CFTC Swaps Hearings and Testimony, 2009-2010

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NOTE: This page contains hearings and testimony from the period just prior to the launch of MarketsReformWiki, the MarketsWiki companion site specifically dedicated to the real-time tracking, aggregation and archiving of all information related to financial regulatory reform, which was launched by John J. Lothian & Co. on February 28, 2011. For a comprehensive list of swap hearings and testimony, please visit the swaps regulation page on MarketsReformWiki.

CFTC Hearings and Testimony Related to Swaps Regulation

The Commodity Futures Trading Commission (CFTC) has delivered a number of speeches, hearings and testimonies regarding swaps regulation and the Dodd-Frank Act.

Gensler discusses Dodd-Frank implementation with NEC. November 9, 2010.

CFTC Chairman Gary Gensler delivered a speech on the implementation of the Dodd-Frank Act to the National Economists Club in Washington, DC on November 9, 2010. In this speech, Gensler talks about the Dodd-Frank Act, noting its two central elements - transparency and lowering risk. He talks about increased transparency in the swaps market, and all swaps participants must be reported in the so-called "Swaps Data Repository." A full list of the topics discussed include:

  • A brief history of derivatives trading.
  • The need to promote transparency in the swaps markets.
  • Methods for lowering risk in the swaps markets which include:

1. Mandatory clearing of standardized swaps

2. Regulating swap dealers through business conduct and documentation standards

3. Regulating swap dealers for capital and margin

  • A brief discussion on the efforts the CFTC has underway to implement the Dodd-Frank Act.

CFTC Public Meeting: Open Meeting on First Series of Proposed Rules under the Dodd-Frank Act. October 1, 2010.

The Commodity Futures Trading Commission (CFTC) held its first public meeting to consider the issuance of proposed rulemakings under the Dodd-Frank Wall Street Reform and Consumer Protection Act. This is a public meeting to consider issuance of:

  • An interim final rule relating to the time frame for reporting pre-enactment unexpired swaps to a swap data repository or to the CFTC;
  • Proposed rules that would prescribe certain financial resource standards for derivatives clearing organizations including derivatives clearing organizations designated as systemically important by the Financial Stability Oversight Council under Title VIII of the Dodd-Frank Act; and
  • Proposed rules specifying requirements for derivatives clearing organizations, designated contract markets and swap execution facilities on governance arrangements and mitigation of conflicts of interest.

Speakers at the meeting included:

Chairman Gary Gensler; whose statements include:

  • Support for that day's Commission vote on the Interim Final Rule.
  • Support for the notice of proposed rulemaking on financial resources for derivatives clearing organizations.
  • Support for the notice of proposed rulemaking on governance for derivatives clearing organizations (DCOs), designated contract markets (DCMs) and swap execution facilities (SEFs).

Commissioner Bart Chilton; whose statements include:

  • This is "Only the Beginning" for market regulation
  • His belief that the changes that are being made as a result of the Flash Crash are important and imperative.

Commissioner Michael V. Dunn; whose statements include:

  • His belief that the principle based regulatory regime the Commission currently adheres to works well.
  • His belief that there are several approaches this agency can take to implement Dodd-Frank and still follow the intentions of its drafters.
  • A request that the staff begin to determine what rules and regulations the CFTC can rescind as a result of the adoption of these new rules and I would encourage future CFTC Commissions to review these new Dodd-Frank rules within three years of enactment to determine if they are doing what they were designed to do.

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

  • The main goal of the Act is to mitigate systemic risk by imposing a mandatory clearing requirement on swaps.
  • As the Commission proposes rules to implement the Act, DCOs will be required to meet more stringent capital requirements, which will be passed on to their clearing members and customers.
  • His agreement with Commission’s decision on the reporting of swaps entered into before July 21, 2010.
  • A main goal of the Act is to mitigate systemic risk in the U.S. financial system by imposing a mandatory clearing requirement on swaps.
  • A stated goal of the Act was to provide all market participants with fair, open, and non-discriminatory access to DCOs.
  • An overarching goal of the Act is the international harmonization of financial regulation.
  • His support for the Commission’s decision to require a registered entity to have its board of directors and certain other committees composed of thirty-five percent (35%) public directors.

Commissioner Jill E. Sommers; whose statements include:

  • Her opinion that the voting equity restrictions being proposed are not necessary or appropriate to mitigate the perceived conflicts and in fact, may do more harm than good to the emerging marketplace for trading and clearing swaps.
  • Her concerns that the proposed limitations on voting equity, especially those proposed for enumerated entities in the aggregate with respect to DCOs, may stifle competition by preventing new DCMs, DCOs and SEFs that trade or clear swaps from being formed.

CFTC Public Meeting: Open Meeting on Second Series of Proposed Rules under the Dodd-Frank Act. October 19, 2010.

This is a public meeting of the Commodity Futures Trading Commission to consider issuance of the following proposed rulemakings under the Dodd-Frank Wall Street Reform and Consumer Protection Act:

  • Definition of “agricultural commodity”;
  • Large trader reporting for swaps on physical commodity;
  • Preventing certain business affiliate marketing and establishing other consumer information protections under the Fair Credit Reporting Act; and
  • Expanding scope of privacy protections for consumer financial information under the Gramm-Leach-Bliley Act.

Speakers at the meeting included:

Chairman Gary Gensler; giving statement on support of the Dodd-Frank rulemaking, which included support for:

  • The official definition for "Agricultural Commodity"
  • The Large Trader Reporting Rule
  • The FCRA Rule
  • The GLBA Rule

Commissioner Michael V. Dunn; whose statements include:

  • His belief that a principles based regulatory regime is the appropriate model for the CFTC to follow.
  • His request that staff present alternative approaches to achieving the goals of Dodd-Frank to himself personally and also to the public for comment on the proposed rules.
  • His concern with the precarious budgetary situation the CFTC finds itself in.

Commissioner Jill E. Sommers; whose statements include:

  • Her support for the proposal to receive daily position reports for physical commodity swaps and swaptions.
  • Her concerns about moving forward with position limits on four specific energy contracts.
  • Her belief that the Commission is currently unable to place position limits, as they lack the proper information to determine what those position limits should be.

Commissioner Scott O’Malia; whose statements include:

  • His concerns with the reporting methodology being developed by the Commission.
  • His fear that the Commission is rushing to implement new reporting methodologies without taking into consideration how each of the new and existing reporting requirements fit together as their foundation.
  • His desire to see a position limit proposal that will:

1) protect bona fide hedgers, including looking through the swap dealer to the actual commercial trader to determine whether or not to issue an exemption;

2) ensure that we establish limits on contracts that have clear price linkages based on empirical data; and

3) not adversely impact commercial interests such as a utility that uses these markets to hedge the multi-year commercial risk of building a new power plant or an airline that uses a variety of futures and swaps to hedge its jet fuel exposure.


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CFTC Public Meeting: Open Meeting on Third Series of Proposed Rules under the Dodd-Frank Act. October 26, 2010

This is a public meeting of the Commodity Futures Trading Commission to consider issuance of the following proposed rulemakings under the Dodd-Frank Wall Street Reform and Consumer Protection Act:

  • Certification and approval of rules and new products for designated contract markets, derivatives clearing organizations, swap execution facilities and swap data repositories;
  • Removing any reliance on credit ratings in Commission regulations;
  • Amending CFTC Regulations 1.25 and 30.7 to provide greater protections for customer funds held by futures commission merchants (FCMs) and derivatives clearing organizations;
  • Process review and the designation of swaps for mandatory clearing;
  • Enhancing the Commission’s ability to protect against manipulation; and
  • An advance notice of proposed rulemaking on disruptive trading practices.

Speakers at the meeting included:

Chairman Gary Gensler; whose statements include:

  • Support for the proposed rulemaking to enhance the Commission’s ability to protect against manipulation.
  • Support for the proposed Advanced Notice of Proposed Rulemaking concerning disruptive trading practices.
  • Support for the proposal to remove any reliance on credit ratings within the Commission’s regulations.
  • Support for the day’s Commission vote on the proposed rulemaking regarding the investment of customer segregated and secured amount funds.
  • Support for the proposed rulemaking to establish a process for the review and designation of swaps for mandatory clearing.
  • Support for the proposal to publish for comment the proposed rule on the Commission’s process for certification and approval of rules and new products for designated contract markets (DCMs), derivatives clearing organizations (DCOs), swap execution facilities (SEFs) and swap data repositories (SDRs).

Commissioner Michael V. Dunn; whose statements include:

  • Without the necessary human capital to review new SEF, DCM and DCO applications, he envisions long waiting periods for potential registrants before their applications are approved to conduct business in the markets the commission regulates.
  • The lack of adequate resources would undoubtedly affect the agency’s ability to approve new products for trading.
  • Without adequate funding, the CFTC may need to delegate a substantial portion of its duties under Dodd-Frank to the industry’s established SROs.
  • A principles-based regulatory regime only works if the regulator has the staff necessary to ensure that its regulatees are adhering to the principals.

Commissioner Bart Chilton; whose statements include:

  • Comments on the precious metals markets and in particular the silver markets.
  • There have been repeated attempts to influence prices in the silver markets.

Commissioner Scott O’Malia; whose statements include:

  • Concern that the Commission is proposing to significantly revise the scope and character of the types of permitted investments of customer funds in the face of numerous public comments to the contrary.
  • The need for the Commission to receive more feedback from the public to better refine these definitions and to better understand how they might impact markets and the market “players.”


Video in Windows Media Format

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CFTC Public Meeting: Open Meeting on Fourth Series of Proposed Rules under the Dodd-Frank Act. November 10, 2010.

This is a public meeting of the Commodity Futures Trading Commission to consider issuance of the following proposed rulemakings under the Dodd-Frank Wall Street Reform and Consumer Protection Act:

  • Registration of Foreign Boards of Trade;
  • Registration of swap dealers and major swap participants;
  • Implementation of new whistleblower provisions of the Commodity Exchange Act;
  • Risk management policies of swap dealers and major swap participants;
  • Two rules concerning firewalls and conflict-of-interest policies and procedures by swap dealers, futures commission merchants and other intermediaries; and
  • Designation of a chief compliance officer and related compliance policies of swap dealers, major swap participants and futures commission merchants.

Speakers at the meeting included:

Chairman Gary Gensler; whose statements include:

  • Support for the proposed rulemaking to establish a program for whistleblowers as mandated by the Dodd-Frank Act.
  • Support for the proposed rulemaking to establish a process for the registration of swap dealers and major swap participants.
  • Support for the proposed rulemaking to implement a registration system for Foreign Boards of Trade (FBOTs) seeking to offer market participants in the United States direct access to the FBOTs’ trading systems.
  • Support for the proposed business conduct standards rulemaking that establishes risk management policies for swap dealers and major swap participants.
  • Support for the proposed rulemakings that establish firewalls to ensure a separation between the research arm, the trading arm and the clearing activities of swap dealers, major swap participants, futures commission merchants and introducing brokers.
  • Support for the proposed rulemaking establishing requirements for the designation, qualifications and duties of a chief compliance officer of swap dealers, major swap participants and futures commission merchants.

Commissioner Scott O’Malia; whose statements include:

  • The Commission must immediately produce the critical definitions that define swap market participants.
  • He recommends that the commission conduct a staff roundtable on the “capital and margin” issue prior to the release of a proposed rulemaking.
  • His opinion that the commission should vote on the real-time reporting rule proposal concurrently with the “swap execution facility” definition.
  • His preference that all of the rules related to clearing be considered together during one Commission rulemaking meeting.


Video in Windows Media Format

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CFTC Public Meeting: Open Meeting on Fifth Series of Proposed Rules under the Dodd-Frank Act. November 19, 2010.

This is a public meeting of the Commodity Futures Trading Commission to consider issuance of the following proposed rulemakings under the Dodd-Frank Wall Street Reform and Consumer Protection Act:

  • Protections of collateral of counterparties to uncleared swaps before and after commodity broker bankruptcies;
  • An advanced notice of proposed rulemaking regarding protections of collateral for uncleared swaps customers before and after commodity broker bankruptcies.
  • Requirements and duties of swap data repositories;
  • Real time public reporting requirements of swaps transactions; and
  • Recordkeeping and reporting requirements for swaps entities.

Speakers at the meeting included:

Chairman Gary Gensler; whose statements include:

  • Support for the advance notice of proposed rulemaking concerning protection of collateral of customers entering into cleared swaps.
  • Support for the proposed rulemaking concerning protection of collateral of counterparties to uncleared swaps.
  • Support for the proposed rulemaking to implement a real-time public reporting regime for swaps.
  • Support for the proposed rulemaking to establish registration requirements and regulations of swap data repositories.
  • Support for the proposed rulemaking to establish swap data recordkeeping and reporting requirements for registered entities and counterparties involved in swaps.

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

  • His concern that doing the commission is not doing best thing by mandating a 15-minute time limit to report block trades and large notional swap trades between dealers and end users, while providing little to no direction on the reporting of all remaining trades.
  • A second concern that the proposed real-time reporting rule is that it fails to take into account the Dodd-Frank Act’s statutory mandate to consider whether reporting may materially reduce market liquidity.
  • Thoughts on the data recordkeeping rulemaking proposal.
  • Thoughts on reorganizing the CFTC to create the office of market data collection and analysis.
  • Concerns about the impact different proposals may have on the risk management practices of futures commission merchants (“FCMs”) that handle swaps under the new regime.

Commissioner Bart Chilton; whose statements include:

  • His opinion that there is a singularity of purpose when it comes to implementation of the Wall Street Reform and Consumer Protection Act, and that is: do what Congress told the commission to do, and that the commission shouldn't veer from that purpose in any way.
  • A call for continued input.

Commissioner Michael V. Dunn; whose statements include:

  • The ambitious deadlines call for the commission to complete almost every rule Dodd-Frank requires by July 15, 2011. However, the rest of the world is not working at this pace.
  • The effective implementation of the proposals set forth by the CFTC will require substantial investment in new technology and human resources.


Video in Windows Media Format

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CFTC Public Meeting: Open Meeting on Sixth Series of Proposed Rules under the Dodd-Frank Act. December 1, 2010.

This is a public meeting of the Commodity Futures Trading Commission to consider issuance of the following proposed rulemakings under the Dodd-Frank Wall Street Reform and Consumer Protection Act:

  • Clearinghouse legal and compliance matters;
  • Clearinghouse recordkeeping and reporting;
  • Designated contract market core principles;
  • Swap dealer recordkeeping and reporting; and
  • Joint proposal with the SEC on entity definitions.

Speakers at the meeting included:

Chairman Gary Gensler; whose statements include:

  • Support for the proposed rule on legal and compliance matters for clearinghouses, which would revise procedures for derivatives clearing organization (DCO) applications, clarify procedures for the transfer of a DCO registration and add requirements for approval of DCO rules for portfolio margining of futures and securities in a futures account.
  • Support for the proposed rulemaking concerning information management, recordkeeping and reporting requirements for derivatives clearing organizations.
  • Support for the proposed rulemaking to update our rules and guidance with regard to designated contract markets (DCMs).
  • Support for the proposed rule regarding reporting, recordkeeping and daily trading records for swap dealers and major swap participants.
  • Support for the joint proposed rule with the Securities and Exchange Commission on entity definitions.

Commissioner Scott O’Malia; whose statements include:

  • Concerns that many end users will be unintentionally swept up in the "Swap Dealers and Major Swap Participants" definition and be subject to significantly higher costs to hedge their commercial risk.
  • Comments on reporting, recordkeeping and daily trading records requirements for swap dealers and major swap participants.
  • Comments on core principles and other requirements for designated contract markets (DCMs).

Commissioner Bart Chilton; whose statements include:

  • The need for clarity in the definition of "Swap Dealers and Major Swap Participants".

Commissioner Jill E. Sommers; whose statements include:

  • Principles-based regulation has worked very well in our industry and our industry has flourished because of it; regulating it would be a mistake.
  • Concern that the definition of swap dealer is too broad and will likely capture entities that do not functionally operate as dealers, and concern regarding the proposed regulations which state that a person who is swap dealer or major swap participant for any swap or activity, shall be deemed a swap dealer or major swap participant for all swaps it enters into.


Video in Windows Media Format

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CFTC Public Meeting: Open Meeting on Seventh Series of Proposed Rules under the Dodd-Frank Act. December 9, 2010.

This is a public meeting of the Commodity Futures Trading Commission to consider issuance of the following proposed rulemakings under the Dodd-Frank Wall Street Reform and Consumer Protection Act:

  • The end-user exception to mandatory clearing of swaps;
  • Business conduct standards with counterparties; and
  • Governance requirements for derivatives clearing organizations, designated contract markets and swap execution facilities.

Speakers at the meeting included:

Chairman Gary Gensler; whose statements include:

  • Support for the proposed rule on further governance and conflicts of interest requirements for derivatives clearing organizations (DCOs), designated contract markets (DCMs) and swap execution facilities (SEFs).
  • Support for the proposed rule on the end-user exception.
  • Support for the interim final rulemaking regarding the reporting timetable for swaps entered into after the date of enactment of the Dodd-Frank Act but prior to the effective date of swap data reporting rules, or “transition” swaps.
  • Support for the proposed rulemaking to establish business conduct standards for swap dealers and major swap participants in their dealings with counterparties.

Commissioner Scott O’Malia; whose statements include:

  • Concerns that the commission is failing to fully address the issue of excluding small banks, farm credit institutions and credit unions from the definition of financial entity.
  • Overall support for the proposal for business conduct standards for swap dealers and major swap participants in their dealings with counterparties and especially counterparties who are Special Entities, but concerns that these layers of protections are not necessary in every relationship scenario.

Commissioner Bart Chilton; whose statements include:

  • Announcing that the Chairman will bring to the Commission a proposal on position limits on December 16th.

Commissioner Michael V. Dunn; whose statements include:

  • An inherent conflict of interest exists when a swap dealer acts as both an advisor and counterparty to its customers, and the need to implement strong business conduct standards to correct this.
  • Dodd-Frank requires the Commission to consider whether to except small banks, savings associations, farm credit institutions, and credit unions from the definition of “financial entity” and thus the clearing requirements, and a request for public comment as to whether any of these groups should be exempt.


Video in Windows Media Format

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CFTC Public Meeting: Open Meeting on Eighth Series of Proposed Rules under the Dodd-Frank Act. December 16, 2010.

This is a public meeting of the Commodity Futures Trading Commission to consider issuance of the following proposed rulemakings under the Dodd-Frank Wall Street Reform and Consumer Protection Act:

  • Confirmation, portfolio reconciliation and portfolio compression requirements for swap dealers and major swap participants;
  • Risk management requirements for derivatives clearing organization;
  • Swap execution facilities; and
  • Position limits for physical commodity derivatives.

Speakers at the meeting included:

Chairman Gary Gensler; whose statements include:

  • Support for the proposed rulemaking that establishes essential business conduct standards for swap dealers and major swap participants.
  • Support for the proposed rulemaking for risk management requirements for derivatives clearing organizations (DCOs).
  • Support for the proposed rulemaking to establish position limits for physical commodity derivatives.
  • Support for the proposed rulemaking to fulfill Congress’s mandate to have rules and core principles requirements for swap execution facilities (SEFs).

Commissioner Bart Chilton; whose statements include:

  • Proposal for the implementation of mandatory position limits required by the new financial reform law:

- Once a trader reaches a specific Position Point, it triggers a new level of heightened regulatory scrutiny. - A Position Point is reached when a trader has an aggregate, on-exchange position limit of 10% of the first 25,000 contracts of open interest in one of 28 commodities (in energy, metals, and agricultural commodities), then 2.5% of open interest above 25,000 contracts. - This triggers a special call of that trader’s swaps positions. - If the swaps positions, netted with on-exchange positions, reduced the aggregate to below the Position Point, there is no regulatory action. - If the swaps positions, netted with on-exchange positions, increases the aggregate to above the Position Point, then regulators use all available authorities, as appropriate, to reduce those positions.

Commissioner Scott O’Malia; whose statements include:

  • Request that the Commission takes the opportunity the spring of 2011 to organize the rulemaking process in a manner that will build derivatives regulation from a strong foundation instead of the regulatory jumble that market participants are attempting to sort with every new rulemaking pushed out by the Commission.
  • Without specific swaps data, the commission have no ability to claim we are applying enforceable limits without understanding the full size of the market, and this is something the commission ought not be held accountable for.
  • Concerns about the risk management requirements for DCO's.

Bruce Fekrat, Senior Special Counsel, Division of Market Oversight; whose statements include:

  • Recommendation that the Commission approve a notice of proposed rulemaking to establish position limits for certain derivatives.
  • The proposal enumerates 28 core physical delivery DCM futures contracts that would be subject to the proposed position limit framework.
  • The proposed spot-month position limit formula seeks to minimize the potential for corners and squeezes by facilitating the orderly liquidation of positions as the market approaches the end of trading and by restricting the swap positions which may be used to influence the price of referenced contracts that are executed on DCM's.
  • Reccommendation for the proposed regulations for account aggregation standards; under the proposed standards, the Federal position limits in referenced contracts would apply to all positions in accounts in which any trader, directly or indirectly, has an ownership or equity interest of 10 percent or greater or, by power of attorney or otherwise, controls trading.


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CFTC, SEC Staffs Host Roundtable on Credit Default Swaps. October 22, 2010.

Commodity Futures Trading Commission (CFTC) and Securities Exchange Commission (SEC) staffs held a public roundtable to discuss certain issues related to clearing of Credit Default Swaps in the context of the Agencies' rulemaking efforts pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act.


Public Roundtable to Discuss Swap Data, Swap Data Repositories and Real Time Reporting - Part 1. September 21, 2010.

Public roundtable to discuss the Commission's proposed Ownership and Control Report (OCR).

Panelists:

  • Keith Anguish, Associate Director, Systems Development, CME Group Inc.
  • Jim Moran, Director, Global Market Regulation Strategy and Technology, CME Group Inc.
  • Karl Cooper, Chief Regulatory Officer, NYSE Liffe U.S.
  • Andy Booth, Chief Technology Officer, NYSE Liffe U.S.
  • Joseph Ott, Vice President, Compliance, Kansas City Board of Trade
  • Dan Umstattd, Director of Operations, Kansas City Board of Trade
  • Mark Fabian, Vice President, Market Regulation, ICE Futures U.S.
  • Barry Legros, Vice President, Application Systems, ICE Futures U.S.
  • R.J. Cummings, Vice President, Product Development, ICE Futures U.S.
  • Leslie Sutphen, Industry Consultant
  • George Crapple, Co-CEO and Co-Chairman, Millburn Ridgefield Corporation
  • Melinda Schramm, Chairman, National Introducing Brokers Association
  • Frank Franiak, President and CEO, Woodfield Fund Administration LLC
  • Ray Tubridy, Managing Director, Derivatives Sales and Marketing and Product Development, State Street Global Markets
  • Kevin Foley, Partner, Katten Muchin Rosenman LLP

Summary: The Commodity Futures Trading Commission (Commission or CFTC) is proposing regulations to implement Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). These proposed amendments would establish the regulatory standards for compliance with derivatives clearing organization (DCO) Core Principles A (Compliance), H (Rule Enforcement), N (Antitrust Considerations), and R (Legal Risk), as well as DCO chief compliance officer (CCO) requirements set forth in Section 5b of the Commodity Exchange Act (CEA). The proposed amendments also would revise procedures for DCO applications, clarify procedures for the transfer of a DCO registration, add requirements for approval of DCO rules establishing a portfolio margining program for customer accounts carried by a futures commission merchant (FCM) that is also registered as a securities broker-dealer (FCM/BD), and make certain technical amendments. The Commission also is proposing amendments to update the definitions of "clearing member" and "clearing organization", and to add definitions for certain other terms.


Public Roundtable to Discuss Swap Data, Swap Data Repositories and Real Time Reporting - Part 2. September 22, 2010.

Public roundtable to discuss the Commission's proposed Ownership and Control Report (OCR).

Panelists:

  • Keith Anguish, Associate Director, Systems Development, CME Group Inc.
  • Jim Moran, Director, Global Market Regulation Strategy and Technology, CME Group Inc.
  • Karl Cooper, Chief Regulatory Officer, NYSE Liffe U.S.
  • Andy Booth, Chief Technology Officer, NYSE Liffe U.S.
  • Joseph Ott, Vice President, Compliance, Kansas City Board of Trade
  • Dan Umstattd, Director of Operations, Kansas City Board of Trade
  • Mark Fabian, Vice President, Market Regulation, ICE Futures U.S.
  • Barry Legros, Vice President, Application Systems, ICE Futures U.S.
  • R.J. Cummings, Vice President, Product Development, ICE Futures U.S.
  • Leslie Sutphen, Industry Consultant
  • George Crapple, Co-CEO and Co-Chairman, Millburn Ridgefield Corporation
  • Melinda Schramm, Chairman, National Introducing Brokers Association
  • Frank Franiak, President and CEO, Woodfield Fund Administration LLC
  • Ray Tubridy, Managing Director, Derivatives Sales and Marketing and Product Development, State Street Global Markets
  • Kevin Foley, Partner, Katten Muchin Rosenman LLP

Summary: The Commodity Futures Trading Commission (Commission or CFTC) is proposing rules to implement new statutory provisions enacted by Title VII and Title VIII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). The proposed regulations establish financial resources requirements for derivatives clearing organizations (DCOs) for the purpose of ensuring that they maintain sufficient financial resources to enable them to perform their functions in compliance with the Commodity Exchange Act and the Dodd-Frank Act.


Over the Counter Derivatives Reform. September 21, 2010.

Gary Gensler spoke about derivatives trading and his perspective as one of the primary regulators in charge of implementing the derivatives title included in the Dodd-Frank Wall Street Reform and Consumer Protection Act. Following his remarks panelists spoke about the potential impact the new rules would have on the over the counter (OTC) derivatives markets, with a special focus on the implications for end-users of derivatives that access OTC derivatives to hedge commercial risks associated with their businesses.

Statements by Gary Gensler:

  • The CFTC intends to comply fully with the statute’s provisions and Congressional intent to lower risk and bring transparency to these markets.
  • The CFTC is consulting heavily with both other regulators and the broader public, and is working very closely with the Securities and Exchange Commission (SEC), the Federal Reserve and other prudential regulators.
  • The CFTC has reached out to, and is actively consulting with international regulators to harmonize swaps oversight.
  • The CFTC is soliciting broad public input into the rules being drafted.
  • The CFTC plans to actively publish proposed rules in the fall, using weekly public Commission meetings for this purpose. Public meetings will allow the proposal of rules out in the open, and promote rule-making transparency.
  • Non-financial entities that are “using swaps to hedge or mitigate commercial risk” will be able to choose whether or not to bring their swaps to clearinghouses; financial entities, however, such as swap dealers, hedge funds and insurance companies, will be required to use clearinghouses when entering into standardized transactions with other financial entities.
  • There are three tests to determine whether an entity is a major swap participant, and they all relate back to whether the entity is substantial enough to be relevant to the economy or the financial system as a whole. Further, an entity can only be a major swap participant if it is not considered a swap dealer.
  • Real time reporting will promote transparency, and must be achieved “as soon as technologically practicable” after a swap is executed to enhance price discovery.
  • The earliest that real time reporting would come into effect will be in September of 2011.


http://www.c-spanvideo.org/program/OvertheCo


Role of Derivatives in Current Financial Crisis. October 14, 2008.

The Senate Agriculture Committee held a hearing on the role of derivatives in the current financial crisis and regulatory issues pertaining to them. Credit swaps and derivatives function in many respects like futures contracts traded on exchanges regulated by the Commodity Futures Trading Commission. The Senate Agriculture Committee hearing explored the scope of the CFTC's authority under existing law and whether this authority is adequate in the wake of the current financial crisis.

Speakers include:

  • William Black
  • Eric Dinallo
  • Terrence Duffy
  • Richard Lindsey
  • Robert Pickle
  • Ananda Radhakrishnan
  • Jonathan Short
  • Michael Crappo
  • Thomas Harkin
  • Blanche Lincoln
  • Richard Lugar


http://www.c-spanvideo.org/program/RoleofD


CFTC Chairman Gary Gensler's Interview on Bloomberg TV's "Political Capital with Al Hunt." August 24, 2010.

Chairman Gensler talks about financial regulatory overhaul and transparency in the swaps market.

  • In the interview, Gensler states that the CFTC will not give in to pressure from Wall Street; "Wall Street would like to keep these markets dark, and Congress has said there has to be transparency... Congress has been very specific, and we are going to follow it"



Chairman Gensler's CNBC Interview. April 19, 2009.

Chairman Gensler's CNBC live interview on the Closing Bell. His statements include:

  • The need to use clearinghouses as a means to reduce risk to the public for all standard derivatives
  • Transparency is needed in the unregulated derivatives market, like in the stock market, but Wall Street is opposed to it
  • Transparency lowers cost
  • The need for a very narrow end-user exemption



Joint CFTC-SEC Advisory Committee Meeting. November 5, 2010

The Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) will hold a public meeting of the Joint CFTC-SEC Advisory Committee on Emerging Regulatory Issues on November 5, 2010, from 9:00 am to 12:00 pm, to:

  • Receive a summary and recap from the staffs of the CFTC and SEC on the report issued September 30, 2010;
  • hear a report from the subcommittee on cross-market linkages;
  • hear a report from the subcommittee on pre-trade risk management; and
  • discuss potential recommendations and responses.

Statements by chairman Gary Gensler:

  • The May 6 "Flash Crash" was caused by three factors:

- very fragile and uncertain markets due in part to the unsettling news concerning the European debt crisis;

- a liquidity crisis in the E-Mini S&P 500 futures contracts (E-Mini) and related index securities; and

- a liquidity crisis in individual securities.

  • Request to discuss:

- what the Committee’s views are on how we protect market integrity in light of both the events of May 6 and the rapidly changing technology in the financial markets.

- what, if any, additional risk protections should be considered with regard to the use of algorithmic and high-frequency trading?

- should exchanges and executing brokers be required to update risk mechanisms and rules for market pauses? If so, how? What thoughts does the Committee have on cross-market linkages either with regard to circuit breakers or any other protections?

- what are the Committee’s views on the variety of recent initiatives taken by our two agencies, including the CFTC’s advanced notice of proposed rulemaking on disruptive trading practices and the pilot program in the securities markets with respect to market pauses?


Video in Windows Media Format

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References