NFA Proposes New Financial Requirements For Members

NFA proposed rules establishing its minimum capital requirements for member swap dealers ("SDs") and major swap participants ("MSPs") that are not prudentially regulated. The derivatives self-regulatory organization also issued a related interpretive notice.

NFA stated that the new requirements largely mirror the CFTC's SD capital requirements under CFTC Rule 23.101 ("Minimum financial requirements for swap dealers and major swap participants"), with the exception of additional requirements concerning subordinated debt agreements and certain financial reporting and recordkeeping requirements.

Under the proposed Financial Requirements Section 18, NFA member SDs that are not otherwise SEC-registered broker-dealers (including OTC derivatives dealers) or security-based SDs will be able to use subordinated debt to satisfy their regulatory capital requirement, provided that such entities obtain pre-approval of the subordinated debt loan agreements from NFA. Such a