Welcome, visitor! [ Register | Login

Post an IOI
  1. A
  2. B
  3. C
  4. D
  5. E
  6. F
  7. G
  8. H
  9. I
  10. J
  11. K
  12. L
  13. M
  14. N
  15. O
  16. P
  17. Q
  18. R
  19. S
  20. T
  21. U
  22. V
  23. W
  24. X
  25. Y
  26. Z
Join Clearing and Settlement Now!

Featured Service Providers

  • ACSA
  • Screen Shot 2012-09-06 at 12.30.19 PM
  • Orbis
  • FirstBank Nigeria
  • Confidebat
  • Escrow.com
  • Eurex Clearing
  • CSOB



Statement of Chairman Heath P. Tarbert Before the December 10, 2019 Open Meeting


Tripling Down On Transparency

December 10, 2019

As regulators, we must be mindful not only of what we do, but how we do it.  Our shared vision for the CFTC is to be the global standard for sound derivatives regulation.[1]  Soundness is built on transparency: we serve our markets best when we act with the benefit of public input and dialogue.  We also owe it to those who rely on our derivatives markets to regulate in the open.  With this in mind, our agency recently adopted Clarity—which we describe as “[p]roviding transparency to market participants about our rules and processes”—as one of the four core values of the CFTC.[2]

Importance of Transparency

Given the importance of transparency, I am committed to holding Commission deliberations in public view.  I have long considered the CFTC to be the most important regulator most Americans have never heard of.[3]  We are working to change this: during the last few months of 2019, our current Commission will have held six open meetings—the same number the Commission held during 2015, 2016, 2017, and 2018 combined.[4]  In 2020, I intend to continue to hold open meetings on a monthly or bimonthly basis so we can continue to decide important policy matters before the public.

While transparency is important for all regulators, it is especially critical for us.  When the Dodd-Frank Act[5] gave the CFTC jurisdiction over the swaps market, we were entrusted with overseeing more than $400 trillion in notion value.[6]  That is a humbling level of responsibility.  It demands that we give the public ample opportunity to see what the Commission is doing and to engage with us.  We will not regulate from behind a curtain.

Reaffirming the value of transparency is vital because the need to “get things done” has not always lent itself to getting them done the right way.  Commentators have argued that in implementing the Dodd-Frank Act, the CFTC sometimes stumbled in its commitment to transparency by focusing too much on the deliverables and not enough on the delivery.[7]  In particular, the CFTC was criticized for regulating through staff no-action letters, policy statements, and enforcement actions rather than “a transparent, notice-and-comment rulemaking process.”[8]  Given the immense demands placed on this agency in the immediate wake of the Dodd-Frank Act, our predecessors surely did not make opacity the goal.  Nevertheless, opacity was the result: the agency too often traded openness for what some have dubbed the quiet expediency of ‘“backroom rulemaking.’”[9]

As we approach the year 2020 and beyond, I am pleased to announce that the CFTC will triple down on transparency by taking action in the following three areas: (1) how we make regulations; (2) how we apply them; and (3) how we enforce them.

  1. Transparency in Rulemaking

First, we will reaffirm the importance of notice-and-comment rulemaking established under the Administrative Procedure Act (APA) as the foundation for providing transparency in how we make regulations.  Today the Commission is voting to approve a final rule to amend Part 13 of our regulations to clarify how we receive, process, and respond to petitions for rulemakings filed under the APA.  Apart from being fully consistent the APA, our Part 13 also retains Section 13.2, which permits any person to petition the Commission for a rulemaking.  This is a unique feature of the CFTC’s rulemaking framework that reinforces transparency and the right of the public to participate in our regulatory process.  Most importantly, we will publish petitions for rulemakings on the CFTC website, facilitating public engagement in our rulemaking process.

In addition to updating Part 13, we will be publishing a summary of our rulemaking process on the CFTC website.[10]  The summary is written for the general public and is designed to explain in plain English how the CFTC proposes and finalizes regulations.  I believe the summary is an important step in improving the public’s understanding of our regulatory process.

  1. Transparency in No-Action, Interpretive, and Exemptive Relief

Second, I am committed to ensuring our agency is transparent in how we apply our regulations through the use of no-action, interpretive, and exemptive relief letters.  To be sure, the Commission is most transparent when we regulate through public notice-and-comment rulemakings that require a majority vote of presidentially-nominated, Senate-confirmed officials.  We should do so whenever possible.  Staff relief should be a supplement, rather than a substitute, for the APA rulemaking process.  I am therefore pleased to announce that the CFTC is finalizing guidance to ensure staff no-action, interpretive, and exemptive letters are limited only to those situations where they are truly appropriate.[11]  Examples include those situations with unique circumstances not suitable for a general rulemaking or where only temporary relief is contemplated pending either the rulemaking process[12]or one or more market events (e.g., Brexit, SOFR transition, etc.).

We must also increase transparency even where staff relief is appropriate.  Today I am also announcing that as of January 1, 2020, the CFTC will publish all requests for staff no-action, interpretive, and exemptive relief on our website when such relief is granted.[13]  Publishing requests alongside our relief letters will harmonize our agency’s practices with those of other federal financial regulators.  This practice will likewise provide greater public visibility into issues before our Commission.  Publicly disclosing requests for staff relief further demonstrates our commitment to putting transparency into practice.

  1. Transparency in Enforcement Settlements

Finally, we must be transparent in how we enforce the law.  One goal of our enforcement program is to change behavior in a positive way by deterring misconduct before it happens.  Deterrence requires clarity about how our laws work.  Long gone are the days when kings would post their edicts high on columns to make the law harder to read and easier to transgress.[14]  Our Founders instead adopted a system in which “the law is king.”[15]  Indeed, it has been said that in our American system, the rule of law is a law of rules.[16]

Consistent with this mandate, our Division of Enforcement will soon publish an updated Enforcement Manual that will inform the public about a number of changes designed to increase transparency.  We take seriously the need to inform the public about our enforcement priorities and practices.

In the same vein, the Commission and its staff must be free to speak publicly about enforcement matters.  Beginning January 1, 2020, I will not present to the Commission any enforcement settlement or consent order that restricts the Commission or our staff from publicly stating their views on the case.[17]  Affirming this right to speak ensures the CFTC can inform the public of our enforcement priorities.  It also advances customer protection: the facts of past cases can serve as early warning signs of new types of fraudulent or manipulative activity.

At the same time, genuine transparency cannot be one-sided.  Just as the Commission should be able to speak freely about enforcement actions, so too should defendants.  Also beginning on January 1, 2020, I will not put before the Commission any settlement agreement or consent order that unduly restricts a defendant’s ability to speak publicly about an enforcement matter.[18]  While the Commission will continue to require that defendants who agree to settle a matter not deny liability, or any fact or statement to which the parties have agreed, the CFTC will not limit any defendant’s ability to discuss his or her case publicly or to criticize our agency.  This approach is good for transparency as well as accountability: defendants may speak freely, but will be unable to hide behind the language of settlements to avoid answering tough questions about their conduct.


Transparency is sometimes avoided because it opens the door to criticism.  But as Aristotle purportedly reminds us, “[c]riticism is something we can avoid easily by saying nothing, doing nothing, and being nothing.”[19]  That has never been of the path of the CFTC during our nearly 45 years of regulating our markets and enforcing our rules.  Nor will it ever be.  Just as we will not shrink from carrying out our duties, calling out wrongdoing, and enforcing the law, so too will we ensure market participants have true insight into the operation of our agency.

Criticism is not always pleasant, but it is a core facet of democracy.  The Commission is an agency of the U.S. Government, and it should be scrutinized when it acts.  When asked what type of government came out of the Constitutional Convention, Benjamin Franklin famously answered, “A Republic, if you can keep it.”  Our Commission will do its part.

[1] See CFTC Vision Statement, available at https://www.cftc.gov/About/Mission/index.htm.

[2] See CFTC Core Values, available at https://www.cftc.gov/About/Mission/index.htm (emphasis added).

[3] Remarks of CFTC Chairman Heath P. Tarbert to the 35th Annual FIA Expo 2019 (Oct. 30, 2019), available at https://www.cftc.gov/PressRoom/SpeechesTestimony/opatarbert2.

[4] See CFTC website, “Upcoming Events,” available at https://www.cftc.gov/PressRoom/Events/CommissionMeetings/index.htm.

[5] Pub. L. No. 111-203, 124 Stat. 1376 (2010).

[6] See CFTC, “Dodd-Frank Act,” available at https://www.cftc.gov/LawRegulation/DoddFrankAct/index.htm.

[7] Hester Peirce, Regulating through the Back Door at the Commodity Futures Trading Commission 61 (Geo. Mason Univ. Mercatus Inst. Working Paper Nov. 2014).

[8] Id. at 35; 4.

[9] Id. at 4 n.5..

[10] See CFTC website, “Commission Rulemaking Explained,” available at https://www.cftc.gov/LawRegulation/CommissionRulemakingExplained/index.htm.

[11] The CFTC expects to release the aforementioned guidance on staff relief in early 2020.

[12] In line with this commitment to regulating via public notice-and-comment rulemaking whenever possible, today the Commission will also vote on a proposal to codify no-action relief that has been in place since 2014.  The no-action relief makes certain anti-evasionary conditions of the inter-affiliate swap clearing exemption practicable for non-U.S. affiliates.  Codifying this relief in the Commission’s regulations is good policy and good government.  The Commission will vote on codifying other no-action letters in a number of areas—with appropriate revisions where needed—in 2020 and beyond.

[13] Requests for staff relief prior to January 1, 2020, will not be affected.

[14] See Antonin Scalia, The Rule of Law as a Law of Rules, 56 U. Chi. L. Rev. 1175, 1179 (1989).

[15] Thomas Paine, “Common Sense,” in Common Sense and Related Writings 72, 98 (Thomas P. Slaughter ed., 2001).

[16] See Scalia, supra note 14, at 1175.

[17] The U.S. Court of Appeals for the Seventh Circuit has already affirmed the right of an individual CFTC Commissioner to state publicly the reason for his or her votes on any matter before the Commission.  CFTC v. Kraft Foods Grp., Inc., No. 19-2769 (7th Cir. Oct. 22, 2019) (quoting Sec. 2(a)(10)(C) of the Act).

[18] While this approach is largely consistent with the CFTC’s past practices, I believe that formalizing it will ensure consistency in the years to come.

[19] James C. Price, “A Lesson on Criticism from Aristotle,” Refresh Leadership Blog (Jan. 22, 2013), available at http://www.refreshleadership.com/index.php/2013/01/lesson-criticism-aristotle.  One should note that while many websites appear to attribute this quote to the philosopher Aristotle, others contend the saying was coined first in the Nineteenth Century by, among others, the American writer Elbert Hubbard. Regardless of its author, the quote is almost certainly something in which Aristotle would concur fully.  See Aristotle, Nicomachean Ethics 49 (Hippocrates G. Apostle, Trans.) (1984) (“[T]o die in order to avoid poverty or the pain of rejected love or anything that is painful is a mark not of a brave man but rather of a coward; for it is softness to avoid painful effort.”).


EVENT: CFTC to Hold an Open Commission Meeting on December 10



Statement of Commissioner Dawn D. Stump for CFTC Open Meeting


Proposed Rule: Capital Requirements for Swap Dealers and Major Swap Participants – Reopening the Comment Period and Requesting Additional Comment

December 10, 2019

I would like to thank the staff of DSIO, OGC, and OCE for their efforts on further refining the capital rules that would apply to those swap dealers who are not otherwise prudentially regulated.  I realize that everyone at the Commission is juggling multiple concurrent priorities and I am grateful for the considerable amount of time you all devoted to our questions and the modifications in the document that were accepted based on our recommendations.

I believe that adequate regulatory capital for swap dealers is an important component of the post-crisis reforms, and I am pleased that the CFTC is advancing this effort.  Swap Dealers and other market participants that rely on their services need regulatory certainty and a logical implementation schedule.  I hope that we will ultimately be able to provide both.

When it comes to regulatory certainty, capital remains the last substantive Dodd-Frank Act rulemaking yet to be finalized by the CFTC.  The Commission has mandated the provisional registration of Swap Dealers for years and imposed all of the associated regulatory obligations.  Today we seek to advance the regulatory certainty as to capital requirements under our authority, which will enable Swap Dealers to more comprehensively ascertain the cost of continuing to provide such services.

Equally important is a transparent and reasonable schedule for the implementation of capital requirements.  Businesses need accurate and timely information to make sound decisions and plan for the allocation of resources.  I think the Commission would be well-served from commenters speaking to the effective date and implementation timeframe for the CFTC’s rule, especially as it relates to cooperation with other regulators and the impact of substituted compliance determinations.

Even while acknowledging that this piece of our swaps regulatory assignment has taken a bit longer compared to the other changes mandated by the Dodd-Frank Act, I am supportive of the Commission again engaging with the public to receive more timely feedback from affected parties.  Much has changed since the 2011 and 2016 proposals concerning capital. We need to solicit a more contemporary snapshot of the issues.  The matter before us today provides us with an opportunity to rethink our approach to capital and allows us to be more consistent with what other regulators have accomplished.  I agree with the need to re-open the comment period and also ask additional questions, but I do that with an open mind and am not presupposing the outcome.  I encourage commenters to not limit their potential answers to the examples provided but instead view the request for comment as a non-exhaustive list of options.  Bottom line, it is time to get this right. To help us do that, this release has explicitly requested data driven responses that illustrate examples of the impact of various capital choices. Any such information commenters can share will help formulate the highest quality rulemaking possible.  I look forward to seeing the comments and getting this rule across the finish line.



Statement of Concurrence by Commissioner Rostin Behnam


Amendments to the Exemption from the Swap Clearing Requirement for Certain Affiliated Entities

December 10, 2019

I respectfully concur with the Commodity Futures Trading Commission’s (the “Commission” or “CFTC”) decision today to issue proposed amendments to the exemption from the swap clearing requirement for certain affiliated entities.  The original inter-affiliate exemption rule was issued by the Commission in 2013.[1]  Today’s proposal reminds us both of how forward thinking the Commission was in implementing the Dodd-Frank Act and the goals envisioned at the 2009 G20 Pittsburgh Summit, and of how we need to be thoughtful and willing to update our rule set when reality differs from what we envisioned.

The impetus for today’s proposal boils down to this.  In some respects, the world hasn’t turned out quite the way the Commission envisioned.  When the Commission promulgated the inter-affiliate exemption rule in 2013, the perhaps overly hopeful expectation was that other jurisdictions would quickly follow our lead and adopt swap clearing requirements in short order.  While a number of jurisdictions now have clearing mandates for certain swaps, some non-U.S. jurisdictions are still in the process of adopting clearing regimes, and some non-U.S. jurisdictions vary significantly from the Commission’s clearing requirement.  While the expectation in 2013 was that the Commission would issue comparability determinations for non-U.S. jurisdictions with respect to the clearing requirement, to date the Commission has not issued any comparability determinations.

Because the Commission in 2013 expected the world to quickly follow with clearing mandates, it established a temporary Alternative Compliance Framework for compliance with the Outward-Facing Swaps Condition of the Inter-Affiliate Exemption.[2]  Since that temporary Alternative Compliance Framework expired in 2014, the Division of Clearing and Risk staff has issued a series of no-action letters extending the Alternative Compliance Framework to provide more time for global harmonization.[3]  Today, because the global regulatory landscape has not turned out quite like we expected, the Commission proposes to codify and make permanent the Alternative Compliance Framework.

While I support today’s proposal and believe that it represents the best path forward to provide legal certainty to market participants regarding the Outward-Facing Swaps Condition of the Inter-Affiliate Exemption, there is one significant aspect of the proposal that gives me pause.  In the preamble to the 2013 rule, the Commission stated that the Alternative Compliance Framework provided for the Outward-Facing Swaps Condition is “not equivalent to clearing and would not mitigate potential losses between swap counterparties in the same manner that clearing would.”[4]  We reiterate this in today’s preamble, stating that “[a]lthough paying and collecting variation margin daily does not mitigate counterparty credit risk to the same extent that central clearing does, the Commission believes, as stated in the 2013 adopting release for the Inter-Affiliate Exemption, that variation margin is an essential risk management tool.”  Despite clearly stating that variation margin does not mitigate counterparty credit risk to the same extent as central clearing, we nonetheless are proposing to exempt certain transactions from central clearing under the theory that variation margin mitigates counterparty credit risk.  This may be the right result, but I want to be absolutely certain that we are not injecting unnecessary risk into the system by exempting these transactions from central clearing in the name of focusing on the easiest, cheapest risk management tool.  I encourage interested parties to comment on whether the alternative compliance framework that we propose to codify effectively mitigates counterparty credit risk, and the differences in risk mitigation between the alternative compliance framework and central clearing.

In part, I am comfortable with the proposal because the existing rule provides the Commission with the ability to monitor how the exemption is working.  Under Regulation 50.52(c)-(d), the election of the Inter-Affiliate Exemption, as well as how the requirements of the exemption are met, must be reported to a Commission-registered swap data repository.[5]  Accordingly, the Commission will have a window into which entities elect the exemption, how many swaps are exempted, and how the requirements of the exemption are met.  In addition, the Commission retains its special call, anti-fraud, and anti-evasion authorities, which should enable it to discharge its regulatory responsibilities under the CEA.  I believe that the Commission should closely monitor SDR data regarding the Inter-Affiliate Exemption going forward in order to be certain that the exemption is not being used to evade central clearing, and to ensure that the exemption is not adding unnecessary and preventable risk to the system.

I thank staff for their thoughtful responses to my questions, and for making edits that reflected comments and suggestions made by me and my staff.

[1] Clearing Exemption for Swaps Between Certain Affiliated Entities, 78 FR 21750 (Apr. 11, 2013).

[2] The Outward-Facing Swaps Condition requires an eligible affiliate counterparty relying on the Inter-Affiliate Exemption to clear any swap covered by the CFTC’s clearing requirement that is entered into with an unaffiliated counterparty, unless the swap qualifies for an exception or exemption from the clearing requirement.  Commission regulation 50.52(b)(4)(i).

[3] CFTC Letter Nos. 14-25 (Mar. 6, 2014), 14-135 (Nov. 7, 2014), 15-63 (Nov. 17, 2015), 16-81 (Nov. 28, 2016), 16-84 (Dec. 15, 2016), and 17-66 (Dec. 14, 2017), all available at https://www.cftc.gov/LawRegulation/CFTCStaffLetters/index.htm.

[4] Id. At 21765.

[5] Commission regulation 50.52(c)-(d).


EVENT: CFTC to Hold an Open Commission Meeting on December 10



Statement of Dissent by Commissioner Rostin Behnam


Capital Requirements of Swap Dealers and Major Swap Participants: Proposed rule; reopening of comment period; request for additional comment

December 10, 2019

I respectfully dissent from the Commodity Futures Trading Commission’s (the “Commission” or “CFTC”) decision today to reopen the comment period and request additional comment on proposed regulations and amendments to implement section 731 of the Wall Street Reform and Consumer Protection Act,[1] which requires the CFTC to establish capital rules for all registered swap dealers (“SDs”) and major swap participants (“MSPs”) that are not banks, including nonbank subsidiaries of bank holding companies, as well as associated financial recordkeeping and reporting requirements (the “Reopening”).  While I would have been comfortable supporting the Reopening as a matter of moving this critical Dodd-Frank Act rule forward to finalization, to the extent it introduces supplementary avenues for future rulemaking such as a leverage ratio requirement, it is a deception.  Impulsively inviting comment on matters tangential to the 2016 Capital Proposal[2], but perhaps relevant to determining appropriate capital standards and methodologies, as opposed to a thoughtful re-proposal sacrifices discipline for expediency, and runs afoul of proper process for notice and comment.  I will not be complicit in supporting Commission action that I believe could invite backdoor rationalization when finalization is before us.  The public deserves–and our integrity demands–that we play by the rules.

Today’s action is a reopening of the comment period and a request for comment, rather than a true proposal, and thus the 2016 Capital Proposal remains the only concrete indicator to the public of the Commission’s intentions.  If the 2016 Capital Proposal is an extreme overshoot, the appropriate way to provide the public with an opportunity to comment is to issue a reproposal.  Asking further questions, without a clear signal as to where the Commission is going, at the minimum risks further slowing this nearly ten-year effort to finalize a capital rule by adding an unnecessary step to the process in the form of a reproposal at some time in the future; and at the worst, incites the agency towards an exercise in creative reasoning outside the bounds of process.

Too often over the last couple of years, I believe this agency has slowed its own progress by snaking outside clear Administrative Procedure Act (“APA”) trajectories and adding unnecessary steps to the rulemaking process.  In part, I fear that we are doing the same thing today.  The competing threads throughout the Reopening make it harder for the public to discern what the Commission is proposing to do, and will make it more difficult to effectively comment on the existing proposal from 2016.   This creates undue risk under the APA, and arguably poisons the well in regard to the reachable goals of this new request for comment.

To reiterate sentiments made in my first speech as a CFTC Commissioner,[3] capital is a cornerstone financial crisis reform[4] that is critical to protecting our financial institutions and our financial system as a whole, specifically from systemic risk and contagion, but also from unintended consequences if capital (and margin) levels are applied and set without due regard to the uniqueness of our financial markets and market participants.  I appreciate that in moving forward, we must heed our directive to establish capital standards appropriately and in due consideration of other activities engaged in by SDs and MSPs such that we ensure that we do not penalize commercial end-users who need choices and benefit from competition in our markets.

The Reopening’s overarching premise is that the chosen response to certain uncertainties at the time of the Commission’s prior proposals[5] resulted in recommending standards that, in application, could in no way be justified as appropriate to offset the greater risk to SDs, MSPs, and the financial system,[6] such that the only solution for the potentially extreme overshoot is to dial it back.  With the passage of time comes a nagging amnesia to the pain that the financial crisis brought on American households and the global economy.  We cannot forget that undercapitalization was at the heart of the crisis.

The overall changes to the derivatives market over the last several years, the Commission’s adoption and implementation of margin rules for uncleared swaps and growing knowledge and experience with SDs, and recent movement by the Securities and Exchange Commission in finalizing capital, margin, and segregation requirements as well as financial reporting requirements for security-based swap dealers and major security-based swap participants,[7] provide a reasonable basis for affording the public an opportunity to reevaluate the 2016 Capital Proposal.  However, to the extent the Reopening seeks additional comment on both broader issues of harmonization and more targeted proposals regarding what amount of capital is appropriate and what methodology is used, its focus on solidifying a data-driven approach should send a strong signal that the Commission must justify its final determinations with respect to capital standards.

To reiterate, I would have liked to support today’s Commission action.  To the extent it would move us toward a final rule on a matter that is critical to the safety and resiliency of our markets, the supplemental concepts for consideration and overarching premise that we overshot the mark badly in the 2016 Capital Proposal raise concerns.  If the 2016 Capital Proposal is an extreme overshoot, and if there are alternative methodologies and concepts to consider because of new market data, the appropriate way to provide the public with an opportunity to comment is to issue a reproposal.  While I would have liked to stand with my fellow Commissioners today in supporting this first step towards a final capital rule, I cannot justify it under these circumstances.

[1] See The Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. 111-203 § 731(e), 124 Stat. 1376, 1704-6 (2010) (the “Dodd-Frank Act”)

[2] Capital Requirements of Swap Dealers and Major Swap Participants, 81 FR 91252 (proposed Dec. 16, 2016).

[3] See Rostin Behnam, The Dodd-Frank Inflection Point: Building on Derivatives Reform, Remarks of CFTC Commissioner Rostin Behnam at the Georgetown Center for Financial Markets and Policy (Nov. 14, 2017), https://www.cftc.gov/PressRoom/SpeechesTestimony/opabehnam.

[4] G20, Leaders’ Statement, Framework for Strong, Sustainable and Balanced Growth, The Pittsburgh Summit (September 24-25 2009), http://www.g20.utoronto.ca/2009/2009communique0925.html (“We committed to act together to raise capital standards…”).

[5] See Capital Requirements of Swap Dealers and Major Swap Participants, 76 FR 27802 (proposed May 12, 2011); 2016 Capital Proposal.

[6] See Id. at §731(e)(2)(C) and (e)(3)(A)(ii); 7 USC 6s(e)(2)(C) and (e)(3)(A)(ii).

[7] See Capital, Margin, and Segregation Requirements for Security-Based Swap Dealers and Major Security-Based Swap Participants and Capital and Segregation Requirements for Broker-Dealers, 84 FR 43872 (Aug. 22, 2019); Recordkeeping and Reporting Requirements for Security-Based Swap Dealers, Major Security-Based Swap Participants, and Broker-Dealers, SEC Release No. 34-87005 (Sept. 19, 2019), available at https://www.sec.gov/rules/final/2019/34-87005.pdf .


EVENT: CFTC to Hold an Open Commission Meeting on December 10



Opening Statement of Commissioner Brian Quintenz before the Open Commission Meeting


December 10, 2019

Good morning. Mr. Chairman, thank you for calling this meeting.  I support all three rulemakings before the Commission today.

Proposed Rule: Capital Requirements for Swap Dealers and Major Swap Participants – Reopening the Comment Period and Requesting Additional Comment

I have long said that finalizing capital requirements for swap dealers (SDs) and futures commission merchants (FCMs) is perhaps the most consequential rulemaking of the post-crisis reforms to get right.

The financial crisis exposed serious vulnerabilities in the financial system – uncollateralized, opaque, bilateral exposures which, under the right circumstances could have, and did, cause a panic and liquidity freeze due to concerns around that counterparty credit risk.  This panic, in my opinion, transformed a significant recessionary event into the crisis as we know it.  Importantly, since the financial crisis, global regulators and certainly those in the U.S. have implemented many policy reforms, like central clearing requirements and margin for uncleared swaps, designed to bring transparency to those exposures.

I have long lamented prior regulators’ implementation of the important swaps market regulatory reforms by viewing them in isolation of each other – calibrating each to try to think it alone could have prevented the crisis.  In fact, the elegance of the reforms is that they work together and build upon each other.

Therefore, in my view, it is wrong to think of capital in terms of what levels should have existed during the financial crisis that could have prevented it.  Very few capital regimes could have provided the market with enough certainty, given the size, nature, and opacity of these exposures, to remove the possibility of the panic, and the capital levels which could have done so would have rendered the entire swaps market obsolete and uneconomic.  Therefore, regulatory capital regimes implemented to respond to the last crisis need to respect the increased transparency and certainty which other reforms have already brought to the market.  I believe we are asking the right questions in this reopening to respect that progress in calibrating our own capital regime appropriately.

The final pillar of our Dodd-Frank Act reforms, capital ensures that firms are able to continue to operate during times of economic and financial stress by providing an adequate cushion to protect them from losses.  Just as important as the safety and soundness of individual firms, capital is designed to give the marketplace confidence that any given firm has a high probability of surviving the next crisis.

Capital requirements also create important incentives that drive market behavior.  The cost of capital may be the most determinative factor in a firm’s decision to remain, or become, a swap dealer, or to continue to provide clearing services to clients, in the case of an FCM.  If capital costs are too expensive, firms will restrict certain business activities, end unprofitable business lines, or, in some cases, exit the swaps or futures markets altogether.  As a result, over time, the swaps and futures markets would become less liquid, less accessible to end users, more heavily concentrated, and less competitive.  These are not the hallmarks of a healthy financial system.

Therefore, appropriate capital levels are directly linked to both the health and vibrancy of the derivatives markets and to the sustainability of the entire financial system more broadly.

To promote a vibrant derivatives market, I believe it is critically important that the CFTC finalize a capital rule that is appropriately calibrated to the true risks posed by an SD’s or FCM’s business.  I am pleased to support the re-opening and request for comment before us today.  This document solicits comment on the key issues the Commission must get right in the final rule to ensure that capital requirements are appropriate and commensurate to a firm’s risk.  I appreciate that market participants have commented on two prior capital proposals and the Commission will continue to consider all past comments in moving forward with a final rule.  Nevertheless, I hope commenters use this opportunity to provide the Commission with much needed data and quantitative analysis demonstrating the impact that various choices contemplated in this proposal would have on a firm’s minimum capital level – and, by extension, on that firm’s ability to participate in the market and adequately service clients.  Data will be vital to the Commission’s ability to evaluate various capital alternatives and identify those alternatives that would render certain business lines or activities uneconomic.  It will also be vital to the Commission’s assessment that the capital requirements established ensure the safety and soundness of the firm.

I welcome comments on all aspects of the reopening, but there are a few areas I am particularly interested in hearing from commenters.

The eight percent risk margin amount.  We heard from many commenters that, of all the alternatives, the eight percent risk margin amount would act not as a capital floor as intended, but rather as the primary driver of firms’ capital requirements and as a potential binding constraint on their businesses.  Whereas FCMs are currently required to include in their minimum capital requirement eight percent of the margin required for their futures and cleared swaps customer positions, the 2016 proposal expanded the eight percent risk margin amount to include proprietary futures, swaps and security-based swap (SBS) positions for FCMs and for SDs electing the net liquid asset capital approach.  In addition to these proprietary positions being included in the risk margin amount, these FCMs and SDs would also be subject to capital charges on these proprietary positions.  I hope commenters can provide us with data showing the capital costs of including proprietary positions, for the first time, in an FCM’s risk margin amount.  To the extent possible, it also would be helpful to see how different risk margin percentages, or a different scope of products included in the margin amount, impacts the minimum capital requirements for an actual or hypothetical portfolio of positions.  I would also be interested to hear from commenters about whether it makes sense to remove the risk margin amount altogether for standalone SDs electing the net liquid asset approach or bank-based approach, given the other minimum capital level requirements in the proposal.

Model approval process.  The Commission must have a workable model approval process.  I am interested to hear commenters’ views on how the Commission or NFA should review or accept capital models that have already been approved by another regulator.  Should such models be granted automatic or temporary approval, while the Commission or NFA conducts its own review?

In closing, I have often worried that the accepted mantra on regulatory capital requirements has become “the higher, the better.”  Respectfully, I disagree.  There is a direct tradeoff between the amount of capital regulators require firms to hold to ensure firms’ resilience and viability, and the amount of available capital firms have to deploy in financial markets to support the market’s ongoing liquidity and health.  There is a balance necessary between capital levels that protect firms from losses on certain products, and capital levels that allow firms an economic benefit in servicing their customers’ risk management needs through those products.  I hope the feedback we receive from commenters on this reopening helps the Commission establish appropriate capital requirements that are commensurate to a firm’s risk and not detrimental to its clients.  I would also like to thank the staff of the Division of Swap Dealer and Intermediary Oversight for answering my questions and incorporating many of my comments into this document.

Proposed Rule:  Amendments to the Exemption from the Swap Clearing Requirement for Certain Affiliated Entities Regarding Alternative Compliance Frameworks for Anti-Evasionary Measures

I support today’s proposal to codify how affiliated swap counterparties have, for the past six years, complied with an important provision of one of the Commission’s exemptions from the swap clearing requirement.  The Commission’s swap clearing requirement has accomplished the important task of requiring financial institutions to centrally clear the overwhelming majority of the most commonly-traded interest rate swaps and credit default swaps through CFTC-supervised clearing organizations.  According to a Financial Stability Board (FSB) report published in October, at least 80% of interest rate swaps and credit default swaps executed in the U.S. are now cleared.[1]  Central clearing, through the posting of initial and variation margin with a clearinghouse, has greatly reduced counterparty credit risk in the swaps market, helping to support confidence in the financial markets.  However, carefully considered exceptions should ensure that uncleared products remain economically viable to provide market participants with flexibility in managing risks.  For example, entities belonging to the same corporate group regularly execute swaps for internal risk management purposes, and these swaps do not incur the same risks as those executed with unaffiliated counterparties.[2]  The Commission has also created exceptions to the swap clearing requirement for commercial end-users, financial institutions organized as cooperatives, and banks with assets of $10 billion or less.  As an additional point, I look forward to the Commission finalizing last year’s proposed exemptions for bank holding companies and savings and loan companies having consolidated assets of $10 billion or less and for community development financial institutions.

I believe the proposal before the Commission today strikes an appropriate balance between guarding against evasion, on the one hand, and providing flexibility for cross-border swaps activity on the other.  When affiliated financial counterparties exchange variation margin on all of their swaps with one another, on a worldwide basis, the risk that a U.S. firm can amass a critical amount of uncollateralized exposure abroad is greatly reduced.  At the same time, the proposal does not disadvantage U.S.-based institutions competing with foreign institutions located in jurisdictions whose swap clearing requirements are narrower in scope than the Commission’s.  I believe that today’s proposal functions rationally with the Commission’s rules for margining uncleared swaps on a cross-border basis, including in the context of inter-affiliate transactions, and I look forward to comments on this topic.

In addition, I note that today’s proposal would simplify the existing inter-affiliate exemption to reflect current market practices and eliminate complicated provisions that may never have been relied upon.  I hope the Commission’s next rulemakings similarly rationalize rules so that industry’s compliance becomes less burdensome and costly.

[1] FSB OTC Derivatives Market Reforms: 2019 Progress Report on Implementation (Oct. 2019),
(Appendix C, Table J),

[2] See the Commission’s original proposed inter-affiliate exemption, Clearing Exemption for Swaps Between Affiliated Entities, 77 Fed. Reg. 50,425, 50,426-50,427 (Aug. 21, 2012).


EVENT: CFTC to Hold an Open Commission Meeting on December 10





December 10, 2019  

CFTC Charges New Mexico Resident with Fraud in Long-Running Ponzi Scheme

Washington, DC – The U.S. Commodity Futures Trading Commission today announced it has filed a civil enforcement action in the District of New Mexico against defendant Douglas Lien (d/b/a Westend Investments) of Santa Fe, New Mexico, charging him with fraud and failing to register with the CFTC.

According to the complaint, starting in at least 2002, Lien solicited and accepted funds from friends and acquaintances for the purpose of trading commodity futures contracts, primarily U.S. Treasury bond futures. The complaint alleges that since at least September 2014, Lien accepted at least $827,650 from his clients, issued periodic account statements showing false trading profits, and reported more than $1.6 million in profits on annual tax forms he issued to clients. In reality, during that time, Lien made no deposits into his futures trading account and placed only three trades in commodity futures contracts, for a combined loss of approximately $200, according to the complaint. The complaint also alleges that Lien misappropriated client funds, using them to pay other clients, in the manner of a Ponzi scheme, and for management fees he charged based on false trading profits.

The complaint further alleges that throughout 2019, several of Lien’s clients have requested the return of their funds, but Lien has strung clients along with false excuses. According to the complaint, Lien falsely advised clients that a broker placed client funds in long-term investments that Lien cannot access without incurring penalties, when, in fact, no client funds are, or were, locked up in such investments.

Additionally, the complaint charges that Lien acted in a capacity requiring him to register with the CFTC and that he failed to do so.

In its continuing litigation, the CFTC seeks restitution to defrauded investors, disgorgement of ill-gotten gains, civil monetary penalties, permanent trading and registration bans, and a permanent injunction against further violations of the Commodity Exchange Act, as charged.

The Division of Enforcement staff members responsible for this case are Stephanie Reinhart, Susan Padove, Bryan Hsueh, Joseph Patrick, David Terrell, and Scott Williamson.

*   *   *   *   *   *

CFTC’s Fraud Advisories

The CFTC has issued several customer protection Fraud Advisories that provide the warning signs of fraud. The CFTC strongly urges the public to verify a company’s registration with the CFTC before committing funds.  If unregistered, a customer should be wary of providing funds to that company. A company’s registration status can be found using NFA BASIC.

Customers can report suspicious activities or information, such as possible violations of commodity trading laws, to the CFTC Division of Enforcement via a toll-free hotline at 866-FON-CFTC (866-366-2382) or file a tip or complaint online.






December 10, 2019

CFTC Approves One Final, Two Proposed Rules at December 10 Open Meeting 

Washington, DC — At an open meeting today, the U.S. Commodity Futures Trading Commission approved one final rule and two proposed rules.

Final Rule: Amendments to Part 13 of the Commission’s Regulations (Public Rulemaking Procedures)

The Commission unanimously approved a final rule amending Part 13 of its regulations to eliminate the provisions that establish procedures for the formulation, amendment, or repeal of rules or regulations. Because the Administrative Procedure Act (APA) governs the CFTC’s rulemaking process, the Commission believes it is unnecessary to codify the rulemaking process in a CFTC regulation. Part 13, as amended, is comprised solely of the procedure for filing petitions for rulemakings, as the APA does not address this process.

Proposed Rule: Capital Requirements for Swap Dealers and Major Swap Participants – Reopening the Comment Period and Requesting Additional Comment

On a 3-2 vote, the Commission reopened the comment period for the proposed capital and financial reporting rules for swap dealers and major swap participants. The reopening provides for a 75-day comment period following publication in the Federal Register, which is intended to provide interested parties with sufficient time to provide comments, supported by empirical data and analysis.

Proposed Rule: Amendments to the Swap Clearing Requirement Exemption for Inter-Affiliate Swaps

The Commission unanimously approved a proposed rule that would reinstate the expired alternative compliance frameworks for the inter-affiliate swaps clearing exemption, with minor revisions to reflect the current variation margining practices of affiliated counterparties electing the exemption. This proposal would codify the relief provided by DCR staff no-action letters and would make the two alternative compliance frameworks available to affiliated entities permanently. This proposed rule has a 60-day comment period following publication in the Federal Register.






December 4, 2019

DSIO Issues Advisory Providing Guidance and Staff Recommendations for Chief Compliance Officer Annual Report Preparation

Washington, DC — The U.S. Commodity Futures Trading Commission’s Division of Swap Dealer and Intermediary Oversight (DSIO) today issued an advisory that addresses the preparation of the Chief Compliance Officer (CCO) Annual Report for futures commission merchants, swap dealers, and major swap participants.

“Clarity is one of the CFTC’s core values, and this advisory details what the Division expects to see in our registrants’ CCO Annual Reports,” said DSIO Director Joshua Sterling. “Providing guidance to its registrants is one of DSIO’s five core building blocks, along with examination, reporting, enforcement coordination, and rulemaking programs. These building blocks allow DSIO to operate world-class oversight programs as part of the CFTC’s vision to be the global standard for sound derivatives regulation. At the same time, we are continuing to take a careful look at how swap dealers are complying with all of their requirements under Dodd-Frank and to understand the root causes and remediation efforts when firms come up short.”

The advisory addresses a number of areas of the CCO Annual Report, including: 1) areas for improvement; 2) material non-compliance issues; 3) financial, managerial, operational, and staffing resources; 4) the certification requirement; 5) furnishing the annual report; and 6) other related matters.

These staff recommendations and guidance follow the publication of a CFTC Final Rule and Guidance in August of 2018 modifying the CCO Annual Report requirements.

“The advisory will help CCOs comply with their regulatory requirements and provide the necessary information to the CFTC in an efficient and useful manner,” said DSIO Associate Director Amanda Olear, who led the agency’s effort to create this guidance. “The CCO Annual Report is an important tool for DSIO to assess its registrants and it is critical that the reports contain the information necessary to fulfill that need.”






December 2, 2019

CFTC Commissioner Behnam Announces Two New Subcommittees of the Market Risk Advisory Committee 

Washington, DC — U.S. Commodity Futures Trading Commission Commissioner Rostin Behnam today announced the creation of the Central Counterparty (CCP) Risk and Governance and Market Structure Subcommittees (Subcommittees) from the current membership of the Market Risk Advisory Committee (MRAC). Commissioner Behnam is the sponsor of the MRAC.

The MRAC established the CCP Risk and Governance Subcommittee to provide reports and recommendations directly to the MRAC regarding current issues impacting clearinghouse risk management and governance. Lee Betsill, Managing Director and Chief Risk Officer, CME Group, and Alicia Crighton, Chief Operating Officer, Prime Services, U.S. Clearing, Goldman Sachs (representing the Futures Industry Association), will serve as co-chairs.

The Market Structure Subcommittee will focus on current issues and events impacting the evolving structure and regulation of the derivatives markets. The subcommittee may consider such topics such as pre- and post-trade transparency and reporting regimes, emerging operational risks, and the impact of competition on liquidity and market concentration. Lisa Shemie, Associate General Counsel, Chief Legal Officer – Cboe FX Markets and Cboe SEF, and Stephen Berger, Managing Director and Global Head of Government & Regulatory Policy, Citadel, will serve as co-chairs.

“I am grateful to the MRAC members who volunteered to join the Subcommittees. The previous MRAC meetings on these topics have provided a solid foundation for further work by the Subcommittees which will provide the MRAC, and ultimately the Commission, with well-reasoned recommendations that will benefit the derivatives industry and market participants,” said Commissioner Behnam.

See full list of members of the MRAC CCP Risk and Governance Subcommittee and the Market Structure Subcommittee.


One Response to “News”

  1. Спасибо за информацию!!!!!

Leave a Reply

Value of posted assets

Est. over 2+ Billion in assets posted
Premium Wordpress Themes