Staff Advisory

CFTC staff advisory reminds swap dealers and major swap participants of their reporting obligations. The US Commodity Futures Trading Commission’s (CFTC) Division of Swap Dealer and Intermediary Oversight (DSIO) issued a staff advisory to remind swap dealers and major swap participants of their swap data reporting obligations under the Commission Regulations 23.204 and 23.205. The regulations require swap dealers and major swap participants to report all information and data in the time and manner specified in Parts 43 and 45 of the CFTC’s regulations. The advisory also discusses common examples of issues and failures that the DSIO has observed with respect to swap data reporting, and provides guidance to assist in addressing these issues and failures. (12/17/2015) CFTC press release.

Final Rules

CFTC amends regulation on records of commodity interest and related cash or forward transactions. The CFTC issued a final rule that will, among other things, clarify that all records, except for records of oral and written communications leading to the execution of a commodity interest transaction and related cash or forward transactions, have to be kept in a form and manner that allows for identification of a particular transaction. (12/24/2015) CFTC Rule.

Final rule on records of commodity interest and related cash or forward transactions is approved. The CFTC unanimously approved a final rule to amend Commission Regulation 1.35(a) relating to the recordkeeping obligations for particular market participants. The amendments reduce regulatory burdens on affected market participants by excluding certain types of those participants from parts of the rule’s written and oral recordkeeping requirements. In addition, the final rule clarifies the requirements governing the form and manner in which records must be kept. Lastly, the final rule reorganizes the rule text to provide affected market participants with greater clarity as to their recordkeeping obligations under the rule. (12/18/2015) CFTC press release. CFTC fact sheet. Massad statement.Giancarlo statement.

CFTC approves final rule on margin requirements for uncleared swaps for swap dealers and major swap participants. The CFTC announced that it has approved the Final Rule on Margin Requirements for Uncleared Swaps for Swap Dealers and Major Swap Participants. The new regulation addresses margin requirements for uncleared swaps entered into by swap dealers (SDs) or major swap participants (MSPs) who are not subject to regulation by the Federal Reserve Board, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Farm Credit Administration or the Federal Housing Finance Agency. (12/16/2015) CFTC Press Release. Final Rule Fact SheetMassad Statement. Bowen Dissenting Statement. Giancarlo Statement.

Proposed Rules

CFTC approves a proposed rule that provides an alternative to fingerprinting for foreign naturals. The CFTC announced that it approved a proposed rule that would add an alternative for foreign natural persons to the requirement to provide fingerprints when applying for CFTC registration. The proposal would allow a foreign natural person’s registered firm to complete a criminal history background check in lieu of submitting fingerprints. The CFTC is seeking comments on the proposal. The comment period ends 30 days after the proposal’s publication in the Federal Register. (1/4/2016) CFTC press release.

CFTC requests comment on minimum testing frequency and independent contractor testing requirements. The CFTC issued an Advance Notice of Proposed Rulemaking requesting public comment on whether the minimum testing frequency and independent contractor testing requirements should be applied, through a future Notice of Proposed Rulemaking, to covered swap execution facilities (to be defined). Comments must be received on or before February 22, 2016. (12/23/2015)

CFTC proposes enhanced requirements for a derivatives clearing organization’s testing of its system safeguards. The CFTC proposed enhanced requirements for a derivatives clearing organization’s testing of its system safeguards, as well as additional amendments to reorder and renumber certain paragraphs within the regulations and make other minor changes to improve the clarity of the rule text. Comments must be received by February 22, 2016. The CFTC also noted that it is amending its system safeguards rules for designated contract markets, swap execution facilities, and swap data repositories, by enhancing and clarifying existing provisions relating to system safeguards risk analysis and oversight and cybersecurity testing, and adding new provisions concerning certain aspects of cybersecurity testing. (12/23/2015)

CFTC proposes safeguards to enhance regulatory regime for Regulation AT.The CFTC proposed a series of risk controls, transparency measures, and other safeguards to enhance the regulatory regime for automated trading on US designated contract markets (DCMs) (Regulation AT). The CFTC’s proposals build on efforts by numerous entities in recent years to promote best practices and regulatory standards for automated trading, including standards and best practices for algorithmic trading systems (ATSs), electronic trade matching engines, and new connectivity methods that characterize modern financial markets. Comments must be received on or before March 16, 2016. (12/17/2015) CFTC proposal.

CFTC approves proposed enhanced rules on cybersecurity for derivatives clearing organizations, trading platforms, and swap data repositories. The CFTC voted unanimously to approved two proposals for amendments to existing regulations addressing cybersecurity testing and safeguards for the automated systems used by critical infrastructures that the CFTC regulates. The proposals will be open for public comment during a 60-day comment period after publication in the Federal Register. The proposals, which will be published in separate Federal Register Notices, identify five types of cybersecurity testing as essential to a sound system safeguards program: vulnerability testing, penetration testing, controls testing, security incident response plan testing, and enterprise technology risk assessments. The proposals would require all derivatives clearing organizations, designated contract markets, swap execution facilities, and swap data repositories to conduct each of the five types of cybersecurity testing, as frequently as indicated by appropriate risk analysis. The proposals would also specify minimum testing frequency requirements for all derivatives clearing organizations and swap data repositories and specified designated contract markets, and require them to have specific tests performed by independent contractors. (12/16/2015) CFTC press release. Massad statement. Giancarlo statement. Bowen statement.

No-Action Relief

DMO provides no-action relief from audit trail requirements in CFTC Regulations that are related to post-trade allocation. The Division of Market Oversight (DMO) provided time-limited no-action relief for swap execution facilities (SEFs) from requirements to capture post-trade allocation information in their audit trail data, as required under CFTC Regulations. The DMO’s no-action relief expires on November 15, 2017 and is subject to certain conditions. (12/22/2015) CFTC press release.

CFTC issues extension of no-action relief from certain recordkeeping requirements under Commission regulations. The CFTC Division of Swap Dealer and Intermediary Oversight and DMO issued a no-action letter extending the relief in CFTC Staff Letter No. 14-147, which expired on December 31, 2015. Letter 14-147 provides that commodity trading advisors that are registered with the CFTC and are members of designated contract markets or of swap execution facilities are not required to record oral communications. Letter 14-147 also provides that market participants covered by the rule will not be required to link records of oral and written communications that lead to the execution of a transaction with any particular transaction. This no-action relief is effective immediately and will expire on the effective date of any CFTC action with respect to the CFTC’s proposal to amend Regulation 1.35(a). (12/8/2015) CFTC press release.


DCR and DMO write letter to ISDA on straight through processing and affirmation of SEF cleared swaps. The CFTC’s Division of Clearing and Risk (DCR) and DMO wrote a letter to Steven Kennedy, the Global Head of Public Policy at the International Swaps and Derivatives Association, Inc. (ISDA) in response to a letter that the ISDA sent to the DCR and DMO in which it requested that the CFTC accept the ISDA’s proposed compliance with the requirement that derivatives clearing organizations (DCOs), SEFs and designated contract markets (SCMs) develop rules and procedures so that DCOs can accept or reject trades for clearing as quickly after execution as would be technologically practicable if fully automated systems were used (AQATP). The DCR and DMO wrote that it believes that the CFTC intended for the AQATP standard to take into account the need to refine and reduce errors in order to facilitate prompt and efficient transaction processing. (12/21/2015) Letter. 

Requests for Comment

CFTC issues request for comment on draft technical specifications for certain swap data elements. The CFTC’s DMO and Office of Data and Technology staff issued a request for comment on the draft technical specifications for certain prioritized swap data elements and associated questions. The request for comment seeks public input on 80 enumerated questions addressing 120 data elements for several swap data reporting topics including counterparty-related elements, price, clearing, product, periodic reporting, orders, package transactions, options, additional fixed payments, notional amount, events, rates and foreign exchange. The comment period will be open for 60 days after publication on the CFTC’s website. Comments should be submitted on or before February 22, 2016. (12/22/2015) Massad statement.

Other Developments

CFTC and SFC sign a Memorandum of Understanding enhancing the supervision of cross-border regulated entities. The CFTC announced that Chairman Timothy Massad has signed a Memorandum of Understanding (MOU) with Hong Kong Securities and Futures Commission (SFC) CEO Ashley Alder regarding cooperation and the exchange of information in the supervision and oversight of regulated entities that operate on a cross-border basis in the US and in Hong Kong. Through the MOU, the CFTC and the SFC articulated their readiness to cooperate in the interest of fulfilling their respective regulatory mandates. The range of the MOU includes markets and organized trading platforms, central counterparties, and intermediaries, dealers, and other market participants. (12/22/2015)