CFTC Open Meeting, May 10, 2012

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Gavel.png FINAL RULE: Designated Contract Market Core Principles
Dodd-Frank Timeline, Core Principles and Other Requirements for Designated Contract Markets
Final Rule Issue Effective Date Compliance Date
June 19, 2012 August 20, 2012 October 17, 2012
Dodd-Frank Timeline, Further Defining “Swap Dealer,” “Major Swap Participant” and “Eligible Contract Participant”
Final Rule Issue Effective Date Compliance Date
May 23, 2012 July 23/Dec. 31, 2012 October 12, 2012
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

The Commodity Futures Trading Commission (CFTC) held a public meeting on May 10, 2012 to consider two rulemakings:

Note: On May 3, 2012, it was rumored that the most contentious issue in the DCM proposal, the so-called "85 percent" rule, would not be included in this final rulemaking, but rather be addressed at a later date. Under the proposal, any contract in which less than 85 percent of the volume is traded on a central limit order book must be de-listed, reclassified as a swap, and trade on a swap execution facility.[1] Exchanges such as CME Group have criticized the 85 percent rule, suggesting that it would deter the development of new products.

Core principle 9, or the "85 percent" rule was not, in fact, finalized at the open meeting on May 10, 2012. According to Chairman Gensler, the additional time before finalizing the rule will allow the commission "to more fully analyze the many public comments on these provisions." It is believed that the commission will finalize Core Principle 9 when it finalizes swap execution facilities rules later in 2012.

View Webcast

Meeting Summary and Links to Related Documents

Speakers

Chairman Gary Gensler; whose statements include:

  • Support for the final rules;
  • An explanation of Dodd-Frank's 23 core principles and requiring DCMs to put in place effective pre-trade risk filters;
  • A note that the rule does not yet finalize core principle 9, or the "85 percent rule";
  • Comments on the passage of an exemptive order regarding the effective dates for swap regulation, which grants additional relief through Dec. 31, 2012; and
  • Updates on finalizing a definition for the term "swap dealer" and on a final rule establishing data recordkeeping and reporting requirements for pre-enactment and transition swaps, collectively called “historical swaps."[2]

Commissioner Bart Chilton, whose statements include:

  • A note that this is production number 32 for the CFTC in finalizing Dodd-Frank rules;
  • A discussion of cost-benefit analysis.[3]

Commissioner Jill Sommers, whose statements include:

  • A reminder that these final DCM rules are designed to allow DCMs the flexibility they need for specific markets and business models;
  • A look forward at finalizing core principle, and creating a final rule that allows DCMs to list new products without expecting forced de-listing;
  • A discussion of core principle 21, that will ultimately ensure a balance in the use of financial resources for DCMs; and
  • The suggestion that as the SEC has done, that swap dealers, major swap participants and eligible contract participants not be required to register until after definitions for these terms have been set through final rules.[4]

Commissioner Scott D. O’Malia, whose statements include:

  • Concerns that core principle 9 would reduce market liquidity and increase risk;
  • Support for the extension of the exemptive order through the end of the year; and
  • "While I support the final rulemaking and the proposed amendment to the July 14 Order, I believe that the Commission’s accelerated rulemaking schedule will likely result in many unforeseen perils."[5]

Related Document: Commissioner O'Malia's Suggested Timetable

References

  1. CFTC Said to Delay Derivatives Exchange Rule Opposed by CME. Bloomberg. Retrieved on May 4, 2012.
  2. Open Commission Meeting for Consideration of Rules Implementing the Dodd-Frank Act: Chairman Gary Gensler. CFTC. Retrieved on May 10, 2012.
  3. “Lettuce Produce”: Statement of Commissioner Bart Chilton at the CFTC Public Meeting on Dodd/Frank Rulemaking, Washington, DC. CFTC. Retrieved on May 10, 2012.
  4. Opening Statement Regarding the Twelfth Open Meeting to Consider Final Rules Pursuant to the Dodd-Frank Act: Commissioner Jill Sommers. CFTC. Retrieved on May 10, 2012.
  5. Opening Statement, Open Meeting to Consider One Final Rule on Core Principles and Other Requirements for Designated Contract Markets: Commissioner Scott D. O’Malia. CFTC. Retrieved on May 10, 2012.

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