Proposed Rules

Forward Contracts with Embedded Volumetric Opportunity

On November 13th, the CFTC and SEC published for comment proposed clarifications of the CFTC’s interpretation concerning forward contracts with embedded volumetric optionality. Comments should be submitted within 30 days after publication in the Federal Register, which is expected shortly.


Volcker Rule Guidance

On November 13th, the CFTC’s Division of Swap Dealer and Intermediary Oversight issued Volcker rule guidance. The guidance addresses metrics reporting during the conformance period and mortgage-backed securities of government-sponsored enterprises.

Regulatory Relief

Foreign Futures and Foreign Options Customer Funds

On November 13th, the CFTC’s Division of Swap Dealer and Intermediary Oversight issued no-action relief to futures commission merchants (“FCMs”) concerning the holding of customer funds deposited to margin foreign futures and foreign options transactions under Regulation 30.7. Regulation 30.7 limits the amount of customer margin funds an FCM is permitted to maintain in accounts with non-U.S. depositories to 120 percent of the required margin on the customers’ foreign futures and foreign options positions. The no-action relief permits an FCM to exclude customer funds deposited with a foreign bank or trust company that otherwise qualifies as a depository under Regulation 30.7 from the calculation of the 120 percent limit. The Division also issued two interpretations of Regulation 30.7. The first permits net offsetting of customer funds between the FCM and the foreign depository. The second provides that an FCM may substitute U.S. dollars for foreign currency in 30.7 customer accounts and consider such transaction as for the benefit of the FCM’s customers. CFTC Press Release.

Trade Execution Requirement

On November 10th, the CFTC’s Division of Market Oversight provided further time-limited no-action relief for swaps executed as part of certain interest rate and credit default swaps that have been made available to trade and are executed as part of five specified categories of “package transactions.” Under the relief provided in CFTC Letter No. 14-137, market participants will also have the opportunity to transition their trading of these swap components onto swap execution facilities and designated contract markets. The letter sets forth a phased compliance timeline. CFTC Press Release.

Other Developments

Rule Changes

On November 14th, Reuters reported CFTC Commissioners appear to agree that changes are needed in the CFTC’s derivatives trading rules in order to address global market fragmentation. Rule Changes.

CFTC Commissioner Giancarlo to Publish Swaps White Paper

On November 12, CFTC Commissioner Christopher Giancarlo announced he will be issuing a white paper seeking comment on the apparent mismatch between how the CFTC regulates the swaps industry and the trading and market structure characteristics of the swaps markets. The paper will then review the adverse consequences of the CFTC’s swaps trading framework and propose an alternative. Giancarlo Statement.

Post-Trade Anonymity

On November 12th, the Wall Street Journal summarized the remarks of CFTC Chair Timothy Massad. Massad said the agency will investigate the circumstances under which derivatives counterparty identities are revealed after a transaction is completed. Some claim that this disclosure discourages central clearing of derivatives. Post-Trade Disclosure.