CFTC Open Meeting, April 27, 2011

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Dodd-Frank Timeline, Protection of Cleared Swaps Customer Contracts and Collateral, Commodity Broker Bankruptcy Provisions
Final Rule Issue Effective Date Compliance Date
February 7, 2012 April 9, 2012 November 13, 2012
Dodd-Frank Timeline, Capital Requirements for Swap Dealers and Major Swap Participants
Proposal Date Comment Deadline Final Rule Issue
May 12, 2011 July 11, 2011 TBA
Dodd-Frank Timeline, Swap Product Definitions
Final Rule Issue Effective Date Compliance Date
August 13, 2012 October 12, 2012 October 12, 2012
Dodd-Frank Timeline, Amendments to Adapt Certain CFTC Regulations to the Dodd-Frank Act
Final Rule Issue, Bunched Orders Final Rule Issue, Adaptations Final Rule Issue, Recording of Transactions
April 9, 2012 October 16, 2012 January 2, 2013


The Commodity Futures Trading Commission (CFTC) public meeting focused on the issuance of proposed rules under the Dodd-Frank Wall Street Reform and Consumer Protection Act on the following topics:[1]

Link to archive webcast:

Meeting Summary and Related Documents

Product Definitions Proposal (Passed 4-1, with Commissioner Sommers voting against).

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Protection of Cleared Swaps Customer Contracts and Collateral and Conforming Amendments to the Commodity Broker Bankruptcy Provisions Proposal (Passed 4-1, with Commissioner Sommers voting against).

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Capital Requirements of Swap Dealers and Major Swap Participants Proposal (Passed 4-1, with Commissioner Sommers voting against).

Read comment letters.png
Read proposed rule.png

Amendments to Adapt Certain CFTC Regulations to the Dodd-Frank Act (Passed 4-1, with Commissioner Sommers voting against).

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Read proposed rule.png

Reopening and Extension of Comment Periods of Dodd-Frank-related Rulemakings (Passed 4-1, with Commissioner Sommers voting against).

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Speakers

Chairman Gary Gensler; whose statements include:

  • In his opening statement, Gensler announced that this meeting marks the completion of the proposed rulemaking phase. As such, the commission plans to reopen the comment period for all proposed rules for 30 days, now that the public "has the opportunity to review the whole mosaic of rules."
  • Support for the capital requirement proposal, citing, "The Dodd-Frank Act requires capital requirements to help ensure the safety and soundness of swap dealers and major swap participants. Capital rules help protect commercial end-users and other market participants by requiring that dealers have sufficient capital to stand behind their obligations with such end-users and market participants."
  • Support for further refinements to swaps definitions, and
  • Support for adapting CFTC regulations to Dodd-Frank Act, including the addition of swaps, and conforming changes to the definitions of introducing brokers (IBs) and futures commission merchants (FCMs).

Commissioner Michael V. Dunn, whose statements included a list of questions for teams to consider in each final rulemaking:

  • Is the proposed final rule in line with a principles based regulatory regime, or is it prescriptive?
  • If the rule is prescriptive, how can it be made more principles based?
  • If the rule cannot be made more principles based, why is this rule better suited to a prescriptive approach rather than a principles based one?
  • What is the expected cost of implementing, maintaining and enforcing this final rule?
  • What are the expected staffing requirements for implementing, maintaining and enforcing this final rule?
  • Will new staff need to be hired in order to implement, maintain and enforce this final rule?
  • Does current staff have the expertise and experience necessary to implement, maintain and enforce this final rule?
  • If the Commission’s budget does not allow additional hiring, how will current staff be allocated to implement, maintain and enforce this final rule?
  • If the Commission’s budget does not allow additional hiring, how will current staff’s new responsibilities regarding this final rule impact their pre-Dodd-Frank responsibilities (ie, what is being done by staff now that won’t get done once the final rule is implemented)?


Commissioner Scott O'Malia, whose statements included:

  • Request for comprehensive scheduling and transparency in final rulemaking
  • Regarding definitions rule, O'Malia expressed concern over the length of the proposal (over 300 pages), the differences that still exist between CFTC and SEC proposals over swaps definitions, and the implementation of the anti-evasion proposal section of the rule.
  • Commissions still need a portfolio margining rule proposal
  • Objection to the capital requirements proposal, as costs will be either directly or indirectly passed on to commercial end-users, which is specifically counter to the intention of Dodd-Frank.
  • Appreciation of the flexibility of the collateral segregation proposal, as it "leans towards adopting a complete legal segregation model, but leaves open consideration of alternatives such as the "futures model.".

Commissioner Jill Sommers; whose statements include:

  • a request that the commission consider the legal uncertainties that will begin on July 16th, 2011, as changes to the Commodity Exchange Act due to Dodd-Frank go into effect, yet "the new regulatory framework for trading and clearing swaps will most certainly not be operational by that date;"
  • reflection, as the commission enters the final reulemaking phase, that the proposal process was often rushed in order to meet the tight deadlines imposed by the act, and that there has been insufficient time to consider, among other things, costs and other unintended consequences;
  • a dissenting opinion on the definitions proposal, as Sommers believes that the commission "overreached" with the anti-evasion section of the proposal;
  • "reservations" regarding the segregation and bankruptcy proposal, as it "mistakenly fails to retain sufficient optionality for FCMs and DCOs to implement different models based upon the needs of their customers;" and
  • "strong objections" to two of the conforming amendments, those concerning the governing of bunched orders, and the requirement thar duties with respect to creating and maintaining audio files of all oral communications leading to the execution of a transaction in a commodity interest or cash commodity. Sommers believes that these issues are significant enough to be addressed separately, rather than in a group of conforming amendments.

References

  1. Open Meeting on Thirteenth Series of Proposed Rules under the Dodd-Frank Act. CFTC. Retrieved on April 14, 2011.

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