CFTC Open Meeting, September 8, 2011

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Swap Transaction Compliance and Implementation Schedule: Clearing and Trade Execution Requirements
Proposal Date Final Rule Issue - Clearing Final Rule Issue - Execution Effective Date - Execution
September 20, 2011 July 30, 2012 June 4, 2013 September 28, 2012
Swap Transaction Compliance and Implementation Schedule: Trading Documentation and Margining Requirements
Proposal Date Comment Deadline Final Rule Issue
September 20, 2011 November 4, 2011 TBA

The Commodity Futures Trading Commission (CFTC) considered the following Dodd-Frank related rule proposals at an open meeting on September 8, 2011:

Additionally, the commission considered a report by the International Organization of Securities Commissions (IOSCO) entitled Principles for the Regulation and Supervision of Commodity Derivatives Markets.

Archived webcast:

Meeting Summary and Links to Related Documents[edit]

Implementation Proposal on Clearing and Trade Execution passed 4-1, with Commissioner O' Malia voting against (see commissioner comments below).

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Related page: Business Conduct Standards

Implementation Proposal on Documentation and Margining passed 4-1, with Commissioner O' Malia voting against.

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Read proposed rule.png

IOSCO Report unanimously approved by the commission.


Chairman Gary Gensler; whose statements include:

  • “The next two items in the queue for the CFTC to consider are rules related to clearinghouse core principles and position limits. In the last quarter of 2011, we also hope to consider final rules on entity and product definitions, both of which are joint rules with the SEC. In addition, we hope to consider final rules on swap data recordkeeping and reporting; real-time reporting; and regulations for trading platforms, such as Designated Contract Markets and Foreign Boards of Trade." The commission also plans to address business conduct rules by the end of 2011.
  • In early 2012, the commission plans to address swap execution facilities, capital and margin, documentation, straight-through trade processing, client clearing, and segregation for uncleared swaps.
  • Regarding support for the meeting’s proposals, Gensler states “until the CFTC completes its rule-writing process and implements and enforces these new rules, the public remains unprotected. That’s why the CFTC is working so hard to ensure that swaps-market reforms promote more open and transparent markets, lower costs for companies and their customers, and protect taxpayers.

Commissioner Scott O'Malia, whose statements include:

  • O’Malia does not support the meeting’s proposals, saying, “I am grateful that the Commission has attempted to provide more certainty. However, I fear that the market will find that these proposals raise more questions than they answer. These proposals fail to facilitate a transition to the new regulatory regime in the orderly manner that the market – as well as the Commission – desires.”
  • O’Malia cites six areas in which these proposals fail to provide proper guidance:
  1. "To date, neither the Commission nor staff has issued any guidance on the substantive criteria that will be used to make mandatory clearing determinations, including any criteria relating to when such determinations would become effective."
  2. "...neither proposal provides market participants with beginning nor end dates, as they are contingent on pending final rulemakings."
  3. "If the Commission is making this choice because the Commission itself is still not clear on how all of its proposals will work in concert together, and how the industry might be able to comply with such proposals, then we have not taken the important step of truly understanding the costs and benefits of our mosaic of rules."
  4. The proposals fail to accommodate [public] comments, and does not justify why or estimate the cost of the Commission’s approach.
  5. "...the proposals incorporate an incomplete and inadequate cost-benefit analysis. The proposals boldly and oddly characterize themselves as relief from time frames in other proposals or in determinations that the Commission has not yet made."
  6. "Instead of making it clear that the Commission will publish guidance on how mandatory clearing determinations will be made, it is still unclear how that process will work."

Commissioner Michael Dunn, whose statements include:

  • Regarding the IOSCO report, Dunn states, “The report we consider today represents an important first step toward this harmonization. The IOSCO report establishes internationally accepted principles for the regulation and supervision of commodity derivatives markets. It is my sincere hope that the principles established in the report will lead to meaningful – and consistent – financial regulatory oversight on a global scale.”
  • Regarding the proposed rules, which Dunn supports, he states, “While I understand that there are some who would like even greater clarity regarding the timing of implementation, and I welcome the public’s comments and suggestions during the comment period, I believe that the proposed rules provide clarity for the industry while simultaneously providing the Commission with the flexibility and information it needs to fashion effective final rules.”

Commissioner Jill Sommers, whose statements include:

  • “International coordination of regulations and regulatory objectives is critical as we move forward. Without coordinated and consistent international regulatory approaches, we run the risk of doing great damage to U.S. futures, option and swap markets. This report goes a long way to avoid such an outcome.”
  • “Regarding the two implementation proposals before us today, I reluctantly support both of them. I support them because they give market participants some certainty about implementation deadlines. My reluctance stems from my view that these proposals represent a very narrow portion of what I expected to be included in an implementation plan. I believe we should have taken this opportunity to attempt to present a comprehensive plan and seek public comment on it.”
  • Sommers also expresses concern that certain language in proposals regarding swap execution are not clear, specifically by use of the phrase “swaps made available for trading,” as opposed to CEA language which uses the phrases “list for trade” and “listing for trade.” Sommers is concerned that rules do not clarify the criteria for determination of whether a swap is “made available for trade,” nor who will make such determination.
  • Finally, Sommers expresses disappointment regarding a recent breach of the confidentiality of customer positions. She believes the commission should investigate the incident.

Commissioner Bart Chilton, whose statements include:

  • “I support the proposals we are considering today. I also support the IOSCO principles. Moving forward on global regulatory reforms is critical to guarding against regulatory arbitrage between international regulatory regimes. The IOSCO principles move that effort forward.”
  • “I am sure there will be those that criticize the Chairman’s agenda: it goes too slow, it goes too fast, it isn’t detailed enough, etc. What I have found in Washington is that when folks criticize you from both sides, when neither side is completely happy, you are probably doing something right.




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