Revisions to Business Conduct and Swap Documentation Requirements for Swap Dealers and Major Swap Participants; Correction

<RULE> COMMODITY FUTURES TRADING COMMISSION <CFR>17 CFR Part 23</CFR> <RIN>RIN 3038-AF38</RIN> <SUBJECT>Revisions to Business Conduct and Swap Documentation Requirements for Swap Dealers and Major Swap Participants; Correction</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Commodity Futures Trading Commission. <HD SOURCE="HED">ACTION:</HD> Correcting amendment. <SUM> <HD SOURCE="HED">SUMMARY:</HD> The Commodity Futures Trading Commission (CFTC or Commission) is correcting a final rule published in the <E T="04">Federal Register</E> 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. </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> Effective on January 29, 2026. </EFFDATE> <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> Jacob Chachkin, Associate Director, 202-418-5496, <E T="03">jchachkin@cftc.gov;</E> or Dina Moussa, Special Counsel, 202-418-5696, <E T="03">dmoussa@cftc.gov,</E> Market Participants Division, Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st Street NW, Washington, DC 20581. </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> On December 30, 2025, the Commission published in the <E T="04">Federal Register</E> (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 ( <E T="03">see</E> 90 FR 61252, amendatory instruction 2). There is also an appendix A to subpart H, “Guidance on the Application of §§ 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 ( <E T="03">see</E> 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 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. <SU>1</SU> <FTREF/> <FTNT> <SU>1</SU>  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 <E T="04">Federal Register</E> 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). </FTNT> <LSTSUB> <HD SOURCE="HED">List of Subjects in 17 CFR Part 23</HD> Reporting and recordkeeping requirements, Swaps, Trading records. </LSTSUB> Accordingly, 17 CFR part 23 is corrected by making the following correcting amendment: <HD SOURCE="HED">PART 23—SWAP DEALERS AND MAJOR SWAP PARTICIPANTS</HD> <REGTEXT TITLE="17" PART="23"> 1. The authority citation for part 23 continues to read as follows: <HD SOURCE="HED">Authority: </HD> 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. <EXTRACT> Section 23.160 also issued under 7 U.S.C. 2(i); Sec. 721(b), Pub. L. 111-203, 124 Stat. 1641 (2010). </EXTRACT> </REGTEXT> <REGTEXT TITLE="17" PART="23"> 2. Add appendix A to subpart H to read as follows: <HD SOURCE="HD1">Appendix A to Subpart H of Part 23— Guidance on the Application of §§ 23.434 and 23.440 for Swap Dealers That Make Recommendations to Counterparties or Special Entities</HD> <EXTRACT> The following provides guidance on the application of §§ 23.434 and 23.440 to swap dealers that make recommendations to counterparties or Special Entities. <HD SOURCE="HD1">Section 23.434—Recommendations to Counterparties—Institutional Suitability</HD> 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 (§ 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 (§ 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. <E T="03">Recommendation.</E> 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.” <E T="03">Safe harbor.</E> A swap dealer may satisfy the safe harbor requirements of § 23.434(b) to fulfill its counterparty-specific suitability duty under § 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 § 23.440 where the recommendation would cause the swap dealer to act as an advisor to a Special Entity within the meaning of § 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 § 23.434(c). Section 23.434(c)(1) provides that a swap dealer will satisfy § 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 ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 20k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━