1.

3(ggg)(1) Definition of Swap Dealer - Decision Flow Chart

Apply
Statutory Tests

Excluded Activity
Determination

Apply Activity
Exclusion(s)

Apply Orig. Loan

Exclusion(s)

Apply de minimis
Exemptions

Fail

Fail

Yes

Yes

Yes

Swap
Dealer?

Applicable?

Pass
Disjunctive (ie, engages in
any one of these activities)

Apply Statutory Definition

Apply Statutory
Tests?

Statutory Definitions Tests

Meet Definition
of Exclusion?

Pass

Meet Definition
of Orig. Loan?

No

Excluded Swap Activity

Meet de min.
Exemption?

No

Depository Originating Loans

Not deemed a
Swap Dealer

Scope
Limited?

No

De minimis Exception

Scope of Designation

Interpretive Guidance Part II.A.4

swaps entered into for the purpose
of accommodating counterpartys
needs or demands irrespective
of having a hedging consequence

Holds itself out as...

1.3(ggg)(1)(i)

Makes a market in...

1.3(ggg)(1)(ii)

Regularly enters into...

1.3(ggg)(1)(iii)

Commonly known in...

1.3(ggg)(1)(iv)

Staff element of def. should be

applied in a reasonable manner

Hedging is not dealing activity

Swaps entered into for the purpose of
hedging or mitigating commercial risk

Part II.A.4.a Dealer-Trader

Dealer-trader distinction forms basis
for framework[See: 75 FR 80177]*

Inter-affiliate activities
1.3(ggg)(6)(i)

Cooperative activities
1.3(ggg)(6)(ii)

Insured depository inst.

1.3(ggg)(5)(i)

Considered loan orig.

1.3(ggg)(5)(ii)

Loan shall not include:

1.3(ggg)(5)(iii)

Part II.A.4.c Market Making

Routinely standing ready to enter
into swaps at request/demand...
Part II.A.4.d Regular Business
(i) purpose of satisfying counterparty;
(ii) separate profit center; (iii) staffing

Part II.A.4.e Hedging Physicals

(i) mitigate price risk; (ii) physical
channel; (iii) reduce commercial risk;
(iv) sound practices; (v) not evasive
Part II.A.4.f Floor Traders
(i) registered CFTC Reg 3.11; (ii)
enters into with proprietary funds via
DCM/SEF, clears via DCO; (iii) is not
affiliated with SD; (iv) does not
participate in RFQ process; (v) does
not provide clearing services; (vi)
does not qualify under (ggg)(6)(iii)
or (kkk); (vii) does not participate in
DCM or SEF market making
program; (viii) recordkeeping as if SD
Part II.A.4.g Interpretive Issues
Definition not susceptible to brightline test; multi-factor interpretation

De Minimis Exception
1.3(ggg)(4)

Application to limit...
1.3(ggg)(3)

Each swap entered into...

Part II.A.4.b Holding Out Indicia

Holding itself out as Commonly
known in trade as [See note 187.]

Persons own account...

1.3(ggg)(2) Exception
...not regular business

Hedging physicals
1.3(ggg)(6)(iii)

Registered floor traders

1.3(ggg)(6)(iv)

See discussion 77 FR
at 30610, Part II.A.4.d.

See (ggg)(6)(iv)
Flow Chart

See 1.3(ggg)(4)
Flow Chart

Swap Dealer
All Categories
Apply via registration

Commission shall determine/grant

limited designation of categories

Limited
Designation

See 1.3(ggg)(5)
Flow Chart

See (ggg)(6)(i)
Flow Chart

See (ggg)(6)(ii)
Flow Chart

See (ggg)(6)(iii)
Flow Chart

Commissions interpret reference for its own account to refer to a person who enters into a
swap as a principal, and not as an agent. A person who enters into swaps as an agent for
customers (ie, customers accounts) would be required to register as FCM, IB, CPO or CTA.
Swap Dealer
For own account;
regular business

Non-Dealer

Non-Dealer

Swap Dealer

Counterparty

For own account;

not regular business

Counterparty

Functional Approach: Identify swap dealers as

those persons whose function is to serve as the
points of connection in the swap markets.
Functional Approach (See 77 FR at 30598 and 75 FR at 80177)

Non-Dealer

Note: regulations read exclusion for swap

activities that are not part of a regular
business; not exclusion from definition.
Thus requirement to maintain records
showing activities are excluded.

Counterparty

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