Comment Letters
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FIA Submits Comments to Federal Reserve on Bank Commodity Activities (April 7, 2014)

FIA on April 7 submitted a comment letter to the Federal Reserve Board on its advance notice of proposed rulemaking related to activities of financial holding companies related to physical commodities.

FIA Comments on Technical Aspects of Basel III Leverage Ratio (Mar. 17, 2014)

On March 17 FIA joined six other trade associations in sending a joint letter to the Basel Committee on Banking Supervision with feedback on the final leverage ratio framework, a key part of the Basel III capital rules. The letter includes several recommendations for clarifying technical aspects of the leverage ratio framework as it relates to the clearing of futures, options and other derivatives.

Groups Submit Comments on CFTC’s Treatment of Transactions with Non-U.S. Swap Dealers (Mar. 10, 2014)
FIA, the Securities Industry and Financial Markets Association and the FinancialServices Roundtable on March 10 submitted comments to the Commodity FuturesTrading Commission regarding the application of Dodd-Frank regulations on transactions involving non-U.S. swap dealers.

The groups in the letter stated that a personnel-based approach to swaps regulation misreads Section 2(i) of the Commodity Exchange Act as using personnel in the US does not import risk.   Additionally, the groups stressed that the guidance is impractical to implement. “It is hard enough to determine, even on a counterparty-by-counterparty basis, whether a specific market participant is a ‘U.S. person,’ ‘guaranteed affiliate’ or ‘conduit affiliate’ and to apply swaps rules accordingly,” the groups wrote.  They cautioned that it is “virtually impossible” to be able to determine on a trade-by-trade basis whether each specific contact with a counterparty or potential counterparty has some nexus to the U.S. could trigger application of the CFTC’s requirements.  The groups recommended that the CFTC abandon the approach.

The groups further stated that no cost-benefit analysis has been undertaken and that personnel-based tests cannot be justified by cost-benefit analysis.  The groups said that the CFTC’s entity-based requirements are broad, and the burden they impose will be compounded by adoption of a personnel-based approach that differs significantly from, and is inconsistent with, the existing entity-based approach. “To expect market participants to create additional systems to determine―on a trade-by- trade basis―whether a swap meets the Commission’s new personnel-based tests would be economically, technologically and operationally impracticable for these market participants, with no discernible benefit,” the groups said.

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FIA Files Comment Letter on Proposed Position Limits Rule (Feb 7, 2014)

On Feb. 7 FIA filed a 48-page comment letter in response to the CFTC’s proposed position limits rule.  FIA said that various aspects of the proposed rule would have a “negative impact” on price discovery and liquidity and would “significantly restrict” the ability of market participants to rely on the derivatives markets to hedge risk. FIA urged the CFTC to defer imposing position limits until after it has collected and analyzed the data necessary to make an empirical finding that 1) speculative position limits are “necessary” to “diminish, eliminate or prevent” the burden on interstate commerce caused by excessive speculation, and 2) that the proposed limit levels are “appropriate”. FIA also urged the CFTC to modify the proposal in a number of ways, and commented that there are less costly and less restrictive alternatives to the proposed compliance and reporting requirements that would still achieve the CFTC’s objectives, and urged the CFTC to adopt a number of specific changes if it decides to proceed with the proposed rule.

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FIA Files Comment Letter on Proposed Aggregation Rule (Feb. 6, 2014)

On Feb. 6 FIA filed a 19-page comment letter in response to the CFTC’s proposed rule regarding the aggregation of positions. FIA said it generally supports the proposal because it incorporates or addresses many of the comments and recommendations made by FIA and other market participants concerning prior proposed amendments to the aggregation rules. In particular FIA said it supports the recognition that certain types of ownership structures should be exempted from aggregation. FIA also urged the CFTC to provide a “reasonable transition period” after the rule is finalized and recommended  a number of additional clarifications and amendments to address the practical impact of the proposed rule.

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