Commodity Futures Trading Commission December 2010 – Federal Register Recent Federal Regulation Documents
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Order Exempting the Trading and Clearing of Certain Products Related to the CBOE Gold ETF Volatility Index and Similar Products
On November 10, 2010, the Commodity Futures Trading Commission (``CFTC'' or the ``Commission'') published for public comment in the Federal Register a proposal to exempt the trading and clearing of certain options (``Options'') on the CBOE Gold ETF Volatility Index (``GVZ Index''), which would be traded on the Chicago Board Options Exchange (``CBOE''), a national securities exchange, and cleared through the Options Clearing Corporation (``OCC'') in its capacity as a registered securities clearing agency, from the provisions of the Commodity Exchange Act (``CEA'') and the regulations thereunder, to the extent necessary to permit such Options to be so traded and cleared. The Commission also requested comment regarding whether it should provide a categorical exemption that would permit the trading and clearing of options on indexes that measure the volatility of shares of gold exchange-traded funds (``ETFs'') generally, regardless of issuer, including options on any index that measures the magnitude of changes in, and is composed of the price(s) of shares of one or more gold ETFs and the price(s) of any other instrument(s), which other instruments are securities as defined in the Securities Exchange Act of 1934 (``the '34 Act''). The Commission has determined to issue this Order essentially as proposed. Authority for these exemptions is found in Sec. 4(c) of the CEA.
Confirmation, Portfolio Reconciliation, and Portfolio Compression Requirements for Swap Dealers and Major Swap Participants
The Commodity Futures Trading Commission (Commission or CFTC) is proposing regulations to implement new statutory provisions established under Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). Section 731 of the Dodd-Frank Act added a new section 4s(i) to the Commodity Exchange Act (CEA), which requires the Commission to prescribe standards for swap dealers and major swap participants related to the timely and accurate confirmation, processing, netting, documentation, and valuation of swaps. The proposed rules would establish requirements for swap confirmation, portfolio reconciliation, and portfolio compression for swap dealers and major swap participants.
End-User Exception to Mandatory Clearing of Swaps
The Commodity Futures Trading Commission (``CFTC'' or ``Commission'') is proposing new requirements governing the elective exception to mandatory clearing of swaps available for swap counterparties meeting certain conditions under Section 2(h)(7) of the Commodity Exchange Act, as amended by the Dodd-Frank Wall Street Reform and Consumer Protection Act. The Commission is requesting comments on the proposed rule and related matters.
Swap Data Repositories
The Commodity Futures Trading Commission (``CFTC'' or ``Commission'') is proposing rules to implement new statutory provisions introduced by Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (``Dodd-Frank Act''). Section 728 of the Dodd-Frank Act amends the Commodity Exchange Act (``CEA'' or the ``Act'') by adding new Section 21, which establishes registration requirements, statutory duties, core principles and certain compliance obligations for registered swap data repositories (``SDRs'') and directs the Commission to adopt rules governing persons that are registered, as such, under this Section.
Business Conduct Standards for Swap Dealers and Major Swap Participants With Counterparties
The Commodity Futures Trading Commission (``Commission'' or ``CFTC'') is proposing for comment new rules under Section 4s(h) of the Commodity Exchange Act (``CEA'') to implement provisions of Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (``Dodd-Frank Act'') relating generally to external business conduct standards for swap dealers and major swap participants.
Core Principles and Other Requirements for Designated Contract Markets
The Commodity Futures Trading Commission (``Commission'' or ``CFTC'') is proposing new rules and amended guidance and acceptable practices to implement the new statutory provisions enacted by Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (``Dodd-Frank Act''). The proposed rules, guidance and acceptable practices, which apply to the designation and operation of contract markets, implement the Dodd-Frank Act's new statutory framework that, among other things, amends Section 5 of the Commodity Exchange Act (``CEA'') concerning designation and operation of contract markets, and adds a new CEA Section 2(h)(8) to include the listing, trading and execution of swaps on designated contract markets. The Commission requests comment on all aspects of the proposed rules, guidance and acceptable practices.
Further Definition of “Swap Dealer,” “Security-Based Swap Dealer,” “Major Swap Participant,” “Major Security-Based Swap Participant” and “Eligible Contract Participant”
In accordance with Section 712(d)(1) of Title VII of the Dodd- Frank Wall Street Reform and Consumer Protection Act of 2010 (``Dodd- Frank Act''), the Commodity Futures Trading Commission (``CFTC'') and the Securities and Exchange Commission (``SEC'') (collectively, the ``Commissions''), in consultation with the Board of Governors of the Federal Reserve System, are proposing rules and interpretative guidance under the Commodity Exchange Act (``CEA''), 7 U.S.C. 1 et seq., and the Securities Exchange Act of 1934 (``Exchange Act''), 15 U.S.C. 78a et seq., to further define the terms ``swap dealer,'' ``security-based swap dealer,'' ``major swap participant,'' ``major security-based swap participant,'' and ``eligible contract participant.''
Agency Information Collection Activities under OMB Review
In compliance with the Paperwork Reduction Act (44 U.S.C. 3501 et seq.), this notice announces that the Information Collection Request (ICR) abstracted below has been forwarded to the Office of Management and Budget (OMB) for review and comment. The ICR describes the nature of the information collection and its expected costs and burden; it includes the actual data collection instruments [if any].
Agency Information Collection Activities Under OMB Review
In compliance with the Paperwork Reduction Act (44 U.S.C. 3501 et seq.), this notice announces that the CFTC is planning to submit the following proposed Information Collection Request (ICR) to the Office of Management and Budget (OMB): Rules Pertaining to Contract Markets and Their Members; [OMB Control Number 3038-0022]. Before submitting the ICR to OMB for review and approval, the CFTC is soliciting comments on specific aspects of the proposed information collection as described below.
Reporting Certain Post-Enactment Swap Transactions
The Commodity Futures Trading Commission (``Commission'' or ``CFTC'') is publishing for comment an interim final rule to implement new statutory provisions introduced by Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (``Dodd-Frank Act''). Section 723 of the Dodd-Frank Act amends Section 2 of the Commodity Exchange Act (``CEA'' or the ``Act'') by adding new Section 2(h)(5)(B), which directs that rules adopted by the Commission under this section shall provide for the reporting of ``transition'' swapsthat is, swaps entered into on or after the date of enactment of the Dodd-Frank Act and prior to the effective date of swap data reporting rules to implement Section 2(h)(5)(B)to a registered swap data repository (``SDR'') or to the Commission. Each category of data is subject to a reporting timetable specified in Section 2(h)(5). The Commission intends shortly to notice for comment substantive rules implementing the swap data reporting provisions of Section 2(h)(5)(B). In order to ensure the preservation of data pending implementation of such rules, the Commission is today adopting an interim final rule directing specified counterparties to post-enactment, or transition, swap transactions entered into prior to the effective date of the swap data reporting and recordkeeping rules implementing Section 2(h)(5)(B) of the CEA to retain information pertaining to the terms of such swaps.
Information Management Requirements for Derivatives Clearing Organizations
The Commodity Futures Trading Commission (Commission or CFTC) is proposing regulations to implement certain core principles for derivatives clearing organizations (DCOs) as amended by Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd- Frank Act). The proposed regulations would establish standards for compliance with DCO Core Principles J (Reporting), K (Recordkeeping), L (Public Information), and M (Information Sharing). Additionally, the Commission is proposing technical amendments to parts 1 and 21 in connection with the proposed regulations. Finally, the Commission also is proposing to delegate to the Director of the Division of Clearing and Intermediary Oversight the Commission's authority to perform certain functions in connection with the proposed regulations.
General Regulations and Derivatives Clearing Organizations
The Commodity Futures Trading Commission (Commission or CFTC) is proposing regulations to implement Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). These proposed amendments would establish the regulatory standards for compliance with derivatives clearing organization (DCO) Core Principles A (Compliance), H (Rule Enforcement), N (Antitrust Considerations), and R (Legal Risk), as well as DCO chief compliance officer (CCO) requirements set forth in Section 5b of the Commodity Exchange Act (CEA). The proposed amendments also would revise procedures for DCO applications, clarify procedures for the transfer of a DCO registration, add requirements for approval of DCO rules establishing a portfolio margining program for customer accounts carried by a futures commission merchant (FCM) that is also registered as a securities broker-dealer (FCM/BD), and make certain technical amendments. The Commission also is proposing amendments to update the definitions of ``clearing member'' and ``clearing organization,'' and to add definitions for certain other terms.
Foreign Futures and Options Contracts on a Non-Narrow-Based Security Index; Commission Certification Procedures
Currently, a security index futures contract traded on, or subject to the rules of, a foreign board of trade may be offered or sold to persons located within the United States pursuant to a staff no-action letter confirming that the contract satisfies the requirements enumerated in Section 2(a)(1)(C)(ii) of the Commodity Exchange Act (the ``CEA'' or ``Act''). The Commodity Futures Trading Commission (``Commission'') is hereby proposing new requirements which would establish a Commission certification procedure applicable to the offer or sale, to persons in the U.S., of a security index futures contract traded on a foreign board of trade; the new certification procedure will replace the existing staff no-action process. Additionally, this proposed rule would establish a procedure for a foreign board of trade to request and receive a Commission certification on an expedited basis. Under this expedited procedure, a security index futures contract of qualifying foreign boards of trade could be offered or sold in the U.S. forty-five (45) days after submission of such request, absent a contrary action (or an extension of time) by the Commission.
Joint Public Roundtable on Issues Related to Capital and Margin Requirements for Swaps and Security-Based Swaps
On Friday, December 10, 2010, commencing at 1 p.m. and ending at 5 p.m., staff of the Agencies will hold a public roundtable meeting at which invited participants will discuss provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the ``Act'') that require the Agencies to adopt rules for the capital and margin requirements applicable to swaps and security-based swaps of swap dealers, major swap participants, security-based swap dealers, and security-based swap participants. The discussion will be open to the public with seating on a first-come, first-served basis. Members of the public may also listen to the meeting by telephone. Call-in participants should be prepared to provide their first name, last name and affiliation. The information for the conference call is set forth below. U.S. Toll-Free: 877-951-7311 International Toll: 1-203-607-0666 Conference ID: 8978249 A transcript of the public roundtable discussion will be published at https://www.cftc.gov/LawRegulation/DoddFrankAct/OTC_5_ CapMargin.html. The roundtable discussion will take place in Lobby Level Hearing Room (Room 1000) at the CFTC's headquarters at Three Lafayette Centre, 1155 21st Street, NW., Washington, DC.
Acceptance of Public Submissions on a Study Mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act, Section 719(b)
The Dodd-Frank Wall Street Reform and Consumer Protection Act (``Dodd-Frank Act'') was enacted on July 21, 2010. The Dodd-Frank Act, among other things, mandates that the Commodity Futures Trading Commission (``CFTC'') and the Securities and Exchange Commission (``SEC'') conduct a study on ``the feasibility of requiring the derivatives industry to adopt standardized computer-readable algorithmic descriptions which may be used to describe complex and standardized financial derivatives.'' These algorithmic descriptions should be designed to ``facilitate computerized analysis of individual derivative contracts and to calculate net exposures to complex derivatives.'' The study also must consider the extent to which the algorithmic description, ``together with standardized and extensible legal definitions, may serve as the binding legal definition of derivative contracts.'' In connection with this study, the staff of the CFTC and SEC seek responses of interested parties to the questions set forth below.
Agency Information Collection Activities Under OMB Review
In compliance with the Paperwork Reduction Act (44 U.S.C. 3501 et seq.), this notice announces that the Information Collection Request (ICR) abstracted below has been forwarded to the Office of Management and Budget (OMB) for review and comment. The ICR describes the nature of the information collection and its expected costs and burden.
Reporting, Recordkeeping, and Daily Trading Records Requirements for Swap Dealers and Major Swap Participants
The Commodity Futures Trading Commission (Commission or CFTC) is proposing regulations to implement new statutory provisions established under Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). Section 731 of the Dodd-Frank Act added new sections 4s(f) and (g) to the Commodity Exchange Act (CEA), which set forth reporting and recordkeeping requirements and daily trading records requirements for swap dealers and major swap participants. The proposed rules would establish the regulatory standards for compliance with these new sections of the CEA.
Swap Data Recordkeeping and Reporting Requirements
The Commodity Futures Trading Commission (``Commission or CFTC'') is proposing rules to implement new statutory provisions enacted by Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act. These proposed rules apply to swap data recordkeeping and reporting requirements for swap data repositories, derivatives clearing organizations, designated contract markets, swap execution facilities, swap dealers, major swap participants, and swap counterparties who are neither swap dealers nor major swap participants (including counterparties who qualify for the end user exception with respect to particular swaps).
Real-Time Public Reporting of Swap Transaction Data
The Commodity Futures Trading Commission (``Commission'') is proposing rules to implement new statutory provisions enacted by Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the ``Dodd-Frank Act''). Specifically, in accordance with Section 727 of the Dodd-Frank Act, the Commission is proposing rules to implement a new framework for the real-time public reporting of swap transaction and pricing data for all swap transactions. Additionally, the Commission is proposing rules to address the appropriate minimum size and time delay relating to block trades on swaps and large notional swap transactions.
Agency Information Collection Activities Under OMB Review: Notice of Intent To Renew Collection 3038-0054, Establishing Procedures for Entities Operating as Exempt Markets
In compliance with the Paperwork Reduction Act (44 U.S.C. 3501 et seq.), this notice announces that the Information Collection Request (ICR) abstracted below has been forwarded to the Office of Management and Budget (OMB) for review and comment. The ICR describes the nature of the information collection and the expected costs and burden.
Implementing the Whistleblower Provisions of Section 23 of the Commodity Exchange Act
The Commodity Futures Trading Commission (``Commission'' or ``CFTC'') is proposing rules to implement new statutory provisions enacted by Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act. These proposed rules apply to the whistleblowers incentives and protection of section 748. The proposed rules establish a whistleblower program that enables the Commission to pay an award, under regulations prescribed by the Commission and subject to certain limitations, to eligible whistleblowers who voluntarily provide the Commission with original information about a violation of the Commodity Exchange Act that leads to the successful enforcement of a covered judicial or administrative action, or a related action. The proposed rules also provide public notice of section 748's prohibition on retaliation by employers against individuals that provide the Commission with information about potential violations.
Protection of Collateral of Counterparties to Uncleared Swaps; Treatment of Securities in a Portfolio Margining Account in a Commodity Broker Bankruptcy
The Commodity Futures Trading Commission (the ``Commission'') hereby proposes rules to implement new statutory provisions enacted by Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the ``Dodd-Frank Act''). Specifically, the proposed rules contained herein impose 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, such proposed rules 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 constitute ``customer property''; and owners of such account constitute ``customers''.
Protection of Cleared Swaps Customers Before and After Commodity Broker Bankruptcies
The Commodity Futures Trading Commission (the ``CFTC'' or ``Commission'') seeks comment on possible models for implementing new statutory provisions enacted by Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (``Dodd-Frank'') concerning the protection of collateral posted by customers clearing swaps.
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