CFTC Open Meeting, March 20, 2012
|FINAL RULE: Approved at CFTC Open Meeting, March 20, 2012|
|Final Rule Issue||Effective Date||Compliance Date, FCMs, DCMs, DCOs||Compliance Date, SEFs|
|April 9, 2012||October 1, 2012||October 1, 2012||TBA|
|Final Rule Issue||Effective Date||Compliance Date, Rule 1.73||Compliance Extension, Bunched Orders|
|April 9, 2012||October 1, 2012||June 1, 2013||September 1, 2013|
The Commodity Futures Trading Commission (CFTC) held a public meeting on Tuesday, March 20, 2012, on a final rule regarding customer clearing documentation, timing of acceptance for clearing, and clearing member risk management. These rules were first proposed at the CFTC Open Meeting, July 19, 2011. For more information on the rules as proposed:
- CFTC Rule Proposal: Clearing Member Risk Management
- CFTC Rule Proposal: Customer Clearing Documentation and Timing of Acceptance for Clearing
Meeting Summary and Links to Related Documents
The rulemaking passed by a vote of 4-1, with Commissioner O'Malia voting against the final rules. See Commissioners' statements below for more information. Details of the rulemaking, along with a summary and background information, can be found HERE.
No future meeting dates were announced at this meeting.
Chairman Gary Gensler; whose statements include:
- "I understand there is a considerable debate about the costs and benefits of our efforts under the Dodd-Frank Act to make the swaps markets more open, transparent and competitive. However, in any discussion about costs and benefits, we cannot forget that our country’s economy was driven to the brink of collapse as a result of built-up risk and leverage and the lack of transparency in the swaps market."
- "Today’s rule an important step toward achieving these goals. It promotes broad access to central clearing, increases market transparency, supports market efficiency and bolsters risk management. Specifically, the rule:
- Establishes requirements for the documentation between an FCM and its customers and between a swap dealer and its counterparties;
- Sets standards for the timely processing of trades that minimize the time between submission and acceptance or rejection of trades for clearing;
- Requires bunched orders for swaps executed as a block to be immediately accepted into clearing and allocated into individual accounts later in the day; and
- Strengthens the risk management procedures of clearing members to enhance market integrity.
Commissioner Jill Sommers, whose statements include:
"The aim of these rules is to provide:
- increased access to clearing and competitive execution of transactions;
- mitigation of counterparty credit risk through central clearing;
- prompt, efficient, and accurate clearing using straight through processing;
- minimization of the time between trade execution and acceptance into clearing;
- certainty around post trade allocation of bunched orders; and
- greater integrity to the markets and the clearing system by setting out basic risk management requirements for participants in the clearing process.
The goals these final rules seek to achieve are the right ones for our markets and for this reason I support them."
Commissioner Sommers does express concerns that some FCMs may not be ready for the rule change by the effective date and says, "To the extent market participants require additional time or other relief to comply with the technological requirements these rules may create, I hope we will take a sensible approach in considering, and when warranted, granting such relief."
Commissioner Bart Chilton, connected via telephone, whose statements include:
- "I am supporting this final rulemaking. I have listened to and met with some who seem to think this rule (and maybe even doing what Congress has clearly directed us to do in other rulemakings) is going too far. But, I don't agree. What we are doing in this instance is a necessary step in the transition to safer and more efficient and effective markets."
- "In order to do our job well, we need to make sure all the provisions are in place: the logistics. This rulemaking ensures that some critical provisions, streamlined straight-through processing and rigorous risk management standards for clearing members, are in place in time for the move toward more clearing."
Commissioner Scott O'Malia, whose statements include:
- "Today’s final rulemaking appropriately combines the customer clearing documentation rules with a group of rules regarding the timing of acceptance for clearing, also known as straight-through processing. I have always been in favor of facilitating prompt execution and clearing of swaps as quickly as current technology will provide."
- "As I stated previously, the Commission continues to play hide the ball by not providing sufficient detail regarding the implementation timeline market participants and registered entities must follow in complying with our rules. This rule is no different. Today’s rulemaking highlights the fact that the sequencing of our rules is haphazard and we seem to go out of our way to make the schedule as complicated as possible...This compliance schedule fails to account for the interdependencies between this rulemaking and other rulemakings, which the Commission has yet to finalize."
- "While the analysis is very well written and includes an appropriate baseline that is not tied to an arbitrary presumption, it is flawed for two important reasons: (1) the lack of quantification; and (2) the failure to conduct any sort of research or sophisticated analysis."
Commissioner Mark Wetjen, whose statements include: