US Codex
C.F.R.
Browse by date

View an earlier version

Latest
Current
Browse all versions by date
Notes

17 C.F.R. §§ 23.501–23.504

4 sections in range

§23.501. Swap confirmation.

17 C.F.R. § 23.501

(a)
Confirmation. Subject to the compliance schedule in paragraph (c) of this section:
(1)
Each swap dealer and major swap participant entering into a swap transaction with a counterparty that is a swap dealer or major swap participant shall execute a confirmation for the swap transaction as soon as technologically practicable, but in any event by the end of first business day following the day of execution.
(2)
Each swap dealer and major swap participant entering into a swap transaction with a counterparty that is not a swap dealer or a major swap participant shall send an acknowledgment of such swap transaction as soon as technologically practicable, but in any event by the end of the first business day following the day of execution.
(3)
(i)
Each swap dealer and major swap participant shall establish, maintain, and follow written policies and procedures reasonably designed to ensure that it executes a confirmation for each swap transaction that it enters into with a counterparty that is a financial entity as soon as technologically practicable, but in any event by the end of the first business day following the day of execution.
(ii)
Each swap dealer and major swap participant shall establish, maintain, and follow written policies and procedures reasonably designed to ensure that it executes a confirmation for each swap transaction that it enters into with a counterparty that is not a swap dealer, major swap participant, or a financial entity not later than the end of the second business day following the day of execution.
(iii)
Such procedures shall include a requirement that, upon a request by a prospective counterparty prior to execution of any such swap, the swap dealer or major swap participant furnish to the prospective counterparty prior to execution a draft acknowledgment specifying all terms of the swap transaction other than the applicable pricing and other relevant terms that are to be expressly agreed at execution.
(4)
Swaps executed on a swap execution facility, designated contract market, or submitted for clearing by a derivatives clearing organization.
(i)
Any swap transaction executed on or pursuant to the rules of a swap execution facility or designated contract market shall be deemed to satisfy the requirements of this section, provided that the rules of the swap execution facility or designated contract market establish that confirmation of all terms of the transaction shall take place as soon as technologically practicable after execution.
(ii)
Any swap transaction submitted for clearing by a derivatives clearing organization shall be deemed to satisfy the requirements of this section, provided that:
(A)
The swap transaction is submitted for clearing as soon as technologically practicable, but in any event no later than the times established for confirmation under paragraphs (a)(1) or (3) of this section, and
(B)
Confirmation of all terms of the transaction takes place at the same time as the swap transaction is accepted for clearing pursuant to the rules of the derivatives clearing organization.
(iii)
If a swap dealer or major swap participant receives notice that a swap transaction has not been confirmed by a swap execution facility or a designated contract market, or accepted for clearing by a derivatives clearing organization, the swap dealer or major swap participant shall execute a confirmation for such swap transaction as soon as technologically practicable, but in any event no later than the times established for confirmation under paragraphs (a)(1) or (3) of this section as if such swap transaction were executed at the time the swap dealer or major swap participant receives such notice.
(5)
For purposes of this section—
(i)
“Day of execution” means the calendar day of the party to the swap transaction that ends latest, provided that if a swap transaction is—
(A)
Entered into after 4— 00 p.m. in the place of a party; or
(B)
Entered into on a day that is not a business day in the place of a party, then such swap transaction shall be deemed to have been entered into by that party on the immediately succeeding business day of that party, and the day of execution shall be determined with reference to such business day; and
(ii)
“Business day” means any day other than a Saturday, Sunday, or legal holiday.
(b)
Recordkeeping.
(1)
Each swap dealer and major swap participant shall make and retain a record of:
(i)
The date and time of transmission to, or receipt from, a counterparty of any acknowledgment; and
(ii)
The date and time of transmission to, or receipt from, a counterparty of any confirmation.
(2)
All records required to be maintained pursuant to this section shall be maintained in accordance with § 23.203 and shall be made available promptly upon request to any representative of the Commission or any applicable prudential regulator, or with regard to swaps defined in section 1a(47)(A)(v), to any representative of the Commission, the Securities and Exchange Commission, or any applicable prudential regulator.
(c)
Compliance schedule. The requirements of paragraph (a) of this section are subject to the following compliance schedule:
(1)
For purposes of paragraph (a)(1) of this section, each swap dealer and major swap participant entering into a swap transaction that is or involves a credit swap or interest rate swap with a counterparty that is a swap dealer or major swap participant shall execute a confirmation for the swap transaction as soon as technologically practicable, but in any event by:
(i)
The end of the second business day following the day of execution for the period from the effective date of this section to February 28, 2014; and
(ii)
The end of the first business day following the day of execution from and after March 1, 2014.
(2)
For purposes of paragraph (a)(1) of this section, each swap dealer and major swap participant entering into a swap transaction that is or involves an equity swap, foreign exchange swap, or other commodity swap with a counterparty that is a swap dealer or major swap participant shall execute a confirmation for the swap transaction as soon as technologically practicable, but in any event by:
(i)
The end of the third business day following the day of execution for the period from the effective date of this section to August 31, 2013;
(ii)
The end of the second business day following the day of execution for the period from September 1, 2013 to August 31, 2014; and
(iii)
The end of the first business day following the day of execution from and after September 1, 2014.
(3)
For purposes of paragraph (a)(2) of this section, each swap dealer and major swap participant entering into a swap transaction that is or involves a credit swap or interest rate swap with a counterparty that is not a swap dealer or a major swap participant shall send an acknowledgment of such swap transaction as soon as technologically practicable, but in any event by:
(i)
The end of the second business day following the day of execution for the period from the effective date of this section to February 28, 2014; and
(ii)
The end of the first business day following the day of execution from and after March 1, 2014.
(4)
For purposes of paragraph (a)(2) of this section, each swap dealer and major swap participant entering into a swap transaction that is or involves an equity swap, foreign exchange swap, or other commodity swap with a counterparty that is not a swap dealer or a major swap participant shall send an acknowledgment of such swap transaction as soon as technologically practicable, but in any event by:
(i)
The end of the third business day following the day of execution for the period from the effective date of this section to August 31, 2013;
(ii)
The end of the second business day following the day of execution for the period from September 1, 2013 to August 31, 2014; and
(iii)
The end of the first business day following the day of execution from and after September 1, 2014.
(5)
For purposes of paragraph (a)(3)(i) of this section, each swap dealer and major swap participant shall establish, maintain, and follow written policies and procedures reasonably designed to ensure that it executes a confirmation for each swap transaction that is or involves a credit swap or interest rate swap that it enters into with a counterparty that is a financial entity as soon as technologically practicable, but in any event by:
(i)
The end of the second business day following the day of execution for the period from the effective date of this section to February 28, 2014; and
(ii)
The end of the first business day following the day of execution from and after March 1, 2014.
(6)
For purposes of paragraph (a)(3)(i) of this section, each swap dealer and major swap participant shall establish, maintain, and follow written policies and procedures reasonably designed to ensure that it executes a confirmation for each swap transaction that is or involves an equity swap, foreign exchange swap, or other commodity swap that it enters into with a counterparty that is a financial entity as soon as technologically practicable, but in any event by:
(i)
The end of the third business day following the day of execution for the period from the effective date of this section to August 31, 2013;
(ii)
The end of the second business day following the day of execution for the period from September 1, 2013 to August 31, 2014; and
(iii)
The end of the first business day following the day of execution from and after September 1, 2014.
(7)
For purposes of paragraph (a)(3)(ii) of this section, each swap dealer and major swap participant shall establish, maintain, and follow written policies and procedures reasonably designed to ensure that it executes a confirmation for each swap transaction that is or involves a credit swap or interest rate swap that it enters into with a counterparty that is not a swap dealer, major swap participant, or a financial entity not later than:
(i)
The end of the fifth business day following the day of execution for the period from the effective date of this section to August 31, 2013;
(ii)
The end of the third business day following the day of execution for the period from September 1, 2013 to August 31, 2014; and
(iii)
The end of the second business day following the day of execution from and after September 1, 2014.
(8)
For purposes of paragraph (a)(3)(ii) of this section, each swap dealer and major swap participant shall establish, maintain, and follow written policies and procedures reasonably designed to ensure that it executes a confirmation for each swap transaction that is or involves an equity swap, foreign exchange swap, or other commodity swap that it enters into with a counterparty that is not a swap dealer, major swap participant, or a financial entity not later than:
(i)
The end of the seventh business day following the day of execution for the period from the effective date of this section to August 31, 2013;
(ii)
The end of the fourth business day following the day of execution for the period from September 1, 2013 to August 31, 2014; and
(iii)
The end of the second business following the day of execution from and after September 1, 2014.
(9)
For purposes of paragraph (c) of this section—
(i)
“Credit swap” means any swap that is primarily based on instruments of indebtedness, including, without limitation: Any swap primarily based on one or more broad-based indices related to instruments of indebtedness; and any swap that is an index credit swap or total return swap on one or more indices of debt instruments;
(ii)
“Equity swap” means any swap that is primarily based on equity securities, including, without limitation: Any swap primarily based on one or more broad-based indices of equity securities; and any total return swap on one or more equity indices;
(iii)
“Foreign exchange swap” has the meaning set forth in section 1a(25) of the CEA. It does not include swaps primarily based on rates of exchange between different currencies, changes in such rates, or other aspects of such rates (sometimes known as “cross-currency swaps”);
(iv)
“Interest rate swap” means any swap which is primarily based on one or more interest rates, such as swaps of payments determined by fixed and floating interest rates; or any swap which is primarily based on rates of exchange between different currencies, changes in such rates, or other aspects of such rates (sometimes known as “cross-currency swaps”); and
(v)
“Other commodity swap” means any swap not included in the credit, equity, foreign exchange, or interest rate asset classes, including, without limitation, any swap for which the primary underlying item is a physical commodity or the price or any other aspect of a physical commodity.
Notes, amendments, and revision history

Amendments

[77 FR 55960, Sept. 11, 2012, as amended at 89 FR 35001, May 1, 2024]

Source

Source: 77 FR 21307, Apr. 9, 2012, unless otherwise noted.

Authority

Authority: 7 U.S.C. 1a, 2, 6, 6a, 6b, 6b-1, 6c, 6p, 6r, 6s, 6t, 9, 9a, 12, 12a, 13b, 13c, 16a, 18, 19, 21. Section 23.160 also issued under 7 U.S.C. 2(i); Sec. 721(b), Pub. L. 111-203, 124 Stat. 1641 (2010).

Source

Source: 77 FR 2628, Jan. 19, 2012, unless otherwise noted.

Amendments

[77 FR 55960, Sept. 11, 2012, as amended at 89 FR 35001, May 1, 2024]

§23.502. Portfolio reconciliation.

17 C.F.R. § 23.502

(a)
Swaps with swap dealers or major swap participants. Each swap dealer and major swap participant shall engage in portfolio reconciliation as follows for all swaps in which its counterparty is also a swap dealer or major swap participant.
(1)
Each swap dealer or major swap participant shall agree in writing with each of its counterparties on the terms of the portfolio reconciliation.
(2)
The portfolio reconciliation may be performed on a bilateral basis by the counterparties or by a qualified third party.
(3)
The portfolio reconciliation shall be performed no less frequently than:
(i)
Once each business day for each swap portfolio that includes 500 or more swaps;
(ii)
Once each week for each swap portfolio that includes more than 50 but fewer than 500 swaps on any business day during any week; and
(iii)
Once each calendar quarter for each swap portfolio that includes no more than 50 swaps at any time during the calendar quarter.
(4)
Each swap dealer and major swap participant shall resolve immediately any discrepancy in a material term of a swap identified as part of a portfolio reconciliation or otherwise.
(5)
Each swap dealer and major swap participant shall establish, maintain, and follow written policies and procedures reasonably designed to resolve any discrepancy in a valuation identified as part of a portfolio reconciliation or otherwise as soon as possible, but in any event within five business days, provided that the swap dealer and major swap participant establishes, maintains, and follows written policies and procedures reasonably designed to identify how the swap dealer or major swap participant will comply with any variation margin requirements under section 4s(e) of the Act and regulations under this part pending resolution of the discrepancy in valuation. A difference between the lower valuation and the higher valuation of less than 10 percent of the higher valuation need not be deemed a discrepancy.
(b)
Swaps with entities other than swap dealers or major swap participants. Each swap dealer and major swap participant shall establish, maintain, and follow written policies and procedures reasonably designed to ensure that it engages in portfolio reconciliation as follows for all swaps in which its counterparty is neither a swap dealer nor a major swap participant.
(1)
Each swap dealer or major swap participant shall agree in writing with each of its counterparties on the terms of the portfolio reconciliation, including agreement on the selection of any third-party service provider.
(2)
The portfolio reconciliation may be performed on a bilateral basis by the counterparties or by one or more third parties selected by the counterparties in accordance with paragraph (b)(1) of this section.
(3)
The required policies and procedures shall provide that portfolio reconciliation will be performed no less frequently than:
(i)
Once each calendar quarter for each swap portfolio that includes more than 100 swaps at any time during the calendar quarter; and
(ii)
Once annually for each swap portfolio that includes no more than 100 swaps at any time during the calendar year.
(4)
Each swap dealer or major swap participant shall establish, maintain, and follow written procedures reasonably designed to resolve any discrepancies in the material terms or valuation of each swap identified as part of a portfolio reconciliation or otherwise with a counterparty that is neither a swap dealer nor major swap participant in a timely fashion. A difference between the lower valuation and the higher valuation of less than 10 percent of the higher valuation need not be deemed a discrepancy.
(c)
Reporting. Each swap dealer and major swap participant shall promptly notify the Commission and any applicable prudential regulator, or with regard to swaps defined in section 1a(47)(A)(v) of the Act, the Commission, the Securities and Exchange Commission, and any applicable prudential regulator, of any swap valuation dispute in excess of $20,000,000 (or its equivalent in any other currency) if not resolved within:
(1)
Three (3) business days, if the dispute is with a counterparty that is a swap dealer or major swap participant; or
(2)
Five (5) business days, if the dispute is with a counterparty that is not a swap dealer or major swap participant.
(d)
Reconciliation of cleared swaps. Nothing in this section shall apply to a swap that is cleared by a derivatives clearing organization.
(e)
Recordkeeping. A record of each swap portfolio reconciliation consistent with § 23.202(a)(3)(iii) shall be maintained in accordance with § 23.203.
Notes, amendments, and revision history

Amendments

[77 FR 55960, Sept. 11, 2012]

Source

Source: 77 FR 21307, Apr. 9, 2012, unless otherwise noted.

Authority

Authority: 7 U.S.C. 1a, 2, 6, 6a, 6b, 6b-1, 6c, 6p, 6r, 6s, 6t, 9, 9a, 12, 12a, 13b, 13c, 16a, 18, 19, 21. Section 23.160 also issued under 7 U.S.C. 2(i); Sec. 721(b), Pub. L. 111-203, 124 Stat. 1641 (2010).

Source

Source: 77 FR 2628, Jan. 19, 2012, unless otherwise noted.

Amendments

[77 FR 55960, Sept. 11, 2012]

§23.503. Portfolio compression.

17 C.F.R. § 23.503

(a)
Portfolio compression with swap dealers and major swap participants—
(1)
Bilateral offset. Each swap dealer and major swap participant shall establish, maintain, and follow written policies and procedures for terminating each fully offsetting swap between a swap dealer or major swap participant and another swap dealer or major swap participant in a timely fashion, when appropriate.
(2)
Bilateral compression. Each swap dealer and major swap participant shall establish, maintain, and follow written policies and procedures for periodically engaging in bilateral portfolio compression exercises, when appropriate, with each counterparty that is also a swap dealer or major swap participant.
(3)
Multilateral compression. Each swap dealer and major swap participant shall establish, maintain, and follow written policies and procedures for periodically engaging in multilateral portfolio compression exercises, when appropriate, with each counterparty that is also a swap dealer or major swap participant. Such policies and procedures shall include:
(i)
Policies and procedures for participation in all multilateral portfolio compression exercises required by Commission regulation or order; and
(ii)
Evaluation of multilateral portfolio compression exercises that are initiated, offered, or sponsored by any third party.
(b)
Portfolio compression with counterparties other than swap dealers and major swap participants. Each swap dealer and major swap participant shall establish, maintain, and follow written policies and procedures for periodically terminating fully offsetting swaps and for engaging in portfolio compression exercises with respect to swaps in which its counterparty is an entity other than a swap dealer or major swap participant, to the extent requested by any such counterparty.
(c)
Portfolio compression of cleared swaps. Nothing in this section shall apply to a swap that is cleared by a derivatives clearing organization.
(d)
Recordkeeping.
(1)
Each swap dealer and major swap participant shall make and maintain a complete and accurate record of each bilateral offset and each bilateral or multilateral portfolio compression exercise in which it participates.
(2)
All records required to be maintained pursuant to this section shall be maintained in accordance with § 23.203 and shall be made available promptly upon request to any representative of the Commission or any applicable prudential regulator, or with regard to swaps defined in section 1a(47)(A)(v) of the Act, to any representative of the Commission, the Securities and Exchange Commission, or any applicable prudential regulator.
Notes, amendments, and revision history

Amendments

[77 FR 55960, Sept. 11, 2012]

Source

Source: 77 FR 21307, Apr. 9, 2012, unless otherwise noted.

Authority

Authority: 7 U.S.C. 1a, 2, 6, 6a, 6b, 6b-1, 6c, 6p, 6r, 6s, 6t, 9, 9a, 12, 12a, 13b, 13c, 16a, 18, 19, 21. Section 23.160 also issued under 7 U.S.C. 2(i); Sec. 721(b), Pub. L. 111-203, 124 Stat. 1641 (2010).

Source

Source: 77 FR 2628, Jan. 19, 2012, unless otherwise noted.

Amendments

[77 FR 55960, Sept. 11, 2012]

§23.504. Swap trading relationship documentation.

17 C.F.R. § 23.504

(a)
In general—
(1)
Applicability. The requirements of this section shall not apply to:
(i)
Swaps executed prior to the date on which a swap dealer or major swap participant is required to be in compliance with this section;
(ii)
Swaps that have been cleared on a derivatives clearing organization or cleared on a clearing organization that is currently exempted from registration by the Commission pursuant to section 5b(h) of the Act; and
(iii)
An ITBC Swap as defined in § 23.401(d).
(2)
Policies and procedures. Each swap dealer and major swap participant shall establish, maintain, and follow written policies and procedures reasonably designed to ensure that the swap dealer or major swap participant executes written swap trading relationship documentation with its counterparty that complies with the requirements of this section. The policies and procedures shall be approved in writing by senior management of the swap dealer and major swap participant, and a record of the approval shall be retained. Other than confirmations of swap transactions under § 23.501, the swap trading relationship documentation shall be executed prior to or contemporaneously with entering into a swap transaction with any counterparty.
(b)
Swap trading relationship documentation.
(1)
The swap trading relationship documentation shall be in writing and shall include all terms governing the trading relationship between the swap dealer or major swap participant and its counterparty, including, without limitation, terms addressing payment obligations, netting of payments, events of default or other termination events, calculation and netting of obligations upon termination, transfer of rights and obligations, governing law, valuation, and dispute resolution.
(2)
The swap trading relationship documentation shall include all confirmations of swap transactions under § 23.501.
(3)
The swap trading relationship documentation shall include credit support arrangements, which shall contain, in accordance with applicable requirements under Commission regulations or regulations adopted by prudential regulators and without limitation, the following:
(i)
Initial and variation margin requirements, if any;
(ii)
Types of assets that may be used as margin and asset valuation haircuts, if any;
(iii)
Investment and rehypothecation terms for assets used as margin for uncleared swaps, if any; and
(iv)
Custodial arrangements for margin assets, including whether margin assets are to be segregated with an independent third party, in accordance with § 23.701(e), if any.
(4)
(i)
The swap trading relationship documentation between swap dealers, between major swap participants, between a swap dealer and major swap participant, between a swap dealer or major swap participant and a financial entity, and, if requested by any other counterparty, between a swap dealer or major swap participant and such counterparty, shall include written documentation in which the parties agree on the process, which may include any agreed upon methods, procedures, rules, and inputs, for determining the value of each swap at any time from execution to the termination, maturity, or expiration of such swap for the purposes of complying with the margin requirements under section 4s(e) of the Act and regulations under this part, and the risk management requirements under section 4s(j) of the Act and regulations under this part. To the maximum extent practicable, the valuation of each swap shall be based on recently-executed transactions, valuations provided by independent third parties, or other objective criteria.
(ii)
Such documentation shall include either:
(A)
Alternative methods for determining the value of the swap for the purposes of complying with this paragraph in the event of the unavailability or other failure of any input required to value the swap for such purposes; or
(B)
A valuation dispute resolution process by which the value of the swap shall be determined for the purposes of complying with this paragraph (b)(4).
(iii)
A swap dealer or major swap participant is not required to disclose to the counterparty confidential, proprietary information about any model it may use to value a swap.
(iv)
The parties may agree on changes or procedures for modifying or amending the documentation required by this paragraph at any time.
(5)
The swap trading relationship documentation of a swap dealer or major swap participant shall include the following:
(i)
A statement of whether the swap dealer or major swap participant is an insured depository institution (as defined in 12 U.S.C. 1813) or a financial company (as defined in section 201(a)(11) of the Dodd-Frank Act, 12 U.S.C. 5381(a)(11));
(ii)
A statement of whether the counterparty is an insured depository institution or financial company;
(iii)
A statement that in the event either the swap dealer or major swap participant or its counterparty is a covered financial company (as defined in section 201(a)(8) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, 12 U.S.C. 5381(a)(8)) or an insured depository institution for which the Federal Deposit Insurance Corporation (FDIC) has been appointed as a receiver (the “covered party”), certain limitations under Title II of the Dodd-Frank Act or the Federal Deposit Insurance Act may apply to the right of the non-covered party to terminate, liquidate, or net any swap by reason of the appointment of the FDIC as receiver, notwithstanding the agreement of the parties in the swap trading relationship documentation, and that the FDIC may have certain rights to transfer swaps of the covered party under section 210(c)(9)(A) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, 12 U.S.C. 5390(c)(9)(A), or 12 U.S.C. 1821(e)(9)(A); and
(iv)
An agreement between the swap dealer or major swap participant and its counterparty to provide notice if either it or its counterparty becomes or ceases to be an insured depository institution or a financial company.
(6)
The swap trading relationship documentation of each swap dealer and major swap participant shall contain a notice that, upon acceptance of a swap by a derivatives clearing organization:
(i)
The original swap is extinguished;
(ii)
The original swap is replaced by equal and opposite swaps with the derivatives clearing organization; and
(iii)
All terms of the swap shall conform to the product specifications of the cleared swap established under the derivatives clearing organization's rules.
(c)
Audit of swap trading relationship documentation. Each swap dealer and major swap participant shall have an independent internal or external auditor conduct periodic audits sufficient to identify any material weakness in its documentation policies and procedures required by this section and Commission regulations. A record of the results of each audit shall be retained.
(d)
Recordkeeping. Each swap dealer and major swap participant shall maintain all documents required to be created pursuant to this section in accordance with § 23.203 and shall make them available promptly upon request to any representative of the Commission or any applicable prudential regulator, or with regard to swaps defined in section 1a(47)(A)(v) of the Act, to any representative of the Commission, the Securities and Exchange Commission, or any applicable prudential regulator.
Notes, amendments, and revision history

Amendments

[77 FR 55960, Sept. 11, 2012, as amended at 90 FR 61259, Dec. 30, 2025]

Source

Source: 77 FR 21307, Apr. 9, 2012, unless otherwise noted.

Authority

Authority: 7 U.S.C. 1a, 2, 6, 6a, 6b, 6b-1, 6c, 6p, 6r, 6s, 6t, 9, 9a, 12, 12a, 13b, 13c, 16a, 18, 19, 21. Section 23.160 also issued under 7 U.S.C. 2(i); Sec. 721(b), Pub. L. 111-203, 124 Stat. 1641 (2010).

Source

Source: 77 FR 2628, Jan. 19, 2012, unless otherwise noted.

Amendments

[77 FR 55960, Sept. 11, 2012, as amended at 90 FR 61259, Dec. 30, 2025]