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Regulatory Information
CFTC Discusses Credit Check Procedures in Cleared Swaps Markets (April 5, 2012) At a March 29 meeting of its Technology Advisory Committee, the Commodity Futures Trading Commission hosted a discussion of industry efforts to reach a consensus on how to apply credit checks to customer trades in cleared swaps. The discussion was led by a panel of industry experts who discussed several models for addressing this issue. Much of the discussion centered on whether trades should pass through credit filters before or immediately after execution. In addition, the panelists discussed the challenges in applying a customer’s credit limit in a marketplace that will likely have multiple execution and clearing platforms.
FIA Files Request for CFTC to Extend Deadline for Large-Trader Reporting The FIA on March 9 filed a request with the Commodity Futures Trading Commission for an extension of the March 20 deadline to comply with large-trader reporting for physical commodity swaps (Part 20). The FIA request explains that clearing members are unable to deliver completely accurate reports because the information needed to compute the notional value of certain swaps is not currently available and the transition from futures large-trader reporting at the control level to swap large-trader reporting at the beneficial owner level is a major technology build. In addition, clearing members are being asked to report as counterparties to a swap position, which means they would be reporting a position that does not exist. FIA also asked that the Guidebook for Part 20 Reports be published in the Federal Register with a 30-day public comment period in accordance with the Administrative Procedure Act and CFTC regulations. The FIA asked that the CFTC extend the compliance deadline until 60 days after all commodity reference prices are publicly available and the guidebook has been published for comment. Alternatively, the FIA has asked the CFTC to grant no-action relief to clearing members that continue to make a good faith attempt to comply with the regulations. CFTC to Consider Final Rule on Business Conduct Standards and Proposed Rule on Block Trade Sizes (Feb. 23, 2012) The Commodity Futures Trading Commission will hold a public meeting on Feb. 23 to consider two rulemakings. One is a final rule on business conduct standards for swap dealers, major swap participants, futures commission merchants and introducing brokers. This rule covers such issues as conflicts of interest, reporting and record-keeping, designation of chief compliance officers, and duties of swap dealers and major swap participants. The other is a proposed rule for determining the minimum size of block trades in swaps. The proposal sets forth several criteria that the CFTC will use to determine which trades are large enough to qualify for a time delay before information about the trade is made available to the public. The proposed rule also provides certain protections for the identities of counterparties to large trades.  Click Here for Fact Sheet on Block Trade Size ProposalClick Here for Frequently Asked Questions about Block Trade Size ProposalClick Here for Fact Sheet on Business Conduct StandardsClick Here for Frequently Asked Questions on Business Conduct StandardsGroups Warn of Extraterritorial Impact of Swap Dealer Registration Requirements (Feb. 2, 2012) Six leading financial industry trade associations have expressed concern about the impact of U.S. swap dealer registration requirements on firms engaged in the global swap markets. The Commodity Futures Trading Commission has said it would accept comments on the extraterritorial aspects of financial reform rules. In a Feb. 2 letter to the CFTC, the six groups, which included the FIA, warned that the new rules could force dealers into “costly, disruptive, and time-consuming” restructuring of their operations. “The new registration rules will require companies—whether headquartered in the U.S. or abroad—to make very significant decisions before they have the information necessary to evaluate the application of the CEA to their extraterritorial swap activities and determine the appropriate organizational structure for those activities,” the groups wrote in the letter submitted to the CFTC. “Legal entity restructuring is a costly, disruptive and time-consuming process, involving extensive re-documentation of client agreements, re-allocation of scarce capital, re-assignment or re-location of personnel as well as potentially extensive systems development and compliance infrastructure,” the groups warned. In addition to the FIA, the signatories included the Securities Industry and Financial Markets Association, The Clearing House, The Financial Services Roundtable, ABA Securities Association, and Institute of International Bankers. FIA Urges CFTC to Withdraw or Substantially Modify Position Limits Rules (Jan. 17, 2012) The Futures Industry Association submitted comments to the Commodity Futures Trading Commission on Jan. 17 related to the position limits rules that the agency adopted on Oct. 18, 2011. The final rules set limits for 28 physical commodity futures contracts as well as limits for swaps that are economically equivalent to such futures contracts , so called “referenced contracts.” The CFTC also set interim final position limit rules on spot month cash settled referenced contracts and asked for public comment on whether a different ratio or formula should be used to set these limits than the Commission used to set other position limits. The FIA letter addressed the interim rules. The FIA requested that the CFTC either withdraw the rules until it has adequate data or substantially modify them. The FIA recommended that “at a minimum” the CFTC should establish higher and less restrictive limits rather than “automatically utilizing the same percentage of deliverable supply formula for different contracts linked only by a common commodity.” In addition, the FIA recommended that the CFTC provide a six-month safe harbor transition period, that the CFTC permit netting in the spot-month between all economically equivalent referenced contracts including physical delivery and cash-settled contracts, and that the CFTC only require aggregation of positions in cash-settled referenced contracts based on common control. “Withdrawal of the position limits rules is the only action that will ensure the Commission does not impair liquidity, efficient price discovery, and the ability of market participants to hedge against risk at a particularly fragile time for the U.S. economy,” the FIA wrote. |
