CFTC

CFTC Approves Final Rules Relating to DCMs, SEFs and Margin Requirements for Uncleared Swaps

 

On December 8, the CFTC approved a number of final rules, including (i) amendments requiring designated contract markets (DCMs) to implement certain risk controls relating to market disruptions caused by electronic trading, (ii) amendments to eliminate certain operational requirements applicable to swap execution facilities (SEFs), and (iii) amendments to the margin requirements for uncleared swaps for swap dealers and major swap participants. DCM Risk Controls Release. SEF Regulations Release. Margin Requirements Release.

CFTC Unanimously Approves Final Rule for Granting Exemptions from Derivatives Clearing Organization Registration

 

On November 18, the Commodity Futures Trading Commission (CFTC) unanimously approved a final rule establishing a framework for the Commission to grant an exemption from registration as a derivatives clearing organization (DCO) to a clearing organization organized outside of the United States for the purpose of clearing proprietary swap transactions for U.S. persons. Section 5b(h) of the Commodity Exchange Act permits the CFTC to exempt a non-U.S. clearing organization from registration for clearing swaps if the CFTC determines that the clearing organization is subject to comparable, comprehensive supervision and regulation by its home country authorities. Therefore, financial institutions may have more options for central clearing counterparties to clear swaps that they enter into that are subject to a clearing mandate by the CFTC – namely, derivatives clearing organizations organized outside of the U.S., so long as the CFTC determines that they are subject to comparable, comprehensive supervision and regulation by the relevant local authorities in the jurisdiction of their organization. Final Rule.

CFTC Unanimously Approves Final Rule Amending Swap Execution Facility Requirements

 

On November 18, the CFTC unanimously approved a final rule amending certain parts of its regulations relating to the execution of “package transactions” on swap execution facilities (SEFs) and the resolution of error trades on SEFs. The final rule amends part 37 of CFTC regulations to allow the swap components of certain categories of package transactions to be executed on SEF but through flexible means of execution rather than through the required methods of execution for “required transactions.” Release.

CFTC Approves Final Rule Exempting Certain Swaps from Swap-Clearing Requirements

 

On November 2, the Commodity Futures Trading Commission (CFTC) approved a final rule exempting swaps entered into by certain financial institutions from the CFTC’s swap-clearing requirement under the Commodity Exchange Act (CEA). The exemption applies to swaps entered into by certain central banks, sovereign entities, international financial institutions, bank holding companies, savings and loan holding companies and community development financial institutions. Release.

CFTC Issues New Exemptions for Certain Foreign Futures and Options Markets

 

On November 2, the CFTC issued multiple orders as part of its Part 30 exemptive program, which allows for increased access to foreign futures and options markets where foreign intermediaries are subject to comparable customer protection standards. The orders were issued with respect to the Bombay Stock Exchange, the National Stock Exchange International Financial Service Centre Limited, the Montreal Exchange, NZX Limited and UBS AG. Release.

CFTC Finalizes Rules to Improve Swap Data Reporting

 

On September 17, the Commodity Futures Trading Commission (CFTC) approved three final rules to revise CFTC regulations for swap data reporting, dissemination and public reporting requirements for market participants. The CFTC also approved a final rule that will permit derivatives clearing organizations organized outside of the U.S. to be registered with the CFTC. The CFTC also approved a supplemental notice of proposed rulemaking regarding amendments to the CFTC’s regulations that govern bankruptcy proceedings for commodity brokers. Release.

CFTC Further Extends Certain No-Action Relief to Market Participants in Response to COVID-19

 

On September 11, the Commodity Futures Trading Commission (CFTC) announced the Division of Swap Dealer Intermediary Oversight (DSIO) and the Division of Market Oversight (DMO) are further extending certain elements of the temporary no-action relief issued in response to the COVID-19 pandemic that are set to expire on September 30. The extended relief expires January 15. Such relief includes relief for affected firms from CFTC regulations related to voice trading and other telephonic communications, as well as time-stamping requirements when located in remote, socially-distanced locations. No-action relief will also be extended for SEFs and DCMs from certain CFTC regulations regarding audit trails, recording of oral communications, and related requirements as a result of the displacement of trading personnel from their normal business sites. Release.

CFTC Approves Proposed Amendments to Margin Requirements for Swap Dealers and Major Swap Participants

 

On August 14, the Commodity Futures Trading Commission (CFTC) approved two proposed amendments to margin requirements for Swap Dealers and Major Swap Participants (the “CFTC Margin Rule”). The first proposal would, among other changes, revise the method for determining whether an entity comes within the scope of the initial margin requirements under the CFTC Margin Rule and the timing for compliance. The second proposal would permit the application of separate minimum transfer amounts for initial and variation margin, as well as a minimum transfer amount of up to $50,000 for separately managed accounts. Each proposal will be subject to a 30-day comment period following publication in the Federal Register. Release.

Regulatory Agencies Finalize Changes to Covered Fund Provisions of the Volcker Rule

 

On July 31, the Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System (FRB), the U.S. CFTC, the Federal Deposit Insurance Corporation (FDIC), and the U.S. Securities and Exchange Commission (SEC) published a final rule amending the regulations that implement Section 13 of the Bank Holding Company Act (the “BHC Act”), commonly known as the Volcker Rule. The final rule, which goes into effect on October 1, is intended to improve and streamline the covered fund provisions of Section 13 of the BHC Act. The final rule aims to accomplish this by, among other things, permitting the following activities: qualifying foreign excluded funds; revising the exclusions from the definition of “covered fund” for foreign public funds, loan securitizations, public welfare investments, and small business investment companies; creating new exclusions from the definition of covered fund for credit funds, qualifying venture capital funds, family wealth management vehicles, and customer facilitation vehicles; modifying the definition of “ownership interest”; and providing that certain investments made in parallel with a covered fund, as well as certain restricted profit interests held by an employee or director, need not be included in a banking entity’s calculation of its ownership interest in the covered fund. OCC Bulletin. Federal Register Final Rule.

CFTC Approves Final Swap Dealer Capital Rule

 

On July 22, the Commodity Futures Trading Commission (CFTC) approved a final rule regarding new capital and financial reporting requirements for swap dealers and major swap participants that are not subject to supervision by a banking regulator and imposing financial reporting requirements for swap dealers and major swap participants generally. The final rule provides swap dealers and major swap participants three alternative methods to establish and meet minimum capital requirements depending on the characteristics of their business. The final rule also includes: a comprehensive model approval process; accompanying financial reporting, recordkeeping, and notification requirements; and a substituted compliance determination process for those swap dealers that may already be required to maintain capital in accordance with a foreign regulator. Release.