The Commodity Futures Trading Commission hosted a meeting of its Global Markets Advisory Committee last week, chaired by Commissioner Mark Wetjen. The principal topics included when the Commission should begin mandating the clearing of foreign exchange-based nondeliverable forward contracts and unique regulatory issues presented by exchange-traded derivative contracts on Bitcoins.
Most surprising was an unrelated announcement by Chairman Timothy Massad during his opening remarks that European regulators have “decided to postpone the imposition of higher capital charges” on European banks that had been expected as of December 15. This is because of European regulators’ failure, to date, to recognize US-based designated clearinghouses as so-called qualified central counterparties. No other details were given in Mr. Massad’s prepared comments.
In his opening statement, Mr. Wetjen observed that there are conflicting views regarding the timeliness of an NDF clearing mandate. However, whatever the decision regarding the timing of a clearing mandate, Mr. Wetjen urged that “the implementation of any such mandate … be aligned with any comparable mandates overseas.” (Click here to see an article regarding the initiation of consultation by the European Securities and Markets Authority regarding NDF mandatory clearing in Europe, “ESMA Begins Consultation on Standards for FX Nondeliverable Forwards Clearing and Proposes Start Dates for Interest Rate Swaps Clearing,” in the September 23 to October 3 and 6 edition of Bridging the Week.)
Mr. Wetjen also observed that one Bitcoin-based derivatives contract has already been proposed by a swap execution facility (TeraExchange, LLC), and other registered and impending-registered platforms intend to list other Bitcoin-denominated contracts too. The discussion at the GMAC dealt with “regulatory challenges that these novel contracts present” as well as “potential benefits that Bitcoin or Bitcoin-like protocols and technology” might introduce to derivatives marketplaces.
Separately, TeraExchange announced last week that the first Bitcoin derivatives transaction had been executed on its trading platform involving a US dollar/Bitcoin swap. (Click here for details of this transaction. Click here for a related article, “Bitcoin: Current US Regulatory Developments” in a November 26, 2013 Corporate/Financial Services Advisory by Katten Muchin Rosenman LLP.)