Yesterday, at an open meeting, the Commodity Futures Trading Commission (CFTC) approved four proposed rulemakings to implement provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act). The rules relate to:
- The definition of “agricultural commodity”;
- Position reports for physical commodity swaps and swaptions;
- The expanding scope of privacy protections for consumer financial information under the Gramm-Leach-Bliley Act; and
- Business affiliate marketing and disposal of consumer information under the Fair Credit Reporting Act.
The Dodd-Frank Act includes two references to the term “agricultural commodity” that implicate the work of the CFTC. Section 723 of Dodd-Frank prohibits swaps in an “agricultural commodity” unless entered into pursuant to a rule, regulation or order of the CFTC. In this regard, in late September the CFTC issued an advance notice of proposed rulemaking seeking public comment on appropriate conditions, restrictions or protections to be included in any rule, regulation or order governing the trading of agricultural swaps. Dodd-Frank also contains a requirement that, within 270 days of Dodd-Frank’s enactment, the CFTC adopt speculative position limits for exempt and agricultural commodities traded on (or under the rules of) a designated contract market (DCM) and for swaps that are economically equivalent to DCM contracts in exempt and agricultural commodities.
Notably, however, the term “agricultural commodity” has never been expressly defined in the Commodity Exchange Act, which Dodd-Frank amends, or the Commission’s regulations. Accordingly, at the open meeting, Chairman Gary Gensler expressed his support for the proposal to publish a definition of this term.
The Commission’s proposed rule regarding position reporting calls for the creation of a new reporting system, which will require daily reports of swap positions by clearing organizations, clearing organization members and swap members. The chairman indicated that this system will allow the CFTC to receive data on physical commodity swaps for the purposes of market surveillance and position limit enforcement. However, Commissioner Jill Sommers voiced concern about the deadlines imposed by Dodd-Frank and stated that she believes it would be best to establish a position limit after a full analysis of market data is complete. Commissioner O’Malia also expressed concern that the Commission may be rushing to implement the rule.
In addition, the CFTC announced proposed rules that would broaden the consumer privacy protections contained in Part 160 of the CFTC regulations that require entities subject to the jurisdiction of the CFTC to provide notice to consumers about applicable privacy policies and explain the conditions under which those entities may disclose nonpublic information about consumers to nonaffiliated third parties; these existing rules also provide a method by which consumers can prevent entities from disclosing nonpublic information. The proposed rule would expand the scope of these existing rules to apply to swap dealers and major swap participants, regardless of whether they are obligated to register with the CFTC.
Finally, the CFTC announced the publication of proposed rules regarding theprotection of consumer information under the Fair Credit Reporting Act. The proposed rules would create guidelines for the use of consumer information to solicit customers by entities subject to the jurisdiction of the CFTC and create a process by which consumers may prohibit the use of their information for this purpose. It would also require these entities to implement a written system for the disposal of consumer information, obtained from an affiliate, which could be used to solicit customers.
The CFTC will hold a third public meeting to discuss additional proposed rulemakings on October 26.