CFTC Open Meeting, January 20, 2011

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Dodd-Frank Timeline, Commodity Options and Agricultural Swaps
Final Rule-Swaps Effective Date - Swaps Effective Date-Options
August 10, 2011 December 31, 2011 June 26, 2012
Dodd-Frank Timeline, Orderly Liquidation Termination Provision in Swap Trading Relationship Documentation
Proposal Date Final Rule Issue Effective Date
February 8, 2011 September 11, 2012 November 13, 2012

Open Meeting on Tenth Series of Proposed Rules under the Dodd-Frank Act
Link to archive webcast:

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]

  • Commodity Options and Agricultural Swaps;
  • Swap Trading Relationship Documentation Relating to Termination Provisions Implicated Under Title II of the Dodd-Frank Act. ("Orderly Liquidation" Provision)

Contents

Meeting Summary

Proposal 1, Agricultural Swaps and Commodity Options, passed 5-0. The proposal appeared in the Federal Register on February 3. The comment period will be open until April 4, 2011.

Proposal 2, Orderly Liquidation Termination Provision in Swap Trading Relationship Documentation Requirements for Swap Dealers and Major Swap Participants, passed 4-1, with Commissioner O'Malia voting against. The proposal appreared in the Federal Register on February 8, 2011. The comment period closed April 11, 2011.

Related Documents

Commodity Options and Agricultural Swaps

Read comment letters.png
Read proposed rule.png

Orderly Liquidation Termination Provision

Read comment letters.png
Read proposed rule.png

Speakers

Chairman Gary Gensler; whose statement included:

  • "We look forward to receiving public comments on all of the proposed rules we are considering today. Each of the rules, as well as fact sheets and “Questions and Answers” on the rules, will be posted on our website shortly."
  • Support for both proposals.
  • Agricultural swaps should be treated as other swaps, as "agricultural producers, packers, processors and handlers will benefit from the ability to use agricultural swaps to hedge their risk and also will benefit from the transparency brought forth under the Dodd-Frank Act." This proposal provides the necessary regulatory framework.
  • The orderly liquidation proposal "should lower litigation risk during times of significant market stress and promote an orderly and effective resolution process for large financial entities."

Commissioner Michael V. Dunn, whose statement included:

  • Reiteration of his concern regarding the lack of funding of the CFTC, that it is required to "continue to operate under a continuing resolution, with funds insufficient to implement and enforce the Dodd-Frank Act."
  • Regarding the Agricultural Swaps regulation, Dunn noted the "near unanimous support" among comment letters being in favor of the treatment of Agricultural Swaps under the same regulatory scheme as other swaps.
  • Support of the orderly liquidation proposal, but looks forward to the comment letters and, in particular, if there are any "unforeseen anti-competitive consequences that may arise out of its application."

Commissioner Jill Sommers; whose statements included:

  • Concern regarding entities seeking safe harbors in order to avoid the new regulatory structure.

Commissioner Bart Chilton, present through a remote link,

Commissioner Scott O’Malia; whose statements included:

  • Recalled the President's Executive Order "Improving Regulation and Regulatory Review," issued Tuesday, January 18, 2011. O'Malia agrees with the high standards the President has directed federal agencies to comply with, including improved cost/benefit evaluations, encouraging innovative alternatives, and ensuring the rules are tailored to impose the least costs. Although, as noted, the CFTC is not among the agencies included in the Executive Order, O'Malia suggests the Commission comply.
  • Support for agricultural swaps proposal, as it "will continue to provide commercial end-users with the flexibility they need to implement a customized and cost effective risk management strategy to hedge against price volatility."
  • Does not support the Orderly Liquidation proposal, saying that CFTC rulemaking in this area is not expressed in FDIA or in Title II of the Dodd-Frank Act. O'Malia suggests that the rule creates "more confusion and questions."

References

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

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