Commodity Futures Trading Commission 2013 – Federal Register Recent Federal Regulation Documents

The following is the analysis and determination of the Commodity Futures Trading Commission (``Commission'') regarding certain parts of a joint request by the European Commission (``EC'') and the European Securities and Markets Authority (``ESMA'') that the Commission determine that laws and regulations applicable in the European Union (``EU'') provide a sufficient basis for an affirmative finding of comparability with respect to the following regulatory obligations applicable to swap dealers (``SDs'') and major swap participants (``MSPs'') registered with the Commission: (i) swap trading relationship documentation; (ii) swap portfolio reconciliation and compression; (iii) trade confirmation; and (iv) daily trading records (collectively, the ``Business Conduct Requirements'').

The following is the analysis and determination of the Commodity Futures Trading Commission (``Commission'') regarding certain parts of a joint request by the Canadian Bankers Association (``CBA''), five individual Canadian banks provisionally-registered with the Commodity Futures Trading Commission (``Commission'') as swap dealers (``SDs''), and the Office of the Superintendent of Financial Institutions (``OSFI'') that the Commission determine that certain laws and regulations applicable in Canada provide a sufficient basis for an affirmative finding of comparability with respect to the following regulatory obligations applicable to SDs and major swap participants (``MSPs'') registered with the Commission: (i) Chief compliance officer; (ii) risk management; and (iii) swap data recordkeeping (collectively, the ``Internal Business Conduct Requirements'').

The following is the analysis and determination of the Commodity Futures Trading Commission (``Commission'') regarding certain parts of a request by the Bank of Tokyo-Mitsubishi UFJ, Ltd (``BTMU'') that the Commission determine that laws and regulations applicable in the Japan provide a sufficient basis for an affirmative finding of comparability with respect to the following regulatory obligations applicable to swap dealers (``SDs'') and major swap participants (``MSPs'') registered with the Commission: (i) Swap trading relationship documentation and (ii) daily trading records (collectively, the ``Business Conduct Requirements'').

The following is the analysis and determination of the Commodity Futures Trading Commission (``Commission'') regarding certain parts of a request by the Hong Kong Monetary Authority (``HKMA'') that the Commission determine that laws and regulations applicable in Hong Kong provide a sufficient basis for an affirmative finding of comparability with respect to the following regulatory obligations applicable to swap dealers (``SDs'') and major swap participants (``MSPs'') registered with the Commission: (i) Chief compliance officer; (ii) risk management; and (iii) swap data recordkeeping (collectively, the ``Internal Business Conduct Requirements'').

The Commodity Futures Trading Commission (CFTC) is announcing an opportunity for public comment on the extension of a proposed collection of certain information by the agency. In compliance with the Paperwork Reduction Act of 1995 (PRA), (44 U.S.C. 3501 et seq.), Federal agencies are required to publish notice in the Federal Register concerning each proposed collection of information, including each proposed extension of an existing collection of information, and to allow 60 days for public comment in response to the notice. This notice solicits comments, as described below, on the proposed Information Collection Request (ICR) titled: Part 41, Relating to Security Futures Products; OMB Control Number 3038-0059.

The Commission proposes to amend regulations concerning speculative position limits to conform to the Wall Street Transparency and Accountability Act of 2010 (``Dodd-Frank Act'') amendments to the Commodity Exchange Act (``CEA'' or ``Act''). The Commission proposes to establish speculative position limits for 28 exempt and agricultural commodity futures and option contracts, and physical commodity swaps that are ``economically equivalent'' to such contracts. In connection with establishing these limits, the Commission proposes to update some relevant definitions; revise the exemptions from speculative position limits, including for bona fide hedging; and extend and update reporting requirements for persons claiming exemption from these limits. The Commission proposes appendices that would provide guidance on risk management exemptions for commodity derivative contracts in excluded commodities permitted under the proposed definition of bona fide hedging position; list core referenced futures contracts and commodities that would be substantially the same as a commodity underlying a core referenced futures contract for purposes of the proposed definition of basis contract; describe and analyze fourteen fact patterns that would satisfy the proposed definition of bona fide hedging position; and present the proposed speculative position limit levels in tabular form. In addition, the Commission proposes to update certain of its rules, guidance and acceptable practices for compliance with Designated Contract Market (``DCM'') core principle 5 and Swap Execution Facility (``SEF'') core principle 6 in respect of exchange- set speculative position limits and position accountability levels.

The Commodity Futures Trading Commission (``Commission'') is adopting final regulations to establish additional standards for compliance with the derivatives clearing organization (``DCO'') core principles set forth in the Commodity Exchange Act (``CEA'') for systemically important DCOs (``SIDCOs'') and DCOs that elect to opt-in to the SIDCO regulatory requirements (``Subpart C DCOs''). Pursuant to the new regulations, SIDCOs and Subpart C DCOs are required to comply with the requirements applicable to all DCOs, which are set forth in the Commission's DCO regulations on compliance with core principles, to the extent those requirements are not inconsistent with the new requirements set forth herein. The new regulations include provisions concerning: procedural requirements for opting in to the regulatory regime as well as substantive requirements relating to governance, financial resources, system safeguards, special default rules and procedures for uncovered losses or shortfalls, risk management, additional disclosure requirements, efficiency, and recovery and wind- down procedures. These additional requirements are consistent with the Principles for Financial Market Infrastructures (``PFMIs'') published by the Committee on Payment and Settlement Systems and the Board of the International Organization of Securities Commissions (``CPSS-IOSCO''). In addition, the Commission is adopting certain delegation provisions and certain technical clarifications.

On May 30, 2012, the Commodity Futures Trading Commission (``Commission'' or ``CFTC'') published in the Federal Register a notice of proposed modifications to part 151 of the Commission's regulations. The modifications addressed the policy for aggregation under the Commission's position limits regime for 28 exempt and agricultural commodity futures and options contracts and the physical commodity swaps that are economically equivalent to such contracts. In an Order dated September 28, 2012, the District Court for the District of Columbia vacated part 151 of the Commission's regulations. The Commission is now proposing modifications to the aggregation provisions of part 150 of the Commission's regulations that are substantially similar to the aggregation modifications proposed to part 151, except that the modifications address the policy for aggregation under the Commission's position limits regime for futures and option contracts on nine agricultural commodities set forth in part 150. Separately, the Commission is also proposing today to establish speculative position limits for the 28 exempt and agricultural commodity futures and options contracts and the physical commodity swaps that are economically equivalent to such contracts that previously had been covered by part 151 of its regulations. If both proposals are finalized, the modifications proposed here to the aggregation provisions of part 150 would apply to the position limits regimes for both the futures and option contracts on nine agricultural commodities and the 28 exempt and agricultural commodity futures and options contracts and the physical commodity swaps that are economically equivalent to such contracts. However, the Commission may determine to adopt the modifications proposed here separately from any other amendment to the position limits regime.

The Commodity Futures Trading Commission (the ``Commission'') is issuing final rules implementing new statutory provisions enacted by Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the ``Dodd-Frank Act''). Specifically, the final rule contained herein imposes requirements on swap dealers (``SDs'') and major swap participants (``MSPs'') with respect to the treatment of collateral posted by their counterparties to margin, guarantee, or secure uncleared swaps. Additionally, the final rule includes revisions to ensure that, for purposes of subchapter IV of chapter 7 of the Bankruptcy Code, securities held in a portfolio margining account that is a futures account or a Cleared Swaps Customer Account constitute ``customer property''; and owners of such account constitute ``customers.''

The Commodity Futures Trading Commission is adopting an amendment to its regulations to clarify certain responsibilities of a swap dealer or major swap participant regarding its employees who solicit, accept or effect swaps in a clerical or ministerial capacity.

U.S. derivatives markets have experienced a fundamental transition from human-centered trading venues to highly automated and interconnected trading environments. The operational centers of modern markets now reside in a combination of automated trading systems (``ATSs'') and electronic trading platforms that can execute repetitive tasks at speeds orders of magnitude greater than any human equivalent. Traditional risk controls and safeguards that relied on human judgment and speeds, and which were appropriate to manual and/or floor-based trading environments, must be reevaluated in light of new market structures. Further, the Commission and market participants must ensure that regulatory standards and internal controls are calibrated to match both current and foreseeable market technologies and risks. This Concept Release on Risk Controls and System Safeguards for Automated Trading Environments (``Concept Release'') reflects the Commission's continuing commitment to the safety and soundness of U.S. derivatives markets in a time of rapid technological change. The Concept Release serves as a platform for cataloguing existing industry practices, determining their efficacy and implementation to date, and evaluating the need for additional measures, if any. The Commission welcomes all public comments.

On December 14, 2011, the Commodity Futures Trading Commission (``Commission'' or ``CFTC'') issued in the Federal Register an interpretation (``Interpretation'') regarding the meaning of the term ``actual delivery,'' as set forth in the Commodity Exchange Act. The Commission also requested public comment on whether the Interpretation accurately construed the statutory language. In response to the comments received, the Commission has determined to clarify its Interpretation.

The Commodity Futures Trading Commission (``CFTC'' or ``Commission'') is adopting final regulations pursuant to its authority under section 4(c) of the Commodity Exchange Act (``CEA'') allowing cooperatives meeting certain conditions to elect not to submit for clearing certain swaps that such cooperatives would otherwise be required to submit for clearing in accordance with section 2(h)(1) of the CEA.

The Commodity Futures Trading Commission (``Commission'') is proposing amendments to its regulations to establish additional standards for compliance with the derivatives clearing organization (``DCO'') core principles set forth in Section 5b(c)(2) of the Commodity Exchange Act (``CEA'') for systemically important DCOs (``SIDCOs'') and DCOs that elect to opt-in to the SIDCO regulatory requirements (``Subpart C DCOs''). SIDCOs and Subpart C DCOs would be required to comply with the requirements applicable to all DCOs, which are set forth in the Commission's DCO regulations on compliance with core principles, to the extent those requirements are not inconsistent with the requirements of the regulations in this proposed rule. The proposed amendments include: Procedural requirements for opting in to the regulatory regime as well as substantive requirements relating to governance, financial resources, system safeguards, special default rules and procedures for uncovered losses or shortfalls, risk management, additional disclosure requirements, efficiency, and recovery and wind-down procedures. These additional requirements would also be consistent with the Principles for Financial Market Infrastructures (``PFMIs'') published by the Committee on Payment and Settlement Systems and the Board of the International Organization of Securities Commissions (``CPSS-IOSCO''). In addition, the Commission is proposing certain delegation provisions and certain technical clarifications.

The Commodity Futures Trading Commission is correcting a final rule that appeared in the Federal Register of June 4, 2013 (78 FR 33476). The final rule applies to the registration and operation of a new type of regulated entity named a swap execution facility, and implements provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act.