Rules and Regulations Federal Register Vol

50605 Rules and Regulations Federal Register Vol. 81, No. 148 Tuesday, August 2, 2016 This section of the FEDERAL REGISTER adopting exemptions from the initial 1501 Farm Credit Drive, McLean, VA contains regulatory documents having general and variation margin requirements 22102–5090. applicability and legal effect, most of which published by the Agencies in November FHFA: George Sacco, Senior Financial are keyed to and codified in the Code of 2015 pursuant to sections 731 and 764 Analyst, Division of Housing Mission Federal Regulations, which is published under of the Dodd-Frank Wall Street Reform and Goals, (202) 649–3276, 50 titles pursuant to 44 U.S.C. 1510. and Consumer Protection Act (the [email protected], or Peggy K. The Code of Federal Regulations is sold by ‘‘Dodd-Frank Act’’ or the ‘‘Act’’). Balsawer, Associate General Counsel, the Superintendent of Documents. Prices of Pursuant to Title III of the Terrorism Office of General Counsel, (202) 649– new books are listed in the first FEDERAL Risk Insurance Program Reauthorization 3060, [email protected], Federal REGISTER issue of each week. Act of 2015 (‘‘TRIPRA’’), this final rule Housing Finance Agency, Constitution exempts certain non-cleared swaps and Center, 400 7th St. SW., Washington, DC non-cleared security-based swaps with 20219. The telephone number for the DEPARTMENT OF THE TREASURY certain financial and non-financial end Telecommunications Device for the users that qualify for an exception or Hearing Impaired is (800) 877–8339. Office of the Comptroller of the exemption from clearing. Currency SUPPLEMENTARY INFORMATION: DATES: This final rule is effective I. Background 12 CFR Part 45 October 1, 2016. FOR FURTHER INFORMATION CONTACT: The Dodd-Frank Act was enacted on [Docket No. OCC–2015–0023] OCC: Ang Middleton, Risk Specialist, July 21, 2010.1 Title VII of the Dodd- Financial Markets Group, (202) 649– Frank Act established a comprehensive RIN 1557–AD00 7138, or Carl Kaminski, Special new regulatory framework for FEDERAL RESERVE SYSTEM Counsel, Legislative and Regulatory derivatives, which the Act generally Activities Division, (202) 649–5490, for characterizes as ‘‘swaps’’ and ‘‘security- 2 12 CFR Part 237 persons who are deaf or hard of hearing, based swaps.’’ As part of this new TTY (202) 649–5597, Office of the regulatory framework, sections 731 and [Docket No. R–1415] Comptroller of the Currency, 400 7th 764 of the Dodd-Frank Act added, respectively, a new section 4s to the RIN 7100–AD74 Street SW., Washington, DC 20219. Board: Sean D. Campbell, Associate Commodity Exchange Act of 1936 (the FEDERAL DEPOSIT INSURANCE Director, (202) 452–3760, Anna M. ‘‘Commodity Exchange Act’’), and a new CORPORATION Harrington, Senior Supervisory section 15F to the Securities Exchange Financial Analyst, (202) 452–6406, or Act of 1934 (the ‘‘Securities Exchange 12 CFR Part 349 Lesley Chao, Senior Supervisory Act’’), which require registration with Financial Analyst, (202) 974–7063, the U.S. Commodity Futures Trading RIN 3064–AE21 Division of Banking Supervision and Commission (the ‘‘CFTC’’) of swap Regulation; Victoria M. Szybillo, dealers and major swap participants and FARM CREDIT ADMINISTRATION Counsel, (202) 475–6325, or Adam with the U.S. Securities and Exchange Cohen, Counsel, (202) 912–4658, Legal Commission (the ‘‘SEC’’) of security- 12 CFR Part 624 Division, Board of Governors of the based swap dealers and major security- RIN 3052–AC69 Federal Reserve System, 20th and C based swap participants.3 These Streets NW., Washington, DC 20551. FEDERAL HOUSING FINANCE FDIC: Karl R. Reitz, Corporate Expert, 1 Public Law 111–203, 124 Stat. 1376 (2010). AGENCY Capital Markets, [email protected]; 2 ‘‘Swaps’’ are defined in section 721 of the Dodd- Michael E. Spencer, Chief, Capital Frank Act to include interest rate swaps, commodity-based swaps, equity swaps and credit 12 CFR Part 1221 Markets Strategy Section, michspencer@ default swaps. ‘‘Security-based swaps’’ are defined fdic.gov, Division of Risk Management in section 761 of the Dodd-Frank Act to include a RIN 2590–AA45 Supervision, (202) 898–6888; Thomas F. swap based on a single security or loan or on a Hearn, Counsel, [email protected], narrow-based security index. See 7 U.S.C. 1a(47); 15 Margin and Capital Requirements for U.S.C. 78c(a)(68). Covered Swap Entities (202) 898–6967, or Catherine Topping, 3 See 7 U.S.C. 6s; 15 U.S.C. 78o–10. Section 731 Counsel, [email protected], (202) 898– of the Dodd-Frank Act requires swap dealers and AGENCY: Office of the Comptroller of the 3975, Legal Division, Federal Deposit major swap participants to register with the CFTC, Currency, Treasury (‘‘OCC’’); Board of Insurance Corporation, 550 17th Street which is vested with primary responsibility for the oversight of the swaps market under Title VII of the Governors of the Federal Reserve NW., Washington, DC 20429. Dodd-Frank Act. Section 764 of the Dodd-Frank Act System (‘‘Board’’); Federal Deposit FCA: J.C. Floyd, Associate Director, requires security-based swap dealers and major Insurance Corporation (‘‘FDIC’’); Farm Finance & Capital Markets Team, security-based swap participants to register with the Credit Administration (‘‘FCA’’); and the Timothy T. Nerdahl, Senior Policy SEC, which is vested with primary responsibility for the oversight of the security-based swaps market Federal Housing Finance Agency Analyst—Capital Markets, Jeremy R. under Title VII of the Dodd-Frank Act. Section (‘‘FHFA’’). Edelstein, Senior Policy Analyst, Office 712(d)(1) of the Dodd-Frank Act requires the CFTC ACTION: Final rule. of Regulatory Policy, (703) 883–4414, and SEC to issue joint rules further defining the TTY (703) 883–4056, or Richard A. terms swap, security-based swap, swap dealer, SUMMARY: major swap participant, security-based swap dealer, The OCC, Board, FDIC, FCA, Katz, Senior Counsel, Office of General and major security-based swap participant. The and FHFA (each an ‘‘Agency’’ and, Counsel, (703) 883–4020, TTY (703) CFTC and SEC issued final joint rulemakings with collectively, the ‘‘Agencies’’) are 883–4056, Farm Credit Administration, Continued VerDate Sep<11>2014 13:32 Aug 01, 2016 Jkt 238001 PO 00000 Frm 00001 Fmt 4700 Sfmt 4700 E:\FR\FM\02AUR1.SGM 02AUR1 Lhorne on DSK30JT082PROD with RULES 50606 Federal Register / Vol. 81, No. 148 / Tuesday, August 2, 2016 / Rules and Regulations registrants are collectively referred to in security-based swap might not be collect initial or variation margin at this preamble as ‘‘swap entities.’’ cleared either because it is not subject such times and in such forms and Sections 731 and 764 of the Dodd- to the mandatory clearing requirement amounts (if any) as the covered swap Frank Act require the Agencies to adopt or because one of the parties to the swap entity determines appropriate in its joint rules that apply to all swap entities is eligible for, and elects to use, an overall credit risk management of the for which any one of the Agencies is the exception or exemption from the covered swap entity’s exposure to the prudential regulator,4 imposing capital mandatory clearing requirement. Such a customer.11 requirements and initial and variation swap or security-based swap is ‘‘non- On January 12, 2015, President margin requirements on all swaps and cleared’’ for purposes of the capital and Obama signed TRIPRA into law.12 Title security-based swaps not cleared by a margin requirements established under III of TRIPRA, the ‘‘Business Risk registered derivatives clearing sections 731 and 764 of the Dodd-Frank Mitigation and Price Stabilization Act of organization or clearing agency.5 After a Act. 2015,’’ amends the statutory provisions rulemaking process that began in 2011, Sections 731 and 764 direct the added by the Dodd-Frank Act relating to the Agencies published a joint final rule Agencies to impose initial and variation margin requirements for non-cleared to implement these Dodd-Frank Act margin requirements on all non-cleared swaps and non-cleared security-based requirements on November 30, 2015 swaps and non-cleared security-based swaps. Specifically, section 302 of (the ‘‘joint final rule’’).6 swaps. The joint final rule takes into TRIPRA amends sections 731 and 764 of The capital and margin requirements account the risk posed by a covered the Dodd-Frank Act to provide that the under sections 731 and 764 of the Dodd- swap entity’s counterparties in initial and variation margin Frank Act apply to non-cleared swaps establishing the minimum amount of requirements do not apply to certain and non-cleared security-based swaps initial and variation margin that the transactions of specified counterparties and complement other provisions of the covered swap entity must exchange that would qualify for an exception or Dodd-Frank Act that require the CFTC with its counterparties.9 In exemption from clearing, as explained and SEC to make determinations as to implementing this risk-based approach, more fully below. Qualifying non- whether certain swaps or security-based the joint final rule distinguishes among cleared swaps and non-cleared security- swaps, or a group, category, or class of four separate types of swap based swaps of entities covered by such transactions, should be required to counterparties: (1) Counterparties that section 302 of TRIPRA are not subject to be cleared.7 If the CFTC or SEC has are themselves swap entities; (2) the Agencies’ joint final rule. made such a determination, it is counterparties that are financial end Section 303 of TRIPRA requires the generally unlawful for any person to users with a material swaps exposure; Agencies to implement the provisions of engage in such a swap or security-based (3) counterparties that are financial end section 302 by promulgating an interim swap unless the transaction is submitted users without a material swaps final rule pursuant to which public to a derivatives clearing organization or exposure, and (4) other counterparties, comment is sought before a final rule is clearing agency, as applicable, for including non-financial end users, issued.

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