Category Archives: CFTC

Joint CFTC-SEC Public Roundtable: Credit Default Swaps

Posted on by
Reply

The SEC has been working closely with the CFTC to coordinate their respective agencies’ rulemakings related to derivatives markets.  Most recently, the SEC and CFTC  staffs held a joint public roundtable on October 22 from 9 a.m. to noon to discuss issues related to the clearing of credit default swaps. The roundtable is meant to assist both agencies in the rulemaking process to implement the Dodd-Frank Wall Street Reform and Consumer Protection Act.

The Agenda for the Roundtable follows.  A transcript of the public roundtable discussion will be published on the CFTC’s website. Continue reading →

Joint SEC-CFTC Report on May 6th “Flash Crash” Implicates High-Frequency Trading

Posted on by
Reply

On October 1, the SEC and CFTC issued a Joint Report on the Market Events of May 6th 2010 which will be presented to the Joint CFTC-SEC Advisory Committee on Emerging Regulatory Issues.  The report builds on the preliminary analysis released by the SEC and CFTC staffs on May 18, 2010 and implicates high-frequency trading.

Focusing on the relationship between E-Mini Standard & Poor’s 500 futures and S&P 500 “SPDR” exchange-traded funds, the staffs concluded that a computer-driven sale worth $4.1 billion by a single trader helped trigger the May “flash crash.”  The report describes how the “interaction between automated execution programs and algorithmic trading strategies” set off a liquidity crisis and resulted in disorderly U.S. futures and stock markets.

In the past months, the SEC has aggressively pursued ways to respond to the flash crash.  Within weeks of May 6th, the SEC proposed establishing a consolidated audit trail of all stock trading (reported in a May 28 Compliance Avenue post).  In June, the SEC initiated a program of new trading curbs known as circuit breakers (reported in a June 17 Compliance Avenue post) and in September approved rules expanding the stock-by-stock circuit breaker program.

CFTC Chairman Gary Gensler and SEC Chairman Mary L. Schapiro issued the following statement in connection with the report:

“We appreciate the incredible effort of all the professionals at both agencies who have worked tirelessly, scouring the data, interviewing market participants and reconstructing the events of May 6th.  This report identifies what happened and reaffirms the importance of a number of the actions we have taken since that day.  We now must consider what other investor-focused measures are needed to ensure that our markets are fair, efficient and resilient, now and for years to come.”

In the wake of the Joint Report, regulators are urging that additional rules be put in place to ensure proper functioning of the U.S. markets.

International Investigations: Last Thursday, there were reports of plans by both Britain and the European Union to investigate high-frequency trading.   Reuters reported that Britain has commissioned a UK Treasury study into the practice of high-frequency trading amid concerns that a computer-generated error could affect the economy.  Bloomberg reported that the Committee of European Securities Regulators will also investigate high-frequency trading and consider setting up a consolidated tape for the European Union.

Joint Statement by CFTC Chairman Gary Gensler and European Commissioner Michel Barnier on the Financial Reform Agenda

Posted on by
Reply

Washington, DC –United States Commodity Futures Trading Commission (CFTC) Chairman Gary Gensler and European Commissioner Michel Barnier spoke today and reaffirmed their strong determination to cooperate closely in strengthening the global financial system. Specifically, Chairman Gensler and Commissioner Barnier discussed regulatory reform of the over-the-counter (OTC) derivatives markets with respect to Dodd-Frank Wall Street Reform and Consumer Protection Act and the September 2010 European proposal for a Regulation on OTC derivatives, central counterparties and trade repositories. Continue reading →

SEC, CFTC Seeking Public Comment on Definitions and Regulation of Mixed Swaps

Posted on by
Reply
cftc-logosec
On August 13, 2010, the Securities and Exchange Commission and the Commodity Futures Trading Commission announced that they had published an advance joint notice of proposed rulemaking that requests public comment to assist the agencies in further defining certain key terms and prescribing regulations regarding “mixed swaps” as required by Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Title VII provides for the comprehensive regulation of swaps and security-based swaps and includes definitions of key terms relating to such regulation. It requires the CFTC and the SEC, in consultation with the Board of Governors of the Federal Reserve System, to jointly further define the terms “swap,” “security-based swap,” “swap dealer,” “security-based swap dealer,” “major swap participant,” “major security-based swap participant,” “eligible contract participant” and “security-based swap agreement.”

Title VII also requires the CFTC and SEC to jointly prescribe regulations regarding “mixed swaps” as necessary to carry out the purposes of Title VII.

The CFTC and SEC invite public comment with respect to all aspects of the statutory definitions of these key terms. The agencies also invite commenters to express views on the regulation of “mixed swaps.”

This request for comment is in addition to the series of email links on the CFTC’s and SEC’s websites to facilitate public comment regarding regulatory reform rulemaking under the Dodd-Frank Act.

The public comment period will remain open for 30 days following publication of the advance notice in the Federal Register. Commenters are urged to submit comments as soon as possible within the 30-day comment period.

SEC, CFTC to Host August 20 Roundtable on Clearing and Listing of Swaps and Security-Based Swaps

Posted on by
1
cftc-logosec
The Securities and Exchange Commission and Commodity Futures Trading Commission staffs will hold a public roundtable on August 20 to discuss issues related to governance and conflicts of interest in the clearing and listing of swaps and security-based swaps.
The roundtable will assist both agencies in the rulemaking process to implement the Dodd-Frank Wall Street Reform and Consumer Protection Act.

The roundtable will be held at the CFTC hearing room at Three Lafayette Centre, 1155 21st Street NW, Washington, D.C. The discussion will be open to the public with seating on a first-come, first-served basis. Members of the public may also listen by telephone and should be prepared to provide their first name, last name, and affiliation.
  • U.S./Canada Toll-Free: (866) 312-4390
  • International Toll: (404) 537-3379

Conference ID: 94280143

Members of the public wishing to submit their views on the topics addressed at the discussion may do so through the comment form or e-mail address on the SEC website or the governance rulemaking page on the CFTC website.

All submissions provided to either the CFTC or the SEC in any electronic form or on paper will be published on the website of the respective agency, without review and without removal of personally identifying information.

Below is a copy of the meeting’s agenda from the SEC website.

# # #

Agenda for the Joint CFTC-SEC Public Roundtable Discussion

9:00 a.m. Opening Statements by CFTC and SEC Staff

9:15 a.m. Panel One — Types of Conflicts
  • Securities Clearing Agencies and Derivatives Clearing Organizations
    • Access to clearing
    • Determination of swaps eligible for clearing
    • Risk management
  • Security-Based Swap Execution Facilities and Swap Execution Facilities
    • Access to trading
    • Determination of swaps eligible for trading
    • Potential for competition with respect to the same swap
  • Designated Contract Markets and National Securities Exchanges
    • Listing of swaps
    • Comparison with conflicts of interest for Swap Execution Facilities and Security-Based Swap Execution Facilities: similarities and differences
10:45 a.m. Panel Two — Possible Methods for Remediating Conflicts
  • Ownership and voting limits
  • Structural governance arrangements
    • Independent or public director requirements for Board and Board committees
    • Consideration of market participant views: Derivatives Clearing Organizations and Designated Contract Markets
    • Fair representation requirement in the Securities Exchange Act
    • Other governance matters (e.g., transparency)
  • Substantive requirements
    • Membership standards
    • Impartial access requirements
  • Appropriateness of applying the same methods to each type of entity
12:00 p.m. Roundtable concludes

CFTC Likely to Expand Its Regulatory Purview

Posted on by
Reply

The Commodities Futures Trading Commission (CFTC) is poised to obtain broad discretion to regulate the traditionally private over-the-counter (OTC) derivatives markets under the U.S. financial reform bill.  The notional amount of outstanding OTC derivatives has been estimated at $615 trillion as of December 2009.

While the Securities and Exchange Commission will regulate security-based derivatives, the CFTC will regulate swaps, which are a much larger component of the derivatives market.  Language currently in the bill would require large swap traders to register with the CFTC and disclose details of proposed swaps, as well as possibly establish position limits on trading.  The CFTC would also have discretion to regulate clearing houses that process derivatives.  CFTC Chairman Gary Gensler compared these regulations to “street lights” on “dark and dangerous highways.”

As reported by Reuters, Gensler is very interested in shaping the legislation and has been spending much of his time meeting with high-profile lawmakers, including Senate Banking Committee Chairman Christopher Dodd, the ranking Republican committee member Richard Shelby and Senate Agriculture Committee Chairman Blanche Lincoln.

CFTC-SEC Advisory Committee to Meet on May 24

Posted on by
1

The Securities and Exchange Commission and the Commodity Futures Trading Commission (CFTC) announced that the first meeting of the Joint CFTC-SEC Advisory Committee on Emerging Regulatory Issues will be held on Monday, May 24.

The Joint Committee will discuss the preliminary findings of the staffs of the CFTC and SEC related to the unusual market events of May 6.  Monday’s meeting will be webcast live on the Internet at www.sec.gov.

For a list of members of the Joint Committee please go to http://www.sec.gov/news/press/2010/2010-79.htm

SEC, CFTC Announce the Creation of a new Joint CFTC-SEC Advisory Committee

Posted on by
1

Securities and Exchange Commission Chairman Mary Schapiro and Commodity Futures Trading Commission Chairman Gary Gensler recently announced the formation of a joint committee that will address emerging regulatory issues.  The establishment of this committee was one of many recommendations included in the agencies’ harmonization report issued last year.  The first item on the committee’s agenda will be to review last Thursday’s market events and to make recommendations related to market structure issues, disparate trading conventions and rules across various markets.

Read More: http://www.sec.gov/rules/other/2010/33-9123.pdf
Continue reading →

CFTC Amendments Go Into Effect

Posted on by
Reply

A few weeks ago, the Commodity Futures Trading Commission (“CFTC”) issued amendments to regulations covering periodic account statements and annual reports that Commodity Pool Operators (“CPOs”) need to prepare and distribute for the commodity pools the CPOs operate. Several of the amendments will impact the reporting that is presently prepared and distributed by CPOs that operate pools in accordance with CFTC Regulation 4.7 (“4.7 Pools”). Furthermore, one of the amendments impacts the annual reports prepared and distributed by those claiming exemptions from registration in accordance with CFTC Regulations 4.13(a)(3) or 4.13(a)(4). These amendments will become effective today and changes that affect annual financial reports will apply to annual reports distributed for fiscal years ending December 31, 2009 and later.

This post only summarizes the amendment provisions. You can view the final rule release here. Continue reading →

Regulators Change Model Privacy Form

Posted on by
Reply

Eight federal regulators (including the SEC and CFTC) recently released a final version of a model privacy notice that will make it easier for consumers (i.e. investors/advisory clients) to understand how financial institutions collect and use personal information.

As way of background, the Gramm-Leach-Bliley Act contains a series of requirements governing the disclosure and use of non-public personal information by financial institutions.   The GLB Act requires the SEC (among others) to carry out the purposes of the provisions and establish standards for their application.  The SEC’s Reg S-P covers investment companies, broker/ dealers and registered investment advisers.  In 2006, the Financial Services Regulatory Relief Act of 2006 amended the GLB Act to require the applicable agencies to provide a succinct model form that allows consumers to easily compare the privacy practices of different financial institutions.

The initial proposed form was released in 2007 and after a comment and research period, a new model form has now been released. This new model form (there’s actually two versions–one with opt-out and one with no opt-out), which can be found here, provides a safe harbor for complying with the privacy rules.

Willkie Farr & Gallagher has a very nice summary of some of the other features and drawbacks of the new model privacy form.