CME Group, Futures Industry Association, the Institute for Financial Markets and National Futures Association today announced the release of a study on the economic feasibility of adopting an insurance regime for the U.S. futures industry.
FIA Global, the new organizational structure that brings together the Futures Industry Association in Washington, the Futures and Options Association in London, and FIA Asia in Singapore, passed a key milestone today when it held its first face-to-face board meeting and began setting its work priorities for the coming year.
The Commodity Futures Trading Commission on Nov. 5 approved a proposed position limits rule and a proposal determining when positions held by two or more related entities should be aggregated. The proposed position limit rule is intended to implement a directive in the Dodd-Frank Act to harden and extend the existing position limit regime. If finalized, the rule would establish position limits for futures and options on 28 physical commodities and several hundred economically equivalent swaps.
The Commodity Futures Trading Commission on Oct. 30 held a public meeting to consider the CFTC’s enhanced customer protection rules. Earlier in the day, the CFTC approved two Dodd-Frank related rules via seriatim.
The Commodity Futures Trading Commission is holding a public meeting today to consider final rules in three areas: enhanced customer protections, ownership and control reports, and segregation for uncleared swaps and treatment of securities in a portfolio margining account. The final rules have not been published yet, but the CFTC distributed the following documents describing these rules:
On Oct. 25, the Futures Industry Association filed a comment letter with the Commodity Futures Trading Commission in response to a proposal from CME Group to eliminate the use of transitory exchange-for-related-position (EFRP) transactions and make various other changes to CME’s Rule 538. In its letter FIA asked the CFTC to defer consideration of CME’s proposal until after the CFTC issues rules implementing the trade execution requirement in Core Principle 9 as well as rules related to block futures trades. By considering all of these rules together, regulators will be better able to coordinate the rules and avoid inhibiting access to futures markets, particularly with respect to less liquid markets.
The Futures Industry Association warned the Basel Committee in a Sept. 20 letter that its proposed leverage ratio framework overstates the risk exposure created by clearing derivatives trades on behalf of clients. This would lead to "punitive capital requirements" that would contravene the intent of the clearing mandate for swaps and would threaten to disrupt the existing market for exchange-traded futures and options. FIA urged the committee to address this problem by excluding client clearing from its proposed treatment of derivatives. Alternatively, FIA recommended that the measurement of risk exposures should exclude the "CCP leg" of the transaction and that the "client leg" should be measured using a methodology that captures the margin and netting benefits of central clearing.
On Sept. 9, FIA hosted a members-only Swap Execution Facility Showcase in New York to hear directly from certain SEFs on issues specific to the role of futures commission merchants in the SEF environment. Eleven swap execution facilities that had filed rulebooks with the Commodity Futures Trading Commission by Sept. 3 participated in the meeting.
To assist FIA members in comparing SEF rules, the FIA Law and Compliance Division developed a comparison chart with excerpts from the rulebooks of the individual SEF applicants that were publicly available on the CFTC's website as of Sept. 3. The SEF Rulebook Comparison Chart and the presentations from the Sept. 9 Showcase are posted in a password-protected section of the FIA website.
The Futures Industry Association submitted comments on Sept. 17 regarding the Securities and Exchange Commission’s proposed amendments to its money market mutual fund rules. FIA cautioned that the SEC proposals may inhibit a futures commission merchant from investing in money market mutual funds or a designated clearing organization from accepting money market mutual funds as margin deposits.
Under the Commodity Futures Trading Commission’s Rule 1.25, money market funds are a permitted investment FCMs can make using customer funds.
One amendment proposed by the SEC would require money market funds to adopt a floating net asset value. FIA warned that requiring prime institutional money market funds to adopt a floating NAV “would likely prevent money market mutual funds from providing the intraday liquidity that is essential for many FCMs.”
An alternative proposal would permit a fund to maintain a stable value NAV but require the fund’s bylaws to authorize the board of directors, in extraordinary circumstances, either to impose a liquidity fee of up to two percent or suspend redemptions for up to 30 days. FIA cautioned that this second alternative, while reducing many of the administrative costs of a floating NAV, could cause the CFTC to conclude that money market mutual funds should no longer be a permitted investment under Rule. 1.25.
The Commodity Futures Trading Commission on Sept. 9 issued a concept release on risk controls and system safeguards for automated trading in the U.S. derivatives markets. The CFTC said the concept release will serve as a platform for cataloguing existing industry practices, determining their efficiency and implementation to date, and evaluating the need for additional measures. Comments are due 90 days from publication in the Federal Register.
- FIA Stresses Value of Drop Copy Functionality for Risk Management - FIA Seeks Greater Standardization of Drop Copy Functionality - FIA Drop Copy Paper Latest in Series of Risk Management Recommendations
Washington, D.C.—Sept. 6, 2013—The Futures Industry Association today released a set of recommendations for increasing the usefulness of drop copy systems in exchange-traded markets. Drop copy systems, which provide a way to monitor trading activity in near real-time, are currently offered by many trading venues and have become a critical component in the risk management processes of brokers, trading firms and end-users. The purpose of the FIA recommendations is to promote the wider adoption and increased standardization of drop copy functionality. The FIA paper also recommends extending drop copy functionality to all types of trading venues and incorporating additional features to meet regulatory reporting requirements and other needs.
The Futures Industry Association released on Aug. 27 an empirical study on changes in the level of volatility in the futures markets. The study was conducted by Robert Whaley and Nicholas Bollen of Vanderbilt University and focused on 15 futures contracts listed on four leading futures exchanges—CME Group, Eurex, IntercontinentalExchange and NYSE Liffe. The study found that while prices in these 15 markets moved through cycles of high and low volatility as well as numerous price spikes attributable to macro-economic events, volatility attributable to structural factors did not change in most of these contracts. In other words, innovations such as algorithmic and high-frequency trading that have affected how trading is conducted do not appear to have affected the volatility of prices.
“The pace of innovation in the futures markets has been nothing short of remarkable,” said Whaley. “Where 10 or 15 years ago, most trading took place in the pits, today the lion’s share is executed electronically at speeds that would not have been imagined in days of old. Yet our research has shown that intraday volatility has not been affected by these changes. Trading is certainly faster than it used to be, but there is no evidence this has caused volatility to increase.”
Washington, D.C., London and Singapore—Aug. 22, 2013—The Futures Industry Association, the Futures and Options Association and FIA Asia are pleased to announce the completion of the final bylaw changes needed to form FIA Global, the confederation of associations that will enhance their combined global voice and reach. The three associations also announced the founding members of the FIA Global board of directors.
The Futures Industry Association joined with the Securities Industry and Financial Markets Association and The Financial Services Roundtable in submitting a joint comment to the Securities and Exchange Commission on Aug. 21 regarding proposed rules and interpretive guidance on cross-border security-based swap activities and related issues. The associations expressed support for many elements of the SEC’s proposal, but expressed concern about the lack of harmonization with the Commodity Futures Trading Commission’s cross-border approach and the SEC’s proposed “conducted within the United States” test.
The Futures Industry Association joined with the Financial Services Roundtable and the Securities Industry and Financial Markets Association in filing a comment letter on Aug. 12 with the Commodity Futures Trading Commission regarding its cross-border exemptive order. The three associations also provided comments on certain aspects of the CFTC’s cross-border interpretative guidance. In particular, they identified a number of challenging implementation issues as well as significant technical issues and ambiguities in the exemptive order. They therefore urged the CFTC to provide more time for market participants to analyze the exemptive order and the interpretative guidance, categorize themselves and their counterparties, and implement the necessary changes to their structure and operations. They also offered a number of recommendations for revising the exemptive order and guidance to clarify certain technical issues and ambiguities.
Washington, D.C.--July 25, 2013--The Futures Industry Association issued the following statement from FIA President and Chief Executive Officer Walt Lukken regarding the vote by the membership of the Futures and Options Association in favor of the proposed affiliation with FIA.
Walt Lukken, president and chief executive officer of the Futures Industry Association, testified before the Senate Agriculture Committee at a July 17 hearing on the reauthorization of the Commodity Futures Trading Commission. In his testimony, Lukken discussed industry efforts to improve customer protections following the failures of MF Global and Peregrine Financial. Lukken also discussed FIA's views on a pending CFTC customer protection proposal and the importance of minimizing complexity in the implementation of Dodd-Frank derivatives reforms.
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