Comment Text:
Submitted: 18 January 2011
Mr. David A Stawick, Secretary
Commodity Futures Trading Commission
Three Lafayette Center
1155 21st Street, NW
Washington, DC 20581
Dear Mr. Stawick
Registration of Swap Dealers and Major Swap Participants; RIN 3038-AC 95
The Petroleum Marketers Association of America (“PMAA”) and the New England Fuel Institute (“NEFI”) are pleased to submit this comment letter in support of the November 19, 2010 Notice of Proposed Rulemaking (“NPR”) published by the Commodity Futures Trading Commission (“CFTC” or the “Commission”) regarding the Registration of Swap Dealers and Major Swap Participants.
I Summary
PMAA and NEFI support the proposed rulemaking to establish a process for the registration of swap dealers and major swap participants. The Dodd-Frank Act requires Swap Dealers and Major Swap Participants to be registered as such with the Commission, and it requires the Commission to adopt rules providing for registration of Swap Dealers and Major Swap Participants, as well as rules regulating their activities. This proposal by the Commission would implement Congress’s mandate that these entities be subject to registration and regulation for their swaps business. Among the Commission’s core functions is the responsibility to insure the integrity and transparency of markets and in so doing insuring that market participants do not engage in exchange arbitrage. Monitoring swap dealers and major swap participants for compliance with the Dodd-Frank Act as outlined in the totality of the Commissions proposed rules is fundamental to this mission. This regulation will enable the Commission to protect market participants and the public and promote sound risk management practices.
II. Oversight Responsibilities
The Commission proposed regulation also includes a proposal that Swap Dealers and Major Swap Participants register with a “registered” futures trading association. PMAA and NEFI believe that given the budgetary uncertainty faced by the Commission that this regulatory approach would provide the Commission with flexibility with regard to its oversight of swap dealers and major swap participants for compliance with the Dodd-Frank Act.
III. Extraterritorial Registration
New Section 2(i) of the CEA, which was added by Section 722(d) of the Dodd-Frank Act, states that provisions of the CEA that were enacted by Title VII of the Dodd-Frank Act (which includes the definition of swap dealer, and the registration requirement) shall not apply to activities outside the United States unless those activities ‘‘have a direct and significant connection with activities in, or effect on, commerce of the United States,’’ or contravene rules or regulations the Commission may promulgate to prevent evasion. (75 Fed. Reg. 71382.)
In view of the global nature of the swap markets, PMAA and NEFI urge the Commission to adopt a bright line test that simply states that a person or entity whose swap dealing activity has no connection or effect of any kind, direct or indirect, whether through affiliates or otherwise, to U.S. commerce would not be required to register as a swap dealer. Adoption of this definition will insure that the Commission will have adequate oversight of activities outside of the United States that have an effect on commerce of the United States or contravene rules or regulations the Commission may promulgate to prevent any evasive schemes.
IV. Summary
PMAA and NEFI support the goals of the Dodd-Frank Act in promoting robust compliance processes. We believe the Commission will be able to
protect market participants and the public and promote sound risk management practices by adopting expansive registration requirements that bring under the Commissions supervision all Swap Dealers and Major Swap Participants that benefit from and or have an impact on the commerce of the United States.
PMAA and NEFI appreciate the opportunity to provide comments on the proposed rule and look forward to working with the Commission as it continues the rulemaking process.
Respectfully Submitted,
Dan Gilligan, President
Petroleum Marketers Association of America
Jim Collura, Vice President
New England Fuel Institute
