The CFTC Market Participants Division (the "Division") granted three swap dealers ("SDs") time-limited, no-action relief from enforcement action for using unapproved internal models to calculate credit risk charges when computing regulatory capital. The no-action relief is in anticipation of the October 6, 2021, compliance date of the SD capital requirements final rule.
Of the three SDs, two are non-bank SDs that requested relief for a period not to exceed November 1, 2021, by which time each non-bank SD (i) will register with the SEC as a security-based swap dealer ("SBSD") and (ii) anticipates SEC approval of its internal models for market and credit risk charges. As dually-registered non-bank SDs and SBSDs, the two firms will compute regulatory capital requirements under CFTC Rule 23.101(a)(1)(ii) ("Minimum financial requirements for swap dealers and major swap participants").
In CFTC Letters 21-21 and 21-22, the Division stated that it will not recommend enforcement action against Nomura Global Financial Products Inc. and Jefferies Financial Services, Inc., respectively, under CFTC Rules 23.102(f)(1) ("Calculation of market risk exposure requirement and credit risk exposure requirement using internal models") and 23.103 ("Calculation of market risk exposure requirement and credit risk requirement when models are not approved"). The relief applies until November 1, 2021, the time at which the firms expect to register with the SEC as SBSDs and receive approval for models for market and credit risk charges. The relief is subject to a number of conditions.
In CFTC Letter 21-23, the Division stated that it will not recommend enforcement action against StoneX Markets LLC under CFTC Rule 23.101(a)(1)(i)(B), paragraph (4) of the definition of "BHC equivalent risk-weighted assets" of CFTC Rule 23.100 and CFTC Rule 23.102. The relief applies until no later than January 6, 2022, and is subject to a number of conditions, including certain business and operational restructuring plans that the firm indicated it would undertake.
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