Final Rules

CFTC repeals exempt commercial markets and boards of trade regulations. The CFTC issued a final rule, effective October 2, 2015, repealing its regulations establishing exempt boards of trade and exempt commercial markets, which were eliminated from the Commodity Exchange Act (CEA) by the Dodd-Frank Act. (10/2/2015) CFTC final rule. 

Proposed Rules and Requests for Comment

CFTC issues supplemental proposal modifying aggregation policy. The CFTC proposed modifications to the aggregation policy under the CFTC’s position limits regime for futures and options contracts, which would allow owners of a greater than 50 percent interest in another entity to disaggregate the owned entity’s positions without waiting for CFTC approval. Comments are due on or before November 13, 2015. (9/22/2015) CFTC press release. See also statements by Chair Timothy Massad and Commissioner J. Christopher Giancarlo in support of the proposal. 

CFTC considers Japan Securities Clearing Corporation’s request for exemption from DCO registration. The CFTC requested comment on a petition submitted by Japan Securities Clearing Corporation for an exemption from registration as a derivatives clearing organization (DCO).(9/21/2015) CFTC press release.

CFTC to amend definition of material terms for swap portfolio reconciliation.The CFTC released a proposal to amend the regulatory definition of the “material terms” for which counterparties must resolve discrepancies when engaging in portfolio reconciliation by excluding certain data fields from the definition. If adopted, the proposed rule would supersede the no-action relief granted by CFTC Staff Letter 13-31. Comments are due on or before November 23, 2015. (9/15/2015) CFTC press release. See also Chair Timothy Massad’s statement(supporting the proposal) and CFTC Commissioner J. Christopher Giancarlo statement (supporting the proposal but questioning costs and burdens to market participants).

Guidance

Division of Clearing and Risk clarifies alignment of CFTC Regulations and PFMIs with respect to DCOs. The CFTC’s Division of Clearing and Risk issued guidance regarding the alignment of Part 39 of CFTC regulations governing systemically important derivatives clearing organizations (SIDCOs) and DCOs that have opted into the SIDCO framework with risk management standards set forth by the CPMI-IOSCO Principles for Financial Market Infrastructures (PFMIs). The Division explained that Part 39 of CFTC regulations incorporates all of the standards set forth in and is fully consistent with the PFMIs. (9/18/2015) CFTC press release.

Division of Clearing and Risk issues guidance regarding the use of a “firm or forced trade” process. The Division of Clearing and Risk released a staff letter explaining that DCOs making use of a “firm or forced trades” process would not be required to register as a swap execution facility, a swap created by this process would not be subject to the CEA’s clearing and trade execution requirements, and a DCO should be the counterparty for these swaps. (9/18/2015) CFTC press release.

No-Action Relief

CFTC issues an extension of no-action relief granted to Eurex Clearing AG. The CFTC’s Division of Clearing and Risk extended until January 31, 2016, the temporary relief it granted to Eurex Clearing AG and its US clearing members. Under the no-action relief, the Division will not recommend enforcement action against Eurex Clearing AG for failing to register as a DCO or against its US clearing members for failing to clear interest rate swaps through a registered exempt DCO. (9/30/2015) CFTC press release. 

CFTC lengthens time of Southwest Power Pool, Inc.’s no-action relief. The CFTC’s Divisions of Clearing and Risk, Market Oversight, and Swap Dealer and Intermediary Oversight extended until December 31, 2015, the no-action relief granted to Southwest Power Pool, Inc. The Divisions previously agreed that they would not recommend enforcement action against Southwest Power Pool, Inc. for failing to comply with CFTC regulations regarding certain contracts, agreements, transactions, and other activities related to Southwest Power Pool’s transmission congestion right market necessary to support the launch of its Integrated Marketplace. (9/29/2015) CFTC no-action letter. 

CFTC grants time-limited relief from OCR electronic filing requirements. The CFTC’s Division of Market Oversight granted conditional, time-limited relief from electronic filing of trader identification and market participant data requirements under the ownership and control (OCR) final rule. The no-action relief from these filing requirements will be effective until dates ranging from April 27, 2016, to February 3, 2017. (9/28/2015) CFTC press release.

Selected Enforcement Actions

CFTC defines virtual currencies as commodities in enforcement action against unregistered Bitcoin options trading platform. The CFTC filed a settled enforcement proceeding against an unregistered Bitcoin options trading platform operator and its chief executive officer for failing to comply with CEA and CFTC regulations by operating a facility for trading or processing commodity options without a trade option exemption or otherwise in compliance with CEA and CFTC regulation requirements. In its order, the CFTC found that Bitcoin and other virtual currencies are commodities, and Coinflip’s activities were subject to compliance with the CEA and CFTC regulations applicable to swaps or required a trade option exemption. The CFTC further found that Coinflip operated a swaps trading facility but failed to register as a Swap Execution Facility. Without admitting or denying the allegations, Coinflip and its CEO agreed to cease and desist from further violations of the CEA and CFTC regulations and comply with certain undertakings. (9/17/2015) CFTC press release. 

Other Developments

Market Risk Advisory Committee meeting. The CFTC’s Market Risk Advisory Committee will hold a public meeting on November 2, 2015. (10/5/2015) CFTC notice.

CFTC awards second whistleblower award. The CFTC announced that a whistleblower will receive approximately US$290,000 as an award for providing information regarding violations of the CEA. This is the second whistleblower award issued by the CFTC’s Whistleblower Program under the Dodd-Frank Act whistleblower provisions. (9/29/2015) CFTC press release.

CFTC announces revisions to swap data repository’s asset classes. The CFTC issued an order adding the “interest rate” and “foreign exchange” asset classes to those that ICE Trade Vault, LLC intends to serve in its capacity as a swap data repository. (9/25/2015) CFTC press release.

CFTC, Korean regulators sign agreement regarding the supervision of cross-border clearing organizations. The CFTC entered into a Memorandum of Understanding (MOU) with the Korean Financial Services Commission and the Korean Financial Supervisory Service regarding the supervision and regulatory oversight of cross-border clearing organizations operating in the U.S. and in the Republic of Korea. (9/25/2015) CFTC press release.

CFTC approves first Subpart C DCO’s registration application. The CFTC approved Nodal Clear, LLC’s application for registration as a DCO, authorizing Nodal Clear to provide clearing services for financially settled futures and options on futures executed on or through its affiliated designated contract market, Nodal Exchange, LLC. (9/24/2015) CFTC press release.