On August 22, 2012, the National Futures Association (“NFA”) filed proposed rule changes with the Commodity Futures Trading Commission (“CFTC”) that will require futures commission merchants (“FCMs”), introducing brokers, commodity pool operators and commodity trading advisors that engage in activities involving swaps subject to CFTC jurisdiction to obtain NFA approval to act as “Swap Firms." The proposed rules also would require all associated persons (“APs”) of Swap Firms who engage in activities involving swaps to be approved by NFA to engage in such activities. Swap Firms would also be required to have at least one of their principals registered as an AP and approved as a Swaps AP. Consequently, currently registered FCMs, introducing brokers, commodity pool operators and commodity trading advisors intending to engage in swaps activity must obtain NFA approval to act as Swap Firms and for their APs to act as Swaps APs, and must ensure that at least one of their principals becomes and remains registered as an AP and a Swaps AP.
If the rule change goes into effect as proposed, it will affect a significant number of CFTC-regulated entities. However, the practical burdens of these new requirements would be limited. Registered firms may file a request for approval as a Swap Firm and for their APs to act as Swaps APs electronically through NFA’s Online Registration System. Moreover, the proposed rule changes exclude Swaps APs engaged in soliciting or accepting orders for swaps and other specified categories of swaps activities from the proficiency testing requirements.
NFA described the proposed rule changes as measures to enable it to track firms and individuals engaged in swaps activities. The proposal will become effective automatically on September 1, 2012, unless the CFTC notifies NFA that it has elected to review the proposed rule changes.
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