The Commodity Futures Trading Commission (“CFTC” or “Commission”) proposed targeted amendments (“Proposal”) to its business conduct and documentation requirements for swap dealers (“SDs”) on September 24.[1] The Proposal is designed to address long-standing compliance concerns from market participants regarding the application of certain external business conduct standards and swap trading relationship documentation rules, particularly in the context of cleared swaps and prime brokerage arrangements. All of these concerns were previously addressed by CFTC staff through various no-action letters (“NALs”). The Proposal, in large part, seeks to codify the relief set forth in such NALs.[2] Additionally, the Proposal reflects Acting Chairman Caroline D. Pham’s objective of “right-sizing and fixing” the CFTC’s Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) rulemakings.[3]
Key Features of the Proposal
The Proposal would provide specific exceptions to compliance with certain business conduct and documentation requirements in two main scenarios:
1. Cleared Swaps Executed Contemporaneously with Execution:
When parties intend for a swap to be cleared immediately upon execution, the Proposal would exempt swap dealers and major swap participants[4] from certain business conduct and documentation obligations that have been viewed as impeding efficient trading in these circumstances. Among other items, the Proposal includes the following:
2. Swaps Subject to Qualifying Prime Broker Arrangements:
For swaps executed under prime brokerage arrangements that meet specified conditions, the Proposal would similarly provide relief from certain requirements that have proven impracticable or impossible to comply with in this context, especially for arrangements established before the implementation of the Commission’s swap rules.
Alignment with Existing No-Action Relief; Technical Clarifications
The Proposal is intended to codify and supersede several long-standing no-action positions issued by the Market Participants Division (“MPD”),[8] which have allowed market participants to operate under these exceptions without adverse regulatory consequences. The Commission has observed that these no-action positions have effectively addressed market concerns without negative impact, and the proposed amendments would formalize these outcomes, with some modifications.
Beyond the primary exceptions, the Proposal includes other technical changes to streamline and clarify the rules.
- The Proposal eliminates § 23.431(a)(3)(i) (pre-trade mid-market mark) outright. It then moves “price” and “compensation” disclosures into § 23.431(a)(2) and (a)(3) respectively, adjusting the rule text accordingly.
- § 23.431(b) would be replaced with “[RESERVED]”, removing the notice/right to request scenario analysis (and its embedded methodology elements) from the external business-conduct rule set.
- To line up the business-conduct disclosure with Part 45 reporting and the uncleared margin framework, the Commission revises the definition/standard used for the “daily mark” and renumbers current § 23.431(d)(2) to § 23.431(d)(3), so firms can make one valuation calculation that satisfies all three purposes (disclosure, SDR reporting, and VM).
- The Proposal standardizes references to “swap entity” (meaning SD) throughout Subpart H and fixes capitalization inconsistencies in the regulatory text.
Key Takeaways
If adopted as final, SDs will have to update compliance controls to address the fact that many of these requirements no longer apply. SDs will also need to update compliance manuals to remove discussions of the vacated requirements as well as cross-references to various staff no-action letters that will be withdrawn.
There are some issues that the industry may want to address in the Proposal, which were particularly troublesome from a compliance perspective in the prior no-action letters. For example, one condition in Letter 23-01 that has proven difficult to practically implement is the condition that if an intended-to-be-cleared (“ITBC”) swap is rejected from clearing, the ITBC swap is deemed void ab initio. It will be interesting to see how the Commission plans to address this and other conditions in prior relief letters in the final rule.
The CFTC is seeking public comment on the Proposal, with a deadline for submissions set for October 24, 2025. Upon adoption of the final rule, the relevant no-action letters are expected to be withdrawn to avoid regulatory overlap.
[1] Proposed Amendments, 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] As reflected in no-action positions contained in NALs 12–58, 13–11, 13–12, 19–06, 23–01, and 25–09.
[3] Caroline D. Pham, Acting Chairman, CFTC, “Acting Chairman Pham Statement on Spring 2025 Unified Agenda” (Sept. 4, 2025), available at: https://www.cftc.gov/PressRoom/SpeechesTestimony/phamstatement090425.
[4] Currently, there are no major swap participants registered with the Commission.
[5] Supra n.1 at 47149.
[6] Id.
[7] Supra n.1 at 47147.
[8] MPD was formed in October 2020 as part of the CFTC’s reorganization. Before the 2020 reorganization, MPD was known as the Division of Swap Dealer and Intermediary Oversight (“DSIO”).
[9] Supra n.1 at 47140.
[10] Id. at 47140.
[11] Id. at 47141.
[12] Id. at 47140
