CFTC Open Meeting, December 16, 2010

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Dodd-Frank Timeline, Position Limits for Derivatives
Interim and Final Rule VACATED BY COURT ORDER Re-proposed Rule Issue Comment Deadline (reopened July 3, 2014)
November 18, 2011 September 28, 2012 November 5, 2013 August 4, 2014
Dodd-Frank Timeline, Core Principles for SEFs, CFTC
Final Rule Issue Effective Date Compliance Date
June 4, 2013 August 5, 2013 October 2, 2013 (one-year phase-in of RFQ minimum); Also see No-action relief note
Dodd-Frank Timeline, Risk Management Requirements for DCOs
Final Rule Issue Effective Date Effective Date, SIDCOs Compliance Date, SIDCOs
October 18, 2011 January 9, 2012 October 15, 2013 December 31, 2013
Dodd-Frank Timeline, Confirmation, Reconciliation, and Compression, Swap Dealers and Major Swap Participants
Proposal Date Final Rule Issue Effective Date
December 28, 2010 September 11, 2012 November 13, 2012

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:

Archived webcast:

Meeting Summary

  • DCO Proposal carries 5-0.
  • SEF Proposal carries 4-1, with Sommers voting against.
  • After considerable staff testimony, and considering the necessary departure of Commissioners Chilton and Dunn from the meeting, Gensler adjourned the meeting without taking a vote on position limits. The proposal was subsequently debated and approved at the January 13, 2011 meeting.

Related Documents

Proposed Rule on Confirmation, Portfolio Reconciliation, and Portfolio Compression Requirements for Swap Dealers and Major Swap Participants:

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Position Limits for Derivatives

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Risk Management Requirements for DCOs

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Swap Execution Facilities

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Speakers

Chairman Gary Gensler; whose statements include:

  • Confirmation, Portfolio Reconciliation and Portfolio Compression Requirements for Swap Dealers and Major Swap Participants -- will establish "procedures that will promote legal certainty regarding swap transactions, early resolutions of valuation disputes, enhanced understanding of one counterparty’s risk exposure to another, reduced operational risk and increased operational efficiency.
  • Risk Management Requirements for Derivatives Clearing Organizations -- will provide "a regulatory framework to support DCO risk management practices,...strengthen the financial integrity of the futures and swap markets,...promote fair and open access to clearing, and promote fair and open access to clearing."
  • Position Limits -- "Position limits help to protect the markets both in times of clear skies and when there is a storm on the horizon." "Today’s proposal would implement important new authorities in the Dodd-Frank Act to prevent excessive speculation and manipulation in the derivatives markets. The Dodd-Frank Act expanded the scope of the Commission’s mandate to set position limits to include certain swaps. The proposal re-establishes position limits in agriculture, energy and metals markets."
  • Swap Execution Facilities -- support for the proposal, as it "fulfills Congress’s mandates to have rules and core principles requirements for swap execution facilities (SEFs), and promote transparency through the trading of swaps on SEFS."

Commissioner Michael V. Dunn, present through a remote link

Commissioner Jill Sommers, whose statements included

  • Objections to the proposed regulations for Swap Execution Facilities (SEFs) and to the proposed Position Limits, as the proposals "stem from our overly-narrow reading of the statute."
  • Disappointment that the public would not be allowed to comment on "alternative language" in the SEF proposal,
  • Cites as grounds for objection to position limits proposal -- "We do not have the data we need to effectively set position limits. Moreover, in the absence of data, any limits we set will be completely unenforceable. I think it is bad policy to promulgate regulations that are not enforceable."

Commissioner Bart Chilton, whose statement included

  • Detailed his Congressional testimony of December 15, 2010, which outlined his position points proposal.

Commissioner Scott O’Malia; whose statements include:

  • His holiday "wish list" for the commission, which included clarity in rulemaking, a better interface with the public, and technology and staffing budgets,
  • Regarding the SEF proposal, the compromise solution "will bring more transparency to the dark markets of the OTC space." But he has reservations about conflicts in the "open access" provision and whether the proposal will enhance or be detrimental to market liquidity.
  • Regarding position limits, O'Malia quoted Thomas Jefferson, "Delay is better than error."
  • Regarding DCOs, the proposal "strikes the delicate balance between providing the fair and open access to clearing organizations, which is required under the Dodd-Frank Act, and maintaining strong standards for clearing members." However, he is concerned about new regulations creating an environment in which products are "too costly to clear."

Bruce Fekrat, Senior Special Counsel, Division of Market Oversight, explained the rationale behind position limits proposals

  • Establishment of a process for setting position limits for certain derivatives,
  • Exemptions for hedgers and certain "grandfathered" market participants
  • Definition of the 28 "Enumerated Commodities" -- high open interest, physically delivered contracts such as major agricultural and metals contracts
  • Phased-in limits; special rules depending on whether a contract is physically or cash-settled,
  • Limited exemptions for commodity pools, aggregation of accounts, and for the positions of discretionary accounts of futures commission merchants (FCMs).

References

  1. Open Meeting on Eighth Series of Proposed Rules under the Dodd-Frank Act. CFTC. Retrieved on March 2, 2011.

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