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dealers or security-based swap terms "swap dealer" and "security- “swap dealer," based upon types of dealers. 150 Also, one commenter based swap dealer” closely follow the activities. As noted above, we are suggested that using a qualitative test for statutory definitions' four tests and adopting a final rule under the CEA the dealer definition might increase exclusion for activities that are not part that, like the proposed rule, defines the costs due to regulatory uncertainty.151 of a “regular business." 157 In addition, term "swap dealer” using terms from One commenter specifically suggested this Adopting Release sets forth the four statutory tests and the that in considering the final rules, the interpretive guidance regarding various exclusion for.swap activities that are not Commissions should consider empirical elements of the final rules. part of “a regular business.” 160 The data regarding the costs and benefits Because the definitions of the terms final rule includes modifications from flowing from the rules and issue a “swap dealer" in the CEA and the proposed rule that are described second analysis of the costs and benefits “security-based swap dealer” in the below, including provisions stating that of the rules for public comment,152 Exchange Act are substantially similar, swaps entered into for hedging physical while other commenters said that the the rules further defining those terms positions as defined in the rule, swaps consideration of cost and benefits and the accompanying interpretations in between majority-owned affiliates, should include the cumulative cost of this Adopting Release reflect common swaps entered into by a cooperative interrelated regulatory burdens arising underlying principles. At the same time, with its members, and certain swaps from all the rules proposed under the the interpretations regarding the entered into by registered floor traders, Dodd-Frank Act.153 Other commenters application of the definitions differ in are excluded from the swap dealer said the Commissions should consider certain respects given the differences in determination. 161 The Commissions, in alternatives that would impose fewer the uses of and markets for swaps and consideration of comments received, are costs. 154 security-based swaps. 158 For example, also making certain modifications to the Another commenter said that the cost- because security-based swaps may be interpretive guidance set out in the benefit analyses in the Proposing used to hedge or gain economic Proposing Release with respect to Release may have understated the exposure to underlying individual various elements of the statutory benefits of the proposed rules, because securities (while recognizing definition of the term “swap dealer," as focusing on individual aspects of all the distinctions between security-based described below. rules proposed under the Dodd-Frank swaps and other types of securities, as The determination of whether a Act prevents consideration of the full discussed below), there is a basis to person is covered by the statutory range of benefits that arise from the build upon the same principles that definition of the term "swap dealer” rules as a whole, in terms of providing presently are used to identify dealers for requires application of various greater financial stability, reducing other types of securities. These same provisions of the rule further defining systemic risk and avoiding the expense principles, though instructive, may be that term, as well as the interpretive of assistance to financial institutions in inapplicable to swaps in certain the future. 155 This commenter said the circumstances or may be applied guidance in this Adopting Release, depending on the person's particular consideration of benefits of the differently in the context of dealing circumstances. We intend that the proposed rules should include the activities involving commodity, interest determination with respect to a mitigated risk of a financial crisis. 156 rate, or other types of swaps. particular person would proceed as follows. 3. Final Rules and Interpretation- addressing the interpretation of the General Principles The person would begin by applying “swap dealer” and “security-based the statutory definition, and the Consistent with the Proposing swap dealer" definitions. Also, as discussed below, the Release, the final rules that define the provisions of the rule which implement Commissions are directing their the four statutory tests and the exclusion for swap activities that are not 150 See letters from American Bankers Association respective staffs to report separately (“ABA") dated November 3, 2011 (“ABA I”), BOK regarding the rules being adopted in part of "a regular business," 162 in order I, and ISDA I. Section 716 of the Dodd-Frank Act to determine if the person is engaged in connection with the definition and prohibits any “swaps entity"-a term that related interpretations. These staff swap dealing activity. In that analysis, encompasses swap dealers and security-based swap reports will help the Commissions dealers-from receiving Federal assistance with the person would apply the interpretive evaluate the “swap dealer” and guidance described in this part II.A.4, respect to any swap, security-based swap, or other activity of the swaps entity. "security-based swap dealer” which provides for consideration of the 151 See letter from API I (stating that costs of relevant facts and circumstances. As definitions in all respects, including regulatory uncertainty stem from the use of whether new or revised tests or part of this consideration, the person qualitative factors for identifying dealing, and from would apply elements of the dealerregulatory efforts to reach beyond "true” swap approaches would be appropriate for trader distinction, as appropriate, dealers); see also letter from Dominion Resources identifying swap dealers and security(the opportunity costs associated with regulatory based swap dealers.159 including as described in part II.A.4.a, uncertainty should be considered). below. 152 See letter from WGCEF I. 4. Final Rules and Interpretation The rule provides that certain swaps 153 See letters from ABA I, NFPEEU and WGCEF Definition of “Swap Dealer” are not considered in the determination dated December 20, 2011, enclosing a report of whether a person is a swap dealer.163 between majority-owned affiliates, 165 are differences in the structure of those involving certain types of securities swaps entered into by a cooperative two statutory definitions,174 we believe (while recognizing that some debt and with its members, 166 swaps entered into that their parallels-particularly their equity securities are not actively for hedging physical positions as |