FIA Seeks to File Brief in Case Regarding Sentinel Bankruptcy Distribution (June 6, 2013)
On June 6, FIA filed a motion with the U.S. appeals court in Chicago seeking to participate as an amicus curiae in the Grede v. FC Stone case, which involves the 2007 bankruptcy of Sentinel Management Group and the subsequent distribution of certain customer funds. FIA's brief supports arguments made by FC Stone in its appeal of a district court's decision that ordered several futures commission merchants to claw back to the bankruptcy estate customer funds that were distributed after the bankruptcy. FIA’s brief argues that the district court’s decision, if not reversed, would erode the certainty of customer protections provided by the Commodity Exchange Act.Click Here for FIA Motion
U.S. Trade Associations Urge CFTC to Provide Cross-Border Relief (June 6, 2013)
Several U.S. trade associations that represent financial institutions submitted a letter to the Commodity Futures Trading Commission on June 6 asking for a six-month extension of an exemptive order issued in December that postponed the application of the CFTC's swap rules to cross-border transactions. That order is set to expire on July 12. In the letter, the trade associations said a six-month extension would provide more time for international regulators to coordinate their efforts to establish a global framework for regulating derivatives and for market participants to consider the implications of the SEC's recent cross-border proposals, which differ from the CFTC’s approach in several important respects. The group of trade associations included the Futures Industry Association as well as the American Bankers Association, the Institute of International Bankers, the International Swaps and Derivatives Association, and the Securities Industry and Financial Markets Association.Click Here for Full Text of Letter
FIA Special Report: CFTC Advisory Committee Discusses Twitter Attack, Customer Protection, 1.73 and 1.74 Implementation, and Swap Data Issues
The Commodity Futures Trading Commission’s Technology Advisory Committee held an all-day meeting on April 30. While the primary focus of the meeting was on data issues, CFTC Commissioner Scott O’Malia, who chairs the committee, used the opportunity to discuss last week’s fake Twitter posting and its impact on the markets. “The social media genie is out of the bottle,” O’Malia said. “We need to begin figuring out how markets and regulators will respond to this new market force.”
Click Here for FIA Special Report
FIA Seeks No-Action Relief from Part 46 Reporting Requirements (March 26, 2013)
The Futures Industry Association on March 26 submitted a letter to the Commodity Futures Trading Commission’s division of market oversight seeking relief from Part 46 reporting requirements with respect to trades occurring in the contingent EFS and EOO markets for CME Group Clearport and ICE contracts and for energy swaps executed continent upon being promptly submitted to and accepted for clearing as swaps by ICE Clear Europe. In its letter, FIA stated that due to the contingent nature of the trades, CME Clearing and ICE Clear Europe already have relevant trade data that provides market transparency and is available to the CFTC for market surveillance purposes. “Absent relief, market participants are incurring (and will continue to incur) substantial costs to achieve a duplicative result that offers no discernible regulatory improvement over that existing trade data,” FIA wrote. FIA requested that the CFTC act promptly on its request in light of the imminent March 30 and April 10 compliance dates for swap dealers, major swap participants and end-users.
FIA Submits Comments on IOSCO Customer Protection Consultation (March 25, 2013)
The Futures Industry Association submitted comments to the International Organization of Securities Commissions regarding its consultation, which proposes enhanced customer protections. FIA said it generally supports the principles, which set out to clarify the roles of intermediaries and regulators in enhancing the protection of client assets. FIA noted that it has taken a leading role in a parallel project underway in the U.S.
While FIA gave its support for IOSCO’s overall efforts, it raised concerns with two proposals. One proposal would require intermediaries, such as futures commission merchants, to highlight to their customers the material differences in client asset protection and/or insolvency regimes outside of their home jurisdictions. “We agree that intermediaries should advise clients that, if they trade on a board of trade outside of their home jurisdiction and their funds are held outside of their home jurisdiction, their funds will be subject to the client asset protection and/or insolvency regime of the foreign jurisdiction. We further agree that any such disclosure should be in clear, concise and understandable. FIA’s Frequently Asked Questions are in accord with these recommendations,” FIA said. But FIA cautioned that the intermediary is not in the position of a legal advisor to its clients.
“Intermediaries do not purport to provide legal advice to their clients, and regulators should not require that they do so,” FIA said, recommending that IOSCO maintain and post on its website a description of the client asset protection laws and regulations in the jurisdictions of IOSCO.
FIA also raised concerns about a proposal that would require intermediaries to be able to provide client asset calculations at any time. “Systems employed by FCMs and other intermediaries currently do not permit at anytime calculations,” FIA said. “The backbone for all applicable data related to customer accounts is the end-of-day batch processing, which occurs overnight following the close of trading each day.” FIA explained that margin and commission processing, including all exchange and clearing organization fee calculations, can take several hours to run. “Intraday runs would be a major drain on technology resources and would cause many other essential systems to slow or fail,” FIA warned, adding that such a requirement is even more difficult in the case of bunched orders.