Katten Muchin Rosenman

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On October 21, the Division of Swap Dealer and Intermediary Oversight (DSIO) of the Commodity Futures Trading Commission issued an advisory to futures commission merchants (FCMs) regarding the holding of virtual currency in segregated accounts. The advisory, Letter No. 20-34, provides guidance to FCMs on how to hold and report certain deposited virtual currency from customers in connection with physically delivered futures contracts or swaps and how to maintain appropriate risk management programs concerning the acceptance of virtual currencies as customer funds. Consistent with the existing requirements for customer funds held by FCMs, DSIO advised FCMs that, among other things:…
On October 22, the Commodity Futures Trading Commission and the Securities and Exchange Commission, at their first-ever joint open meeting, approved (1) a joint final rule to lower the margin requirement for an unhedged security futures position from 20 percent to 15 percent, which was approved over the dissents of Commissioners Lee and Crenshaw of the SEC; and (2) the issuance of a joint request for comment on the portfolio margining of uncleared swaps and non-cleared security-based swaps. The CFTC press release and access to the Federal Register releases are available here. The SEC press release is available here
On October 15, the Commodity Futures Trading Commission adopted new rules on position limits. As described in greater detail in Katten’s advisory, CFTC Adopts New Position Limit Requirements, the new rules (1) set forth federal position limits for 25 different futures contracts; (2) enhance the roles played by exchanges in setting limits and granting exemptions; (3) modify exemptions from federal position limits; and (4) eliminate Form 204 (Statement of Cash Positions in Grains) and portions of Form 304 (Statement of Cash Positions in Cotton). More information, including a link to the new position limit rules, is available here.…
On October 15, at the same open meeting in which it approved the final rule on position limits, the Commodity Futures Trading Commission unanimously approved two other unrelated final rules. The first final rule extends the compliance date one year, from September 1, 2021 to September 1, 2022, for margin requirements for uncleared swaps for swap dealers and major swap participants for which there is no banking regulator. This rule will be effective 30 days after publication in the Federal Register. The second final rule amends the registration exemptions available under CFTC Regulation 3.10(c) (collectively, 3.10 Exemption) for certain foreign-located…
On October 13, the Division of Market Oversight (DMO) of the Commodity Futures Trading Commission issued two no-action letters that provide limited relief from swap transaction and pricing data reporting requirements for specific derivatives clearing organizations (DCOs) and market participants that take part in upcoming DCO auctions intended to assist in transitioning certain cleared swaps away from discounting using the Effective Federal Funds Rate and instead using the Secured Overnight Financing Rate (such auctions, Transition Auctions). This transition in discounting methods is an important step in the broader initiative to transition swaps that reference interbank offered rates, like the London…
On October 1, the United States Department of Justice (DOJ) issued a favorable business review letter to the International Swaps and Derivatives Association (ISDA) that clears the way for ISDA to complete its work on developing standard amendments to swap documents to account for the discontinuation of LIBOR and other interbank offered rates (collectively, IBORs). Because of the global scope of the IBOR replacement problem, ISDA had been concerned that its work in developing standard document solutions could be perceived as promoting coordination among competitors. The DOJ letter alleviates those concerns: “Based on the information and representations you provided, after…
On October 6, the National Futures Association (NFA) issued Notice I-20-37 to announce changes to the no-action relief that had previously been issued relating to fingerprinting requirements for applicants for registration as an associated person (AP) and natural person principals of an applicant or registrant found at NFA Registration Rules 204(a)(2)(A) and 206(a)(1)(A). The NFA’s action follows a decision by the Commodity Futures Trading Commission’s (CFTC) Division of Swap Dealer and Intermediate Oversight (Division) that the Division would not extend beyond September 30, parallel no-action relief from the fingerprinting requirements set out in CFTC Regulations 3.10(a)(2) and 3.12(c)(3). (For additional…
On October 8, the Commodity Futures Trading Commission (CFTC) announced that it will hold an open meeting on October 15. At this meeting, the CFTC will consider the following: Final Rule: Margin Requirements for Uncleared Swaps for Swap Dealers and Major Swap Participants (Phase VI Compliance Date Extension); Final Rule: Exemption from Registration for Certain Foreign Intermediaries; and Final Rule: Position Limits for Derivatives. The meeting will be held virtually in accordance with CFTC’s implementation of social distancing due to COVID-19. More information is available here.…
On September 29, the Commodity Futures Trading Commission (CFTC) announced that it will hold an open meeting on Tuesday, October 6 at 10:30 a.m. (ET). The meeting will consider amendments to compliance requirements for Commodity Pool Operators on Form CPO-PQR and the memorandum of understanding between the CFTC and the Officer of Financial Research Regarding the Sharing of Data and Information Collected on Form CPO-PQR. The meeting can be publicly accessed via live stream at www.cftc.gov on the CFTC’s YouTube channel or by phone (domestically at +1.877.951.7311; passcode: 3774262). Additional information is available here.…
On September 25, the Commodity Futures Trading Commission’s (CFTC) Division of Market Oversight (DMO) extended relief from certain reporting obligations under the ownership and control reports final rule (OCR Final Rule). The OCR Final Rule requires the electronic submission of trader identification and market participant data.  The current no-action letter, CFTC Letter No. 20-30, extends the relief, which was most recently granted in CFTC Letter No. 17-45, until September 29, 2023 (unless otherwise addressed by the CFTC). Additional information is available here. CFTC Letter No. 20-30 is available for download here.…
In response to CFTC Letter No. 20-28, the Joint Audit Committee (JAC) has issued Regulatory Alert #20-02 and Regulatory Alert #20-03. As reported in the September 18 edition of Corporate & Financial Weekly Digest, CFTC Letter No. 20-28 provided supplemental guidance and no-action relief with respect to CFTC Regulation 1.56 (prohibition of guarantees against loss) compliance and further no-action relief with respect to the treatment of separate accounts by futures commission merchants (FCMs), initially set out in CFTC Letter No. 19-17. Specifically, with regard to compliance with the requirements of CFTC Regulation 1.56(b), Letter No. 20-28 gives FCMs…
National Futures Association (NFA) recently redesigned its Annual Questionnaire, which applicants are required to submit with their NFA membership applications and current members are required to file annually. On September 29, at 9:30 a.m. CT/10:30 a.m. ET, NFA will host a webinar to address the transition to the new Annual Questionnaire. Among other changes, the updated Annual Questionnaire: uses dynamic question logic so that members will only be required to answer questions relevant to their operations; consolidates specific questionnaires based on registration category into one master questionnaire; includes new questions and clarifies existing questions; and integrates material with other NFA…
On September 15, the staff of the Commodity Futures Trading Commission’s (CFTC) Division of Clearing and Risk (DCR) and Division of Swap Dealer and Intermediary Oversight (DSIO) issued CFTC Letter No. 20-28, providing supplemental guidance and further no-action relief with respect to the treatment of separate accounts by futures commission merchants (FCMs). Initial guidance and relief was set out in CFTC Letter No. 19-17, which was issued in July 2019. As reported in the July 12, 2019 issue of the Corporate and Financial Weekly Digest (available here), Letter No. 19-17 was issued in response to two Regulatory Alerts that…
On September 11, the Commodity Futures Trading Commission (CFTC) announced that the Division of Swap Dealer and Intermediary Oversight (DSIO) and the Division of Market Oversight (DMO) had issued CFTC Letter No. 20-26, further extending certain elements of the temporary no-action relief issued in response to the COVID-19 pandemic that are set to expire on September 30. The extended relief expires on January 15, 2021. DSIO and DMO initially granted temporary relief on March 17 to a broad spectrum of market participants to support orderly trading and liquidity as they implemented social distancing measures during the pandemic. Subject to the…
On September 15, the Commodity Futures Trading Commission’s (CFTC) Division of Market Oversight (DMO) granted no-action relief to Tassat Derivatives LLC, a CFTC-registered swap execution facility (SEF), from SEF reinstatement requirements under CFTC Regulation 37.3(d). The no-action relief set out in CFTC Letter No. 20-27 is subject to certain conditions. On November 6, 2019, the CFTC issued a transfer order approving the transfer of trueEX LLC’s SEF registration to Tassat. In addition to the SEF registration, Tassat acquired all work product related to the development of a physically-deliverable Bitcoin swap contract. Since the transfer, Tassat has been operational and in…
On September 9, the Climate-Related Market Risk Subcommittee of the Market Risk Advisory Committee of the Commodity Futures Trading Commission released a comprehensive report addressing potential risks to the financial system arising from, or related to, climate change. The report is the first of its kind from a US financial regulator. Its findings and recommendations are wide-ranging, frequently extending beyond the CFTC’s remit. Key findings of the report include: “financial markets will only be able to channel resources efficiently to activities that reduce greenhouse gas emissions if an economy-wide price on carbon is in place at a level that reflects…