resulted in an unsound rulemaking 
process, the start of 2014 is no better.
    Today's announcement of the request for comment on a staff 
Advisory abrogates the Commission's fundamental legal obligations 
under the Administrative Procedure Act (``APA'') and provides 
another example of the Commission's unsound rule implementation 
process.
    Making matters worse, today's request for comment is completely 
outside the scope of the cross-border Guidance and the Exemptive 
Order as the Commission did not address the issue relating to swaps 
negotiated between non-U.S. swap dealers (``SDs'') and non-U.S. 
counterparties acting through agents of the non-U.S. SDs located in 
the United States. This is simply a strategic move by the Commission 
to try to duck blame for consistently circumventing the fundamental 
tenets of the APA and failing to adhere faithfully to the express 
congressional directive to limit the extraterritorial application of 
the Dodd-Frank Act to foreign transactions that ``have a direct and 
significant connection with activities in, or effect on, commerce of 
the United States.'' \1\
---------------------------------------------------------------------------

    \1\ 7 U.S.C. 2(i).
---------------------------------------------------------------------------

    Moreover, I question why the Commission has decided to request 
comment on a narrow issue of the extraterritorial application of 
Dodd-Frank, while essentially ignoring the dozens of comments 
already filed as part of the Commission's cross-border Exemptive 
Order.\2\ Simply requesting comment on a staff Advisory does not 
endorse the validity of the cross-border Guidance or the staff 
Advisory issued based on the Guidance.
---------------------------------------------------------------------------

    \2\ See Statement of Dissent by Commissioner Scott D. O'Malia, 
Interpretive Guidance and Policy Statement Regarding Compliance With 
Certain Swap Regulations and Related Exemptive Order, July 12, 2013, 
http://www.cftc.gov/PressRoom/SpeechesTestimony/omaliastatement071213b.
---------------------------------------------------------------------------

    Additionally, I have serious concerns with the evolving 
jurisdictional application of the Commission's authority over cross-
border trades. It appears based on the staff Advisory, that the 
Commission is applying a ``territorial'' jurisdiction test to 
elements of a trade between non-U.S. entities. To better understand 
the legal underpinnings of this position, I have included several 
additional questions to be considered as part of the overall comment 
file. It is my hope that public comments will provide greater 
clarity regarding our cross-border authority and identify areas 
where we must harmonize global rules with our international 
regulatory partners in the near future. It makes no sense to apply 
guidance or staff advisories that do not enjoy the full support and 
authority provided through rulemakings based on the Commodity 
Exchange Act (``CEA'').
    Looking forward into this year, the CFTC needs to do away with 
the reflexive rule implementation process via staff no-action and 
advisories that are not voted on by the Commission. It should be the 
goal of the Commission to develop rules that adhere to the APA and 
ensure proper regulatory oversight, transparency and promote 
competition in the derivatives space.
    In this regard, I would like to seek additional comment on the 
following points:
    1. Please provide your views on whether Covered Transactions 
with non-U.S. persons who are not guaranteed or conduit affiliates 
of U.S. persons meet the direct and significant test under CEA 
section 2(i).\3\ Please provide a detailed analysis of any such view 
and its effect on other aspects of the Commission's cross-border 
policy, if any. Would your view change depending on whether a non-
U.S. SD is a guaranteed affiliate or a conduit affiliate of a U.S. 
person?
---------------------------------------------------------------------------

    \3\ 7 U.S.C. 2(i).
---------------------------------------------------------------------------

    2. CEA section 2(a)(1) \4\ provides for the general 
jurisidiction of the Commission. Please provide your views on 
whether Covered Transactions with non-U.S. persons who are not 
guaranteed or conduit affiliates of U.S. persons fall within the 
Commission's jurisdiction under CEA section 2(a)(1) or any other 
provision of the CEA providing for Commission jurisdiction. Please 
provide a detailed analysis of any such view and its effect on other 
aspects of the Commission's cross-border policy, if any. Would your 
view change depending on the nature of the non-U.S. SD (i.e., 
whether it is a guaranteed affiliate or a conduit affiliate of a 
U.S. person)?
---------------------------------------------------------------------------

    \4\ 7 U.S.C. 2(a)(1).
---------------------------------------------------------------------------

    3. To the extent that Covered Transactions fall within the 
Commission's jurisdiction, should a non-U.S. SD be required to 
comply with all, or only certain, Transaction-Level Requirements? 
Please provide a detailed analysis of any such view and its effect 
on other aspects of the Commission's cross-border policy, if any. 
Would your view change depending on the nature of the non-U.S. SD 
(i.e., whether it is a guaranteed affiliate or a conduit affiliate 
of a U.S. person)?
    4. In the open meeting to consider the cross-border final 
guidance and cross-border phase-in exemptive order, I asked about 
the Commission's enforcement and legal authority under the cross-
border guidance. The Commission's General Counsel replied, ``[T]he 
guidance itself is not binding strictly. We couldn't go into court 
and, in a count of the complaint, list a violation of the guidance 
as an actionable claim.'' \5\ If the Commission adopts the staff 
Advisory as Commission policy (and not through the rulemaking 
process), please provide your views on the Commission's ability to 
enforce such policy.
---------------------------------------------------------------------------

    \5\ Transcript of Open Meeting to Consider Cross-Border Final 
Guidance and Cross-Border Phase-In Exemptive Order (July 12, 2013), 
page 79.

[FR Doc. 2014-00080 Filed 1-7-14; 8:45 am]
BILLING CODE 6351-01-P