NFA to Develop Swap Testing Program

On June 5, 2018, the Board of the National Futures Association (NFA) approved the development of a proficiency requirements program for “associated persons” (APs) of registered commodity pool operators (CPOs) and commodity trading advisors (CTAs) engaged in swaps activities. The proficiency program will be in the form of an online learning program with an embedded examination. The Commodity Exchange Act (CEA) requires, among other things, the NFA to establish training standards and proficiency testing for APs subject to the provisions of the CEA and their supervisors. Currently, NFA’s Registration Rules require APs of CPOs and CTAs engaged in futures/options activities to take and pass a proficiency examination in the form of the Series 3 (or an alternative) that tests both their market knowledge and their knowledge of regulatory requirements. Currently, there are no analogous requirements solely applicable to swaps related activity. In addition, the NFA continues to accept waiver requests from the Series 3 available to (i) APs whose activities are solely limited to swap activities, or (ii) APs of CPOs that would be exempt from registration under CFTC Regulation 4.13(a)(3) but for their swap activities (i.e., the sponsoring firm would meet the de minimis requirements if swaps were not included as commodity interests).

The NFA Board has approved the formation of an advisory committee to consult with and assist NFA Staff regarding the development and implementation of the program, including the content of questions for an examination. The NFA Board expects the program to be launched in early 2020 and it will be applicable to all APs of CPOs and CTAs engaged in swap related activity.