The National Futures Association (NFA) requires each NFA member commodity pool operator (CPO), commodity trading advisor (CTA), futures commission merchant (FCM) and introducing broker (IB) engaged in swaps activities regulated by the Commodity Futures Trading Commission — for example, activities related to nondeliverable FX forwards, interest rate swaps, and certain security index derivatives — to be approved by NFA as a swap firm and requires each associated person (AP) of a swap firm whose activities involve swaps to be approved as a swap AP.1
Although persons associated with swap dealers (SDs) are not required to be approved by NFA, and the statutory and regulatory provisions applicable to such persons differ from those applicable to APs of CPOs, CTAs, FCMs and IBs, an SD may also have one or more APs to whom the requirements described in this Sidley Update will apply. For the purpose of this Sidley Update, such persons are referred to as swap APs. Individuals who supervise swap APs are also swap APs. This is true for all persons above a swap AP in a firm’s supervisory chain.
Effective January 31, 2020, NFA will implement its long-awaited swaps proficiency requirements. Swap APs of NFA member CPOs, CTAs, FCM and IBs will be required to take and pass a newly developed examination. Swap APs of SDs will also generally be required to take and pass the exam; however, swap APs of SDs located outside the United States, including in non-U.S. branches of U.S. SDs, generally will not be required to take and pass the exam if they limit their swap-related activities to swap counterparties that are themselves non-U.S. persons or non-U.S. branches of U.S. SDs.
The swaps proficiency requirements may be satisfied by taking and passing each module of an online examination. The online exam will be available beginning January 31, 2020. Swap APs who are subject to the swaps proficiency requirements must satisfy the requirements by no later than January 31, 2021.2 Swap APs who fail to satisfy the swaps proficiency requirements will not be allowed to act as swap APs after January 31, 2021.
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