Rule2026-01712
Revisions to Business Conduct and Swap Documentation Requirements for Swap Dealers and Major Swap Participants; Correction
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
January 28, 2026
Effective
January 29, 2026
Issuing agencies
Commodity Futures Trading Commission
Abstract
The Commodity Futures Trading Commission (CFTC or Commission) is correcting a final rule published in the Federal Register on December 30, 2025. The final rule amended certain of the Commission's business conduct and documentation requirements applicable to swap dealers and major swap participants. This correction rectifies a technical error that would otherwise result in the unintended removal of an appendix to the Commission's regulations that was not meant to be altered by the final rule.
Full Text
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<title>Federal Register, Volume 91 Issue 18 (Wednesday, January 28, 2026)</title>
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[Federal Register Volume 91, Number 18 (Wednesday, January 28, 2026)]
[Rules and Regulations]
[Pages 3640-3642]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-01712]
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COMMODITY FUTURES TRADING COMMISSION
17 CFR Part 23
RIN 3038-AF38
Revisions to Business Conduct and Swap Documentation Requirements
for Swap Dealers and Major Swap Participants; Correction
AGENCY: Commodity Futures Trading Commission.
ACTION: Correcting amendment.
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SUMMARY: The Commodity Futures Trading Commission (CFTC or Commission)
is correcting a final rule published in the Federal Register on
December 30, 2025. The final rule amended certain of the Commission's
business conduct and documentation requirements applicable to swap
dealers and major swap participants. This correction rectifies a
technical error that would otherwise result in the unintended removal
of an appendix to the Commission's regulations that was not meant to be
altered by the final rule.
DATES: Effective on January 29, 2026.
FOR FURTHER INFORMATION CONTACT: Jacob Chachkin, Associate Director,
202-418-5496, <a href="/cdn-cgi/l/email-protection#3359505b52505b585a5d73505547501d545c45"><span class="__cf_email__" data-cfemail="e288818a83818a898b8ca281849681cc858d94">[email protected]</span></a>; or Dina Moussa, Special Counsel, 202-
418-5696, <a href="/cdn-cgi/l/email-protection#5e3a33312b2d2d3f1e3d382a3d70393128"><span class="__cf_email__" data-cfemail="d4b0b9bba1a7a7b594b7b2a0b7fab3bba2">[email protected]</span></a>, Market Participants Division, Commodity
Futures Trading Commission, Three Lafayette Centre, 1155 21st Street
NW, Washington, DC 20581.
SUPPLEMENTARY INFORMATION: On December 30, 2025, the Commission
published in the Federal Register (90 FR 61226) a final rule (the
``Final Rule'') amending certain of the Commission's business conduct
and documentation requirements applicable to swap dealers and major
swap participants. The Final Rule is effective January 29, 2026. The
amendments consisted chiefly of a revision of the regulatory text of
subpart H of 17 CFR part 23 in its entirety (see 90 FR 61252,
amendatory instruction 2). There is also an appendix A to subpart H,
``Guidance on the Application of Sec. Sec. 23.434 and 23.440 for Swap
Dealers That Make Recommendations to Counterparties or Special
Entities.'' This appendix has been present in the Commission's rules
from the time that subpart H was added to part 23 in 2012 (see 77 FR
9734, Feb. 17, 2012). The Final Rule was not intended to alter appendix
A to subpart H in any way. Accordingly, no reference to appendix A or
its contents was included in the amendments to the regulatory text of
subpart H or the table of contents thereto, as presented in the Final
Rule.
As a technical codification matter, because the Final Rule
amendments are presented as revising subpart H as a whole, without an
explicit instruction to retain appendix A to the subpart unchanged, the
appendix will be
[[Page 3641]]
removed from the Code of Federal Regulations (CFR) when the amendments
are incorporated. Such an outcome would be unintended and erroneous.
The lack of an instruction in the Final Rule specifying that appendix A
to subpart H should be retained in the CFR was an inadvertent technical
oversight.
To remedy this technical error, this correcting amendment sets
forth the contents of appendix A to subpart H of 17 CFR part 23, as
they exist currently, prior to the effectiveness of the Final Rule,
with an instruction that the appendix be added back to the subpart.
Presentation of this correction as an addition of the appendix is
necessary due to the technical mechanics of the CFR codification
process. Nonetheless, and for the avoidance of doubt, this correcting
amendment makes no changes to the contents of appendix A. Because the
correcting amendment does not make any changes or otherwise impose any
new substantive regulatory requirements, pre-publication public comment
period is unnecessary.\1\
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\1\ 5 U.S.C. 553(b)(3)(B). Section 553 of the Administrative
Procedure Act (``APA'') generally requires an agency to publish
notice of a rulemaking in the Federal Register and provide an
opportunity for public comment. This requirement does not apply,
however, if the agency ``for good cause finds . . . that notice and
public procedure are impracticable, unnecessary, or contrary to the
public interest. For the same reason stated above, the Commission
finds that there is good cause to make the rule effective on January
29, 2026 pursuant to section 553(d) of the APA, 5 U.S.C. 553(d)
(requiring publication of a rule no less than 30 days before its
effective date unless the agency finds good cause for making the
rule effective sooner).
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List of Subjects in 17 CFR Part 23
Reporting and recordkeeping requirements, Swaps, Trading records.
Accordingly, 17 CFR part 23 is corrected by making the following
correcting amendment:
PART 23--SWAP DEALERS AND MAJOR SWAP PARTICIPANTS
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1. The authority citation for part 23 continues to read as follows:
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).
0
2. Add appendix A to subpart H to read as follows:
Appendix A to Subpart H of Part 23-- Guidance on the Application of
Sec. Sec. 23.434 and 23.440 for Swap Dealers That Make Recommendations
to Counterparties or Special Entities
The following provides guidance on the application of Sec. Sec.
23.434 and 23.440 to swap dealers that make recommendations to
counterparties or Special Entities.
Section 23.434--Recommendations to Counterparties--Institutional
Suitability
A swap dealer that recommends a swap or trading strategy
involving a swap to a counterparty, other than a swap dealer, major
swap participant, security-based swap dealer or major security-based
swap participant, must undertake reasonable diligence to understand
the potential risks and rewards associated with the recommended swap
or trading strategy involving a swap--general suitability (Sec.
23.434(a)(1))--and have a reasonable basis to believe that the
recommended swap or trading strategy involving a swap is suitable
for the counterparty--specific suitability (Sec. 23.434(a)(2)). To
satisfy the general suitability obligation, a swap dealer must
undertake reasonable diligence that will vary depending on, among
other things, the complexity of and risks associated with the swap
or swap trading strategy and the swap dealer's familiarity with the
swap or swap trading strategy. At a minimum, a swap dealer's
reasonable diligence must provide it with an understanding of the
potential risks and rewards associated with the recommended swap or
swap trading strategy.
Recommendation. Whether a communication between a swap dealer
and a counterparty is a recommendation will turn on the facts and
circumstances of the particular situation. There are, however,
certain factors the Commission will consider in reaching such a
determination. The facts and circumstances determination of whether
a communication is a ``recommendation'' requires an analysis of the
content, context, and presentation of the particular communication
or set of communications. The determination of whether a
``recommendation'' has been made, moreover, is an objective rather
than a subjective inquiry. An important factor in this regard is
whether, given its content, context, and manner of presentation, a
particular communication from a swap dealer to a counterparty
reasonably would be viewed as a ``call to action,'' or suggestion
that the counterparty enter into a swap. An analysis of the content,
context, and manner of presentation of a communication requires
examination of the underlying substantive information transmitted to
the counterparty and consideration of any other facts and
circumstances, such as any accompanying explanatory message from the
swap dealer. Additionally, the more individually tailored the
communication to a specific counterparty or a targeted group of
counterparties about a swap, group of swaps or trading strategy
involving the use of a swap, the greater the likelihood that the
communication may be viewed as a ``recommendation.''
Safe harbor. A swap dealer may satisfy the safe harbor
requirements of Sec. 23.434(b) to fulfill its counterparty-specific
suitability duty under Sec. 23.434(a)(2) if: (1) The swap dealer
reasonably determines that the counterparty, or an agent to which
the counterparty has delegated decision-making authority, is capable
of independently evaluating investment risks with regard to the
relevant swap or trading strategy involving a swap; (2) the
counterparty or its agent represents in writing that it is
exercising independent judgment in evaluating the recommendations of
the swap dealer; (3) the swap dealer discloses in writing that it is
acting in its capacity as a counterparty and is not undertaking to
assess the suitability of the recommendation; and (4) in the case of
a counterparty that is a Special Entity, the swap dealer complies
with Sec. 23.440 where the recommendation would cause the swap
dealer to act as an advisor to a Special Entity within the meaning
of Sec. 23.440(a).
To reasonably determine that the counterparty, or an agent to
which the counterparty has delegated decision-making authority, is
capable of independently evaluating investment risks of a
recommendation, the swap dealer can rely on the written
representations of the counterparty, as provided in Sec. 23.434(c).
Section 23.434(c)(1) provides that a swap dealer will satisfy Sec.
23.434(b)(1)'s requirement with respect to a counterparty other than
a Special Entity if it receives representations that the
counterparty has complied in good faith with the counterparty's
policies and procedures that are reasonably designed to ensure that
the persons responsible for evaluating the recommendation and making
trading decisions on behalf of the counterparty are capable of doing
so. Section Sec. 23.434(c)(2) provides that a swap dealer will
satisfy Sec. 23.434(b)(1)'s requirement with respect to a Special
Entity if it receives representations that satisfy the terms of
Sec. 23.450(d) regarding a Special Entity's qualified independent
representative.
Prong (4) of the safe harbor clarifies that Sec. 23.434's
application is broader than Sec. 23.440--Requirements for Swap
Dealers Acting as Advisors to Special Entities. Section 23.434 is
triggered when a swap dealer recommends any swap or trading strategy
that involves a swap to any counterparty. However, Sec. 23.440 is
limited to a swap dealer's recommendations (1) to a Special Entity
(2) of swaps that are tailored to the particular needs or
characteristics of the Special Entity. Thus, a swap dealer that
recommends a swap to a Special Entity that is tailored to the
particular needs or characteristics of the Special Entity may comply
with its suitability obligation by satisfying the safe harbor in
Sec. 23.434(b); however, the swap dealer must also comply with
Sec. 23.440 in such circumstances.
Section 23.440--Requirements for Swap Dealers Acting as Advisors to
Special Entities
A swap dealer ``acts as an advisor to a Special Entity'' under
Sec. 23.440 when the swap dealer recommends a swap or trading
strategy involving a swap that is tailored to the particular needs
or characteristics of the
[[Page 3642]]
Special Entity. A swap dealer that ``acts as an advisor to a Special
Entity'' has a duty to make a reasonable determination that a
recommendation is in the ``best interests'' of the Special Entities
and must undertake ``reasonable efforts'' to obtain information
necessary to make such a determination.
Whether a swap dealer ``acts as an advisor to a Special Entity''
will depend on: (1) Whether the swap dealer has made a
recommendation to a Special Entity; and (2) whether the
recommendation concerns a swap or trading strategy involving a swap
that is tailored to the particular needs or characteristics of the
Special Entity. To determine whether a communication between a swap
dealer and counterparty is a recommendation, the Commission will
apply the same factors as under Sec. 23.434, the suitability rule.
However, unlike the suitability rule, which covers recommendations
regarding any type of swap or trading strategy involving a swap, the
``acts as an advisor rule'' and ``best interests'' duty will be
triggered only if the recommendation is of a swap or trading
strategy involving a swap that is ``tailored to the particular needs
or characteristics of the Special Entity.''
Whether a swap is tailored to the particular needs or
characteristics of the Special Entity will depend on the facts and
circumstances. Swaps with terms that are tailored or customized to a
specific Special Entity's needs or objectives, or swaps with terms
that are designed for a targeted group of Special Entities that
share common characteristics, e.g., school districts, are likely to
be viewed as tailored to the particular needs or characteristics of
the Special Entity. Generally, however, the Commission would not
view a swap that is ``made available for trading'' on a designated
contract market or swap execution facility, as provided in Section
2(h)(8) of the Act, as tailored to the particular needs or
characteristics of the Special Entity.
Safe harbor. Under Sec. 23.440(b)(2), when dealing with a
Special Entity (including a Special Entity that is an employee
benefit plan as defined in Sec. 23.401(c)(3)),\1\ a swap dealer
will not ``act as an advisor to a Special Entity'' if: (1) The swap
dealer does not express an opinion as to whether the Special Entity
should enter into a recommended swap or swap trading strategy that
is tailored to the particular needs or characteristics of the
Special Entity; (2) the Special Entity represents in writing, in
accordance with Sec. 23.402(d), that it will not rely on the swap
dealer's recommendations and will rely on advice from a qualified
independent representative within the meaning of Sec. 23.450; and
(3) the swap dealer discloses that it is not undertaking to act in
the best interests of the Special Entity.
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\1\ The guidance in this appendix regarding the safe harbor to
Sec. 23.440 is limited to the safe harbor for any Special Entity
under Sec. 23.440(b)(2). A swap dealer may separately comply with
the safe harbor under Sec. 23.440(b)(1) for its communications to a
Special Entity that is an employee benefit plan as defined in Sec.
23.401(c)(3).
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A swap dealer that elects to communicate within the safe harbor
to avoid triggering the ``best interests'' duty must appropriately
manage its communications. To clarify the type of communications
that they will make under the safe harbor, the Commission expects
that swap dealers may specifically represent that they will not
express an opinion as to whether the Special Entity should enter
into a recommended swap or trading strategy, and that for such
advice the Special Entity should consult its own advisor. Nothing in
the final rule would preclude such a representation from being
included in counterparty relationship documentation. However, such a
representation would not act as a safe harbor under the rule where,
contrary to the representation, the swap dealer does express an
opinion to the Special Entity as to whether it should enter into a
recommended swap or trading strategy.
If a swap dealer complies with the terms of the safe harbor, the
following types of communications would not be subject to the ``best
interests'' duty: \2\ (1) Providing information that is general
transaction, financial, educational, or market information; (2)
offering a swap or trading strategy involving a swap, including
swaps that are tailored to the needs or characteristics of a Special
Entity; (3) providing a term sheet, including terms for swaps that
are tailored to the needs or characteristics of a Special Entity;
(4) responding to a request for a quote from a Special Entity; (5)
providing trading ideas for swaps or swap trading strategies,
including swaps that are tailored to the needs or characteristics of
a Special Entity; and (6) providing marketing materials upon request
or on an unsolicited basis about swaps or swap trading strategies,
including swaps that are tailored to the needs or characteristics of
a Special Entity. This list of communications is not exclusive and
should not create a negative implication that other types of
communications are subject to a ``best interests'' duty.
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\2\ Communications on the list that are not within the meaning
of the term ``acts as an advisor to a Special Entity'' are outside
the requirements of Sec. 23.440. By including such communications
on the list, the Commission does not intend to suggest that they are
``recommendations.'' Thus, a swap dealer that does not ``act as an
advisor to a Special Entity'' within the meaning of Sec. 23.440(a)
is not required to comply with the safe harbor to avoid the ``best
interests'' duty with respect to its communications.
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The safe harbor in Sec. 23.440(b)(2) allows a wide range of
communications and interactions between swap dealers and Special
Entities without invoking the ``best interests'' duty, including
discussions of the advantages or disadvantages of different swaps or
trading strategies. The Commission notes, however, that depending on
the facts and circumstances, some of the examples on the list could
be ``recommendations'' that would trigger a suitability obligation
under Sec. 23.434. However, the Commission has determined that such
activities would not, by themselves, prompt the ``best interests''
duty in Sec. 23.440, provided that the parties comply with the
other requirements of Sec. 23.440(b)(2). All of the swap dealer's
communications, however, must be made in a fair and balanced manner
based on principles of fair dealing and good faith in compliance
with Sec. 23.433.
Swap dealers engage in a wide variety of communications with
counterparties in the normal course of business, including but not
limited to the six types of communications listed above. Whether any
particular communication will be deemed to be a ``recommendation''
within the meaning of Sec. Sec. 23.434 or 23.440 will depend on the
facts and circumstances of the particular communication considered
in light of the guidance in this appendix with respect to the
meaning of the term ``recommendation.'' Swap dealers that choose to
manage their communications to comply with the safe harbors provided
in Sec. Sec. 23.434 and 23.440 will be able to limit the duty they
owe to counterparties, including Special Entities, provided that the
parties exchange the appropriate representations.
Issued in Washington, DC, on January 26, 2026, by the
Commission.
Christopher Kirkpatrick,
Secretary of the Commission.
Note: The following appendix will not appear in the Code of
Federal Regulations.
Appendix to Revisions to Business Conduct and Swap Documentation
Requirements for Swap Dealers and Major Swap Participants; Correction--
Commission Voting Summary
On this matter, Chairman Selig voted in the affirmative. No
Commissioner voted in the negative.
[FR Doc. 2026-01712 Filed 1-27-26; 8:45 am]
BILLING CODE 6351-01-P
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