CFTC

UK and US Authorities Release Statement on Post-Brexit Continuity of Derivatives Trading and Clearing

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On February 25, the Bank of England (BoE), the Financial Conduct Authority (FCA) and the US Commodity Futures Trading Commission (CFTC) published a joint statement detailing the measures that will be taken to ensure the continuity of UK-US derivatives trading and clearing activities after Brexit.

The measures address:

UK equivalence for the US: UK authorities have confirmed that US trading venues, firms and central counterparties (CCPs) will be able to continue providing services in the UK. The basis on which these trading venues, firms and CCPs currently provide services in the EU and to EU firms is as a result of various decisions taken by the European Commission in declaring the CFTC regulatory framework equivalent.

Continued supervisory co-operation: The FCA and CFTC will update their memorandums of understanding (MoUs) covering certain firms in the derivatives and the alternative investment fund industry. The BoE and CFTC will update their MoU covering clearing activity, in connection with the UK’s forthcoming recognition of CFTC-registered CCPs.

Extension of existing CFTC relief and comparability for the UK: The CFTC intends that existing regulatory relief granted by the CFTC to EU firms, including UK firms, will be extended to UK firms when the UK leaves the EU.

CFTC Requests Public Comment on a Rule Amendment Certification Filing by IFUS

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On February 13, the Commodity Futures Trading Commission (“CFTC“) requested public comment on a rule amendment certification filing by ICE Futures U.S., Inc. (“IFUS“). The amendment to IFUS Rule 4.26 would allow for the implementation of Passive Order Protection (“POP“) Functionality. As described in the certification, POP Functionality is intended to reduce latency advantages between traders engaged in arbitrage strategies against related markets. The POP Functionality would be implemented in the Gold Daily and Silver Daily futures markets. Comments must be submitted on or before March 15. Release.

CFTC Approves a Final Rule to Amend Uncleared Swap Margin Requirements

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On November 19, the Commodity Futures Trading Commission (“CFTC”) announced that it approved a final rule to amend its uncleared swap margin requirements to better align with certain rules adopted by the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency that impose restrictions on certain qualified financial contracts. Press release. Rule.

CFTC’s Office of the Chief Economist Issues Report on Initial Margin Phase 5

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On October 31, the Office of the Chief Economist of the Commodity Futures Trading Commission (“CFTC“) issued a report about uncleared margin rules, which goes into effect on September 1, 2020. On such date, swap market participants with between $8 and $750 billion of swaps notional amounts must begin to post and collect initial margin on all trades that have at least one swap-dealer counterparty. Release.

CFTC Proposes to Streamline Regulations for Commodity Pool Operators and Commodity Trading Advisors

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On October 9, the Commodity Futures Trading Commission (“CFTC“) unanimously approved proposed rules as a part of its KISS initiative to simplify regulations for commodity pool operators (“CPOs“) and commodity trading advisors (“CTAs“). The KISS initiative “requested public input on simplifying and modernizing the agency’s regulations to make them less burdensome and costly, while maintaining their regulatory benefits.” READ MORE →

CFTC Unanimously Approves a Proposal to Amend the Clearing Requirement to Help End-Users

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On August 23, 2018, the Commodity Futures Trading Commission (“CFTC“) unanimously proposed a rule that “exempt[s] from the clearing requirement swaps entered into by bank holding companies and savings and loan holding companies with consolidated assets of $10 billion or less, and community development financial institutions that meet certain conditions.” This change is consistent with prior no-action letters. Comments are allowed for 60 days following the proposed rule’s publishing in the Federal Register. Press Release.

CFTC Adopts Rule Amendments Simplifying CCO Duties and Annual Report Rules

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On August 21, 2018, the Commodity Futures Trading Commission (“CFTC“) unanimously approved final amendments clarifying and simplifying its regulations governing chief compliance officer (“CCO“) duties and annual compliance reporting requirements for futures commission merchants (“FCM“), swap dealers and major swap participants. The amendments aim to clarify a CCO’s duties by providing reasonable standards and guidance on effective compliance. The amendments also modify the CCO annual report content and submission requirements to reduce report preparation burdens while also making the reports more effective. Press Release. Final Rule.

CFTC Reduces Risk for Customer Funds Held by Derivatives Clearing Organizations by Expanding Investment Options

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On July 19, 2018, the Commodity Futures Trading Commission (the “CFTC“) approved an order that allows registered derivatives clearing organizations (“DCOs“) to invest customer euro cash in French and German sovereign debt. Allowing DCOs to invest customer euro cash in high-quality European sovereign debt poses less risk than the current practice of holding customer euro cash at commercial banks. To read the full release, click here.

CFTC and SEC Announce Approval of New MOU

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On June 28, 2018, the Commodity Futures Trading Commission (“CFTC“) and the Securities and Exchange Commission (“SEC“) announced that they have entered into a new memorandum of understanding – the agencies had previously entered into a memorandum of understanding in 2008 – designed to be “more relevant in the current market environment and promote efficiency in rule making, regulatory oversight, and enforcement [.]” CFTC Release. SEC Release.