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CFTC Swap Dealer Disclosures and Notices
Coex Partners is a division of TP ICAP Broking Ltd (TPIB). TPIB is provisionally registered with the U.S. Commodity Futures Trading Commission (CFTC) as a non-U.S. swap dealer (NFA ID: 0304063. LEI number: 549300BMVW85YF9FGN67) pursuant to the Commodity Exchange Act (CEA), as amended by Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the Dodd-Frank Act). The CEA and the CFTC regulations promulgated thereunder impose regulatory requirements on swap dealers, including business conduct standards with respect to the execution of swaps with certain counterparties.
These business conduct standards mandate that TPIB provide certain disclosures of material information at a reasonably sufficient time prior to entering into a swap transaction with its swap counterparties (other than counterparties that are swap dealers, major swap participants, security-based swap dealers or major security-based swap participants) to allow the counterparty to assess the material risks and material characteristics of the swap and the material incentives and conflicts of interest that TPIB may have in connection with the swap.
If you are a swap dealer, major swap participant, security-based swap dealer or major security-based swap participant or if you are a non-U.S. person to which TPIB is not required by the CFTC to provide these disclosures, the disclosures outlined below are not intended nor provided for your use.
Where this refers to “we,” it refers to the relevant TPIB entity with which you are transacting and where this refers to “you,” it refers to you or your organization.
Disclosure of Material Information
Pursuant to CFTC Regulation 23.431(a), TPIB is hereby providing you with the International Swaps and Derivatives Association’s (ISDA) General Disclosure Statement and Disclosure Annex relating to particular swap transaction types, which describe the following:
- Material characteristics and risks of swaps transactions;
- Material characteristics of swaps transactions related to a particular underlying reference asset; and
- Material incentives and conflicts of interests that may exist when entering into a swap transaction with TPIB.
These disclosures documents, including certain asset-class-specific disclosures relating to interest rates may be found here:
Interest Rate Derivatives Disclosure
These disclosures shall be deemed to be supplemented by any such additional information and disclosures included in any transaction-specific documentation exchanged between you and TPIB, including any derivatives master agreement or amendment thereto, swap transaction term sheet, pre trade confirmation or master confirmation agreement, or such other communications exchanged between you and TPIB incorporating such additional information with respect to a swap or proposed swap (“Transaction Disclosures”). In the event of any conflict between such Transaction Disclosures and other (more generic) disclosures, the Transaction Disclosures shall prevail.
You should not construe the content of any of the materials herein or disclosures provided as legal, financial, tax, accounting or other advice, and you should consult your own attorney, financial advisor, tax advisor or accountant as to legal, financial, tax, accounting and related matters concerning the materials and disclosures provided.
Nothing in the materials or disclosures provided amends or supersedes the express terms of any swap transaction between you and TPIB.
In the context of discussing, proposing or entering into a swap with TPIB, you should refer to any transaction-specific disclosures, material economic terms and any other documentation provided to you by TPIB, as well as to the disclosures provided in this communication.
Material Economic Terms
Prior to entering into a swap with TPIB, we will communicate to you what we believe to be the material economic terms of that swap. Please contact your TPIB representative if you believe that a material economic term of that swap has been not been provided to you.
Please see the relevant link below for the market standard material economic terms (“MET”) of swaps required to be provided to you pursuant to CFTC Regulation 23.431(a)(2).
In the event of any conflict between transaction-specific pre-trade information provided by TPIB to you and any template, standard product terms or market convention or any standardized product disclosures, the transaction-specific information provided to you by TPIB will govern your swap.
CLEARING DISCLOSURES
For swaps required to be cleared: If you are not a swap dealer, major swap participant, security-based swap dealer or major security-based swap participant, with respect to any swap entered into between you and TPIB under any applicable agreement that is subject to the mandatory clearing requirements under Section 2(h) of the Commodity Exchange Act, you have the sole right to select the Derivatives Clearing Organization (DCO) at which the swap will be cleared. TPIB is not obligated, however, to execute a swap for clearing on a DCO where TPIB does not have clearing rights through a clearing intermediary.
For swaps not required to be cleared: If you are not a swap dealer, major swap participant, security-based swap dealer or major security-based swap participant, with respect to any swap entered into you and TPIB under any applicable agreement that is not subject to the mandatory clearing requirements under Section 2(h) of the Commodity Exchange Act, you may elect to clear such swap and have the sole right to select the DCO at which the swap will be cleared. TPIB is not obligated, however, to execute a swap for clearing on a DCO where TPIB does not have clearing rights through a clearing intermediary
Upon acceptance of a swap by a DCO:
- The original pre-cleared swap is extinguished;
- The original swap is replaced by equal and opposite swaps with the DCO; and
- All terms of the swap shall confirm to the product specifications of the cleared swap established under the DCO’s rule.
Currently, TPIB can trade swaps cleared at LCH, CME and EUREX.
Pre-trade Mid-Market Mark
Any pre trade mid-market mark (PTMMM) that TPIB may provide to you in connection with a swap pursuant to CFTC Regulation 23.431(a)(3)(i) will not include amounts for profit, credit reserve, hedging, funding, liquidity, or any other costs and adjustments, and may not necessarily:
- Be a price at which either TPIB or you would agree to replace or terminate the swap;
- Unless otherwise expressly agreed, be the basis for margin calls and maintenance of collateral; or
- Be the value of the swap that is marked on TPIB’s books and records.
We will generally provide the PTMMM to you either:
- In writing via electronic mail, Bloomberg chat or any other means of electronic communication notified by us to you to the email address that you have provided; or
- Orally, whether over the telephone or any other similar communication device and followed up with a post-trade written confirmation to the email or Bloomberg address that you have provided for such purposes (provided that you have either consented in writing or made the relevant election under the ISDA 2012 DF Protocol and Questionnaire to receive oral pre trade mid-market marks).
As TPIB is not a market maker and holds no positions in any instruments, it never has a bias as to which side of a price it deals on. The prices we show clients are obtained by the aggregation of market makers prices. As such, the arithmetic middle of any two way price we show can be taken to be the PTMMM if not explicitly given.
TPIB makes no representations or warranties to you that the prices at which TPIB offers or values swaps are the best prices available in the marketplace. You may wish to seek representative quotations from other participants in the relevant market to compare prices or to determine the intrinsic or current market value of a particular swap.
You should not regard any PTMMM that we provide to be an offer to enter into or terminate the relevant swap at that value or price, unless we identify that value or price as firm or binding with respect to a specific quantity or notional amount of the swap. TPIB makes no representations or warranties that any such PTMMM is suitable for complying with any financial or tax reporting obligation, determining net asset value, computing any tax liability or for any other purpose, which are matters you should discuss with your own financial, legal, tax, accounting and other professional advisors and, except as otherwise agreed, TPIB disclaims any liability for any such use or reliance thereon, whether losses or damages are direct, indirect, incidental or consequential, even if TPIB is advised of their possibility.
To the extent that you do not wish to receive a PTMMM, you may, under certain limited circumstances and with respect to certain limited products, waive your right to a PTMMM. Please contact your TPIB relationship contact for further details.
If you have any further questions regarding TPIB’s calculation of the mid-market mark for any particular product, please contact your TPIB relationship contact.
Daily Marks
CFTC Regulation 23.431(d)(2) requires that TPIB provide you with a daily mark for all uncleared swaps subject to CFTC regulation under the Dodd-Frank Act. Please note that TPIB does NOT transact any uncleared swaps.
With respect to cleared swaps originally executed between you and TPIB, you can obtain daily marks for such cleared swaps from the CFTC-registered futures commission merchant (FCM) through which you clear swaps or the relevant DCO.
Scenario Analysis
With respect to scenario analysis, TPIB hereby notifies you that you have the right to request scenario analysis prior to entering into a swap transaction with TPIB. Scenario analysis may help you assess potential exposure in connection with a swap transaction. Please note that scenario analysis is unavailable when trading on a designated contract market or swap execution facility.
Under CFTC Regulation 23.431(b), scenario analysis is required to use a range of assumptions, including severely negative scenarios that could result in significant loss. We are required to disclose to you all of our material assumptions and explain our calculation methodologies unless it is confidential and proprietary model information.
The scenario analysis is also required to consider relevant analyses that TPIB undertakes for its own risk management purposes. Our scenario analysis may use market data and such other information that we believe to be accurate and reliable. However, TPIB does NOT represent, warrant or guarantee that any such information is accurate or complete.
Further, TPIB shall not be liable to you or to any other person or entity for any losses or damages arising out of or in connection with any scenario analysis, including, for any errors, omissions or changes in market factors or conditions.
If you wish to receive scenario analysis for a swap transaction with TPIB or have any further questions regarding scenario analysis, please contact your TPIB relationship contact.
Potential Conflicts of Interest
If TPIB determines that it may have a conflict of interest in connection with a particular swap or that it may have received compensation or other material incentives from a source other than the counterparty to the swap in connection with such swap, TPIB will notify such counterparty of such apparent conflicts of interest or material incentives.
If you have any further questions regarding TPIB’s conflict of interest policy, please contact your TPIB relationship contact.
Special Entity Status
If you are an employee benefit plan defined in Section 3 of ERISA that is not subject to Title I of ERISA, you may elect to be treated as a special entity pursuant to CFTC Regulation 23.430(c).
