The Commodity Futures Trading Commission (“CFTC” or “Commission”) proposed targeted amendments (“Proposal”) to its business conduct and documentation requirements for swap dealers (“SDs”) on September 24.[1] The Proposal is designed to address long-standing compliance concerns from market participants regarding the application of certain external business conduct standards and swap trading relationship documentation rules, particularly in the context of cleared swaps and prime brokerage arrangements. All of these concerns were previously addressed by CFTC staff through various no-action letters (“NALs”). The Proposal, in large part, seeks to codify the relief set forth in such NALs.[2] Additionally, the Proposal reflects Acting Chairman Caroline D. Pham’s objective of “right-sizing and fixing” the CFTC’s Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) rulemakings.[3]
Key Features of the Proposal
The Proposal would provide specific exceptions to compliance with certain business conduct and documentation requirements in two main scenarios:
1. Cleared Swaps Executed Contemporaneously with Execution:
When parties intend for a swap to be cleared immediately upon execution, the Proposal would exempt swap dealers and major swap participants[4] from certain business conduct and documentation obligations that have been viewed as impeding efficient trading in these circumstances. Among other items, the Proposal includes the following:
| CFTC Rule | Title / Requirement | Description of Requirement | Proposal: Treatment for ITBC Swaps (Swaps Intended to Be Cleared) |
| § 23.402 | General Provisions | Policies and procedures; KYC/true name and owner; reliance on reps; disclosure mechanics; recordkeeping. | Partial exemption. New § 23.402(h) disapplies the KYC/true name and owner for ITBC swaps. |
| § 23.431(a) | Disclosure of Material Information | Requires pre-trade disclosure of (i) material risks, (ii) material characteristics, (iii) price, and (iv) conflicts of interest. | Exempt. The Proposal disapplies pre-trade disclosures for A-ITBC swaps (Anonymous ITBC Swaps) ITBC swaps executed on a DCM, SEF, or Exempt SEF. |
| § 23.431(a)(3)(i) | Pre-Trade Mid-Market Mark ("PTMMM") | Requires disclosure of the PTMMM prior to entering a swap. | Fully eliminated. The Proposal removes § 23.431(a)(3)(i) altogether for all swaps (not just ITBC). |
| § 23.431(b) | Right to Scenario Analysis | Requires SDs to notify counterparties of their right to request a scenario analysis. | Fully eliminated. The Proposal removes the scenario-analysis disclosure requirement entirely for all swaps, including ITBC. |
| § 23.432 | Disclosure of Right to Clear a Swap | Requires informing counterparties that a swap may be cleared and how. | Exempt. The Commission notes that for ITBC swaps (and A-ITBC swaps), the counterparty has the present intention to clear the swap prior to execution and thus has no need to receive notice of the right to clear the swap or choose the clearinghouse.”[5] |
| § 23.433 | Communication Standards | Requires communications to be fair, balanced, and not misleading. | No exemption. Conduct standards remain in effect. |
| § 23.434 | Recommendations to Counterparties (Suitability) | Requires SDs making swap recommendations to ensure suitability based on counterparty information. | Exempt. The exemption is for (i) A–ITBC Swaps and (ii) ITBC Swaps executed on DCM/SEFs/Exempt SEFs. The Commission explains that standardized cleared swaps have “sufficient information about the pricing and material risks and characteristics of such swaps.”[6] |
| § 23.440–23.451 | Duties to Special Entities | Include best-interest duties, qualification checks for advisors, and recordkeeping for Special Entities. | Exempt. The exemption is for (i) A–ITBC and (ii) ITBC initiated by a Special Entity on DCM/SEF/Exempt SEF where the SD does not know the counterparty’s Special Entity status. |
| § 23.504 (Subpart I) | Swap Trading Relationship Documentation (STRD) | Requires SDs to establish written documentation covering credit support, netting, and valuation before execution. | Exempt. The Proposal exempts ITBC swaps from the § 23.504 documentation requirement. |
2. Swaps Subject to Qualifying Prime Broker Arrangements:
For swaps executed under prime brokerage arrangements that meet specified conditions, the Proposal would similarly provide relief from certain requirements that have proven impracticable or impossible to comply with in this context, especially for arrangements established before the implementation of the Commission’s swap rules.
| CFTC Rule | Title / Requirement | Description of Requirement | Relief / Exemption for Qualifying Prime Brokerage Arrangements |
| § 23.431(a) | Disclosures of Material Information | Requires SDs to disclose material risks, characteristics, price, and conflicts of interest prior to execution. | Exempt. PB/SDs would not be required to provide these disclosures for “Permitted PB Transactions,” so long as (i) the PB Counterparty acknowledges receipt of the PB’s “Regulatory Disclosures,” and (ii) the PB/SD is not aware of facts making its disclosures misleading.[7] PB Counterparties may request updated disclosures in writing before execution. |
| § 23.431(a)(3)(i) | Pre-Trade Mid-Market Mark (PTMMM) | Requires SDs to provide a PTMMM before execution. | Fully removed. The Proposal eliminates this for all swaps, making this relief permanent. |
| § 23.431(b) | Scenario Analysis Disclosure | Requires SDs to notify counterparties of their right to a scenario analysis. | Fully removed. The Proposal relieves PB/SDs from the obligation to provide scenario-analysis rights. |
| § 23.203 | Recordkeeping | Requires SDs to maintain complete records of all swap activity. | Partially retained. PB/SDs must maintain a record of (i) the Prime Broker Arrangement and (ii) the counterparty’s acknowledgement until five years after all PB transactions under that arrangement terminate. |
| § 23.401(g) | Definition of “Qualifying Prime Broker Arrangement” | Introduces the defined term and qualifying conditions. | New provision. Defines “Qualifying PB Arrangement” and ties relief to conditions such as (a) execution of mirror and trigger swaps, (b) credit intermediation role of PB, and (c) execution in accordance with the customer’s instruction and acknowledgement of disclosures. |
Alignment with Existing No-Action Relief; Technical Clarifications
The Proposal is intended to codify and supersede several long-standing no-action positions issued by the Market Participants Division (“MPD”),[8] which have allowed market participants to operate under these exceptions without adverse regulatory consequences. The Commission has observed that these no-action positions have effectively addressed market concerns without negative impact, and the proposed amendments would formalize these outcomes, with some modifications.
CFTC Staff Letter | Topic | Prior No-Action | The Proposal |
| 12-58 | Request for Relief Regarding Obligation to Provide Pre-Trade Mid-Market Mark for Certain Credit Default Swaps and Interest Rate Swaps | 12-58 excused SDs from providing a PTMMM for specified, liquid untranched CDS indices and standard-term interest-rate swaps when real-time bid/offer pricing was electronically available and counterparties consented in advance. | The Proposal repeals § 23.431(a)(3)(i) in its entirety, eliminating the PTMMM disclosure requirement for all swaps. The Commission found that the PTMMM “provides no useful information to counterparties and delays efficient execution.”[9] Thus, the specific relief originally granted in 12-58 becomes permanent, expanded to all swaps rather than limited to index CDS and interest rate swaps. |
| 13-11 | Time Limited Relief for Swap Dealers in Connection with Prime Brokerage Arrangements | 13-11 acknowledged that prime brokers (“PBs”) cannot know price or counterparty terms before executing “trigger” and “mirror” swaps and therefore cannot satisfy the PTMMM and scenario-analysis disclosure requirements under § 23.431(a)–(b). It allowed PB SDs to allocate disclosure responsibilities to the executing (“trigger”) SD or, for Exempt FX Transactions, omit the PTMMM and scenario-analysis disclosures altogether. | The Proposal creates a permanent exemption for swaps executed pursuant to prime brokerage arrangements that meet specified qualifying conditions. The Commission expressly recognized the “significant structural and informational hurdles” in PB transactions and determined that long-standing no-action relief “sufficiently addressed these hurdles”[10] with no adverse consequences. Accordingly, the amendments will embed the 13-11 framework directly into the rule text and remove the need for staff-level relief. |
| 13-12 | Relief for Swap Dealers and Major Swap Participants Regarding the Obligation to Provide Certain Disclosures for Certain Transactions Under Regulation 23.431 | 13-12 (revising 12-42) provided that SDs need not disclose a PTMMM for (a) short-tenor physically-settled FX swaps, forwards, or vanilla options among the 31 major “BIS currencies,” and (b) Exempt FX Transactions executed anonymously on non-SEF trading platforms, so long as bid/offer quotes were electronically available and counterparties consented. | Because the Proposal eliminates the PTMMM requirement altogether, all relief in 13-12 becomes moot. The rule recognizes that “the PTMMM Requirement has been unworkable in a wide variety of contexts,”[11] including the FX market, and formally repeals the underlying obligation. |
| 19-06 | No- Action Position for Off-SEF Swaps Executed Pursuant to Prime Brokerage Arrangements | 19-06 extended the 13-11 relief to PB swaps executed anonymously on a SEF, where PBs could not provide pre-trade disclosures to their customers before execution of the “mirror” swap. | The proposed amendments incorporate 19-06 by expanding the prime brokerage exemption to cover both on- and off-SEF PB transactions. The Commission confirmed that “PB arrangements common in the swaps and Exempt FX Transaction markets… present significant structural and informational hurdles” and that 13-11 and 19-06 “appear to have sufficiently addressed these significant structural and informational hurdles.”[12] |
| 23-01 | Revised No-Action Positions for Swaps Intended to be Cleared | 23-01 superseded 13-70 and reaffirmed relief for SDs entering into ITBC Swaps—those executed with the intent to clear immediately—where the business-conduct and documentation rules were impracticable and unnecessary. It extended the relief to swaps executed or cleared on Exempt SEFs and Exempt DCOs. | The Proposal creates a rule-based exemption for swaps “intended to be cleared contemporaneously with execution.” The Commission reasoned that standardized cleared swaps already provide transparent pricing and risk information, and that compliance hindered efficient trading of cleared swaps. This codifies and broadens the 23-01 (and 13-70) no-action positions. |
| 25-09 | No-Action Position for Swap Dealers and Major Swap Participants Regarding the Obligation to Provide a Pre-Trade Mid-Market Mark under 17 CFR 23.431(a)(3)(i) | 25-09 provided industry-wide relief from § 23.431(a)(3)(i) pending Commission rulemaking, citing that the PTMMM does not provide significant informational value, imposes significant operational burdens, and impedes prompt execution. | The Proposal formally eliminates the PTMMM disclosure obligation, achieving the precise regulatory outcome anticipated by 25-09. Upon adoption of the final rule, MPD will withdraw 25-09, 12-58, and 13-12 as moot. |
Beyond the primary exceptions, the Proposal includes other technical changes to streamline and clarify the rules.
- The Proposal eliminates § 23.431(a)(3)(i) (pre-trade mid-market mark) outright. It then moves “price” and “compensation” disclosures into § 23.431(a)(2) and (a)(3) respectively, adjusting the rule text accordingly.
- § 23.431(b) would be replaced with “[RESERVED]”, removing the notice/right to request scenario analysis (and its embedded methodology elements) from the external business-conduct rule set.
- To line up the business-conduct disclosure with Part 45 reporting and the uncleared margin framework, the Commission revises the definition/standard used for the “daily mark” and renumbers current § 23.431(d)(2) to § 23.431(d)(3), so firms can make one valuation calculation that satisfies all three purposes (disclosure, SDR reporting, and VM).
- The Proposal standardizes references to “swap entity” (meaning SD) throughout Subpart H and fixes capitalization inconsistencies in the regulatory text.
Key Takeaways
If adopted as final, SDs will have to update compliance controls to address the fact that many of these requirements no longer apply. SDs will also need to update compliance manuals to remove discussions of the vacated requirements as well as cross-references to various staff no-action letters that will be withdrawn.
There are some issues that the industry may want to address in the Proposal, which were particularly troublesome from a compliance perspective in the prior no-action letters. For example, one condition in Letter 23-01 that has proven difficult to practically implement is the condition that if an intended-to-be-cleared (“ITBC”) swap is rejected from clearing, the ITBC swap is deemed void ab initio. It will be interesting to see how the Commission plans to address this and other conditions in prior relief letters in the final rule.
The CFTC is seeking public comment on the Proposal, with a deadline for submissions set for October 24, 2025. Upon adoption of the final rule, the relevant no-action letters are expected to be withdrawn to avoid regulatory overlap.
[1] Proposed Amendments, Revisions to Business Conduct and Swap Documentation Requirements for Swap Dealers and Major Swap Participants, 90 Fed. Reg. 47136 (Sept. 30, 2025), available at: https://www.cftc.gov/sites/default/files/2025/09/2025-18924a.pdf.
[2] As reflected in no-action positions contained in NALs 12–58, 13–11, 13–12, 19–06, 23–01, and 25–09.
[3] Caroline D. Pham, Acting Chairman, CFTC, “Acting Chairman Pham Statement on Spring 2025 Unified Agenda” (Sept. 4, 2025), available at: https://www.cftc.gov/PressRoom/SpeechesTestimony/phamstatement090425.
[4] Currently, there are no major swap participants registered with the Commission.
[5] Supra n.1 at 47149.
[6] Id.
[7] Supra n.1 at 47147.
[8] MPD was formed in October 2020 as part of the CFTC’s reorganization. Before the 2020 reorganization, MPD was known as the Division of Swap Dealer and Intermediary Oversight (“DSIO”).
[9] Supra n.1 at 47140.
[10] Id. at 47140.
[11] Id. at 47141.
[12] Id. at 47140
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