New Final Rule

Exclusion of Utility Operations-Related Swaps

On September 26th, the Commodity Futures Trading Commission (“CFTC”) published new final rules which exclude utility operations-related swaps with utility special entities from the de minimis threshold for swaps with special entities. The rule is effective October 27, 2014. 79 FR 57767.

Regulatory Relief

Trade Execution Relief for Package Transactions

On September 30th, the Divisions of Market Oversight and Clearing and Risk announced that swap execution facilities (“SEFs”) and designated contract markets (“DCMs”) will have time-limited no-action relief from certain regulations.  The regulations include: Regulation 37.9(a)(2) regarding methods of execution for required transactions, and Regulations 37.203(a) and 38.152 that prohibit pre-arranged trading, if a SEF or DCM permits a new trade, with terms and conditions that match the terms and conditions of the original trade, other than the time of execution, to be submitted for clearing. Effectively, SEFs and DCMs will be permitted to continue to use a “new trade, old terms” procedure that had previously been extended as part of implementation of the trade execution requirement for certain interest rate and credit default swaps. The relief will expire on February 16, 2015. CFTC Letter No. 14-121; CFTC Press Release.

SD and MSP Risk Exposure Reports

On September 29th, the Division of Swap Dealer and Intermediary Oversight announced that swap dealers (“SDs”) and major swap participants (“MSPs”) may furnish risk exposure reports to the agency through the National Futures Association’s (“NFA”) online filing system, WinJammer. SDs and MSPs will not need to use the CFTC’s web portal since risk exposure reports submitted by SDs and MSPs through WinJammer will be furnished to the CFTC automatically. CFTC Press Release. See also NFA Notice I-14-24.

Registration Relief

On September 29th, the Division of Market Oversight issued no-action relief extending previously provided time- limited relief relating to certain occasional, off-facility, cleared credit default swaps (“CDS”) entered into pursuant to a derivatives clearing organization’s rules related to its price submission process for determining end-of-day settlement prices for cleared CDS. The relief expires on September 30, 2015. CFTC Press Release.

Other Developments

First Criminal Commodities Spoofing Case Is Filed

On October 2nd, the Federal Bureau of Investigation (“FBI”) announced the first federal prosecution of a high- frequency trader for allegedly manipulating commodities futures prices. The indictment charges Michael Coscia, the former manager and sole owner of Panther Energy Trading LLC, with illegally earning nearly $1.6 million as a result of trading orders he placed through CME Group and European futures markets in 2011. FBI Press Release. Reuters reported that in 2013, U.S. and U.K. regulators fined Coscia and Panther Energy $3.1 million for market manipulation. The regulatory orders also required Coscia and Panther Energy to disgorge $2.7 million.  Regulatory Precedent.

Special Calls

On September 30th, Risk.net discussed the CFTC’s increasing issuance of special calls to small energy companies. The special calls require the firms to complete large swaps trader Form 40S.

Information Sharing Agreement Signed with Australia

On September 30th, the CFTC announced it entered into an information sharing agreement with the Australian Securities and Investments Commission. CFTC Press Release.

Global Markets Advisory Committee to Meet

The CFTC’s Global Markets Advisory Committee will meet on October 9th, 2014 to discuss issues related to clearing Non-Deliverable Forwards (“NDFs”)and the digital currency bitcoin. CFTC Press Release.