On September 24, 2025, the Commodity Futures Trading Commission (CFTC) issued a notice of proposed rulemaking to revise its external business conduct standards and swap documentation requirements applicable to swap dealers and major swap participants (collectively, Swap Entities).1 The proposal seeks to remove “unnecessary burdens” on Swap Entities, ensuring that trades can be processed and executed efficiently without compromising the protections available to their end-user counterparties. Moreover, the proposed rules would codify longstanding no-action relief related to the regulations and harmonize the CFTC’s framework with related regimes by the Securities and Exchange Commission for security-based swap dealers and the Municipal Securities Rule Making Board for brokers, dealers, and municipal securities dealers. The deadline for submitting comments in response to the proposal is October 24, 2025.
The CFTC’s external business conduct standards require that Swap Entities make certain pre-trade disclosures to their counterparties that are not Swap Entities, security-based swap dealers, or security-based major swap participants. Among other required disclosures, Swap Entities must disclose the price of a swap and the pre-trade mid-market mark (PTMMM) to the swap counterparty (PTMMM Requirement) and must notify the swap counterparty that it may request and consult on the design of a scenario analysis to allow the counterparty to assess its potential exposure in connection with a swap (Scenario Analysis Requirement). The CFTC’s regulations also require that Swap Entities enter into swap trading relationship documentation before a swap is executed.
Since 2013, the CFTC staff has issued no-action letters that provide compliance relief related to the external business conduct standards and documentation requirements for swaps where the parties intend to execute and clear the swap contemporaneously (Intended to Be Cleared Swaps or ITBC Swaps) and prime brokerage swaps.2 For ITBC Swaps, CFTC staff letters recognized that many of the onboarding disclosures and documentation become redundant once the swap is cleared and the central counterparty becomes the counterparty-of-record. For prime brokerage swaps, CFTC staff has acknowledged that the structure and information flows of prime broker arrangements make compliance with the external business conduct standards complex and duplicative, slowing down execution. For these reasons, the CFTC’s proposed amendments would codify the compliance carve-outs of the no-action letters, exempting Swap Entities executing ITBC Swaps and swaps under prime broker arrangements from completing certain disclosures under the external business conduct standards and swap trading relationship documentation requirements. The proposal adds conditions that a swap or prime brokerage arrangement must meet in order for a Swap Entity to qualify for the exemptions.
The CFTC is also proposing to eliminate the PTMMM Requirement and Scenario Analysis Requirement entirely. Current rules require that Swap Entities provide counterparties with a pre-trade mid-market mark before execution. This requirement has purportedly been difficult to operationalize in high-volume cleared swap markets because the PTMMM is calculated using a specific methodology and may be different from the value of the swap logged in a Swap Entity’s books and records, delaying efficient trade execution. This has caused the CFTC staff to issue no-action letters exempting compliance in certain circumstances.3 Under the proposed rules, Swap Entities would be permitted to provide the mid-market mark information on a post-trade basis or through standardized documentation agreed upon with counterparties, rendering the related no-action letters moot. The CFTC similarly proposes to eliminate the Scenario Analysis Requirement because, according to the CFTC’s proposing release, counterparties rarely request scenario analyses and generally do not find the information useful when considering whether to enter into a swap.4
Additionally, the proposal amends the existing daily mark disclosure requirement to harmonize the rule with the CFTC’s uncleared swap margin rules and swap data reporting rules. Pursuant to existing CFTC regulations, a Swap Entity may be required to calculate three different valuations of a swap using three similar but not identical criteria for purposes of: (1) providing the daily mark of the swap to its counterparty under the external business conduct standards; (2) reporting valuation data for the swap to a swap data repository under swap data reporting rules; and (3) calculating the variation margin amount under uncleared margin rules. The CFTC’s proposal revises the calculation methodology for the daily mark such that Swap Entities would only be required to calculate the valuation of a swap once daily, and then use the result of that calculation to provide the daily mark to its counterparty in compliance with external business conduct standards, and, if otherwise required, use such result for reporting valuation data to a swap data repository and for purposes of calculating the variation margin.
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1 See Revisions to Business Conduct and Swap Documentation Requirements for Swap Dealers and Major Swap Participants, 90 Fed. Reg. 47136 (Sept. 30, 2025), available at: https://www.cftc.gov/sites/default/files/2025/09/2025-18924a.pdf.
2 See, e.g., CFTC Staff Letter 13-70 (Nov. 15, 2013), Re: No-Action Relief: Swaps Intended to be Cleared; CFTC Staff Letter 13-11 (Apr. 30, 2013), Re: Time Limited Relief for Swap Dealers in Connection with Prime Brokerage Arrangements; and CFTC Staff Letter 19-06 (Mar. 22, 2019), Re: No-Action Position for Off-SEF Swaps Executed Pursuant to Prime Brokerage Arrangements.
3 See CFTC Staff Letter 12-58 (Dec. 18, 2012), Re: Request for Relief Regarding Obligation to Provide Pre-Trade Mid-Market Mark for Certain Credit Default Swaps and Interest Rate Swaps; CFTC Staff Letter 13-12 (May 1, 2013), Re: Relief for Swap Dealers and Major Swap Participants Regarding the Obligation to Provide Certain Disclosures for Certain Transactions Under Regulation 23.431; and CFTC Staff Letter 25-09 (Apr. 4, 2025), Re: No-Action Position for Swap Dealers and Major Swap Participants Regarding the Obligation to Provide a Pre-Trade Mid-Market Mark under 17 CFR § 23.431(a)(3)(i).
4 See 90 Fed. Reg. at 47142, 47160.
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