Tag: policy

Commissioners Unhappy With CFTC No-Action Letters

Several commissioners have spoken out over the CFTC’s no-action letters, claiming that many of them were instituted hastily, leaving little time to review or edit them.

The Commodity Futures Trading Commission has put in place almost 70 rules since the 2010 regulatory reform law was put into place. Of these rules, 36 were related to Dodd-Frank. However, within these 36 rules, over 200 no-action letters or other forms of guidance have had to be issued after the rules were instituted.

Some commissioners have defended the CFTC no-action letters, saying that their use was inevitable, as overhauling the operations of the $600 trillion dollar derivatives market is no small task. As former commissioner Micheal Dunn explained it to Risk.net, “You can’t make an omelette without breaking some eggs.”

Most commissioners agree that some no-action letters will be necessary. However, it seems for many commissioners, the issue revolves around how the CFTC no-action letters were instituted.

Commissioners have pointed out that while some of the no-action letters are only temporary, quite a few of them are indefinite or permanent. Many of the commissioners only received notice of the letters the night before they were issued, which has them feeling as though their input had not been considered over what is essentially a complete change in policy.

CFTC chairman nominee Timothy Massad recognized the need for a more streamlined and organized rule making process while being questioned at a confirmation hearing by the Senate.

While former CFTC chairman Gary Gensler spent most of his time putting many of the Dodd-Frank rules into place, it seems Massad’s focus will fall on figuring out how to amend and enforce these rules.

Senate Questions New CFTC Nominees

The three CFTC nominees waiting for approval to join the Commodity Futures Trading Commission are now facing some questions at a Washington approval hearing from the Senate over how much they will be willing to enforce the rules put in place by the Dodd-Frank Act.

Among the nominees is President Obama’s choice for CFTC chairman, Timothy Massad. Drawing skepticism from the senate, some are worried that Massad doesn’t have much of a record or policy in regards to what the CFTC regulates.

Outside of Massad, CFTC nominees Sharon Y. Bowen and J. Christopher Giancarlo, who are slated to take on roles as commissioners, will also be answering some questions for the Senate.

Among the concerns, it seems those involved in the matter are eager to hear about the CFTC nominees’ views on speculation in commodity markets and the reach of Dodd-Frank rules overseas.

Upon, approval, these CFTC nominees will significantly change the make-up of the Commission’s current leadership. The CFTC is already only operating with three of the five commissioners it’s supposed to, and with commissioner Chilton on his way out, they will actually be making up the majority of the Commission’s leadership.

CFTC and EU Work Out Cross-Border Trading Agreement

The Commodity Futures Trading Commission (CFTC) and the European Union (EU) have been butting heads over how to jointly regulate international swap trades for some time now. But after meeting yesterday, it seems the two regulators have finally worked out a cross-border trading agreement.

The CFTC and the EU have agreed to allow US firms to trade over European platforms, rather than forcing them to be traded through US swap execution facilities, or SEFs. The cross-border trading agreement will keep liquidity within the market, as well as ease tensions between the US and Europe over the CFTC’s foreign trading policy.

The agreement is not without restrictions however. In order for trades to be executed outside of US facilities, the country handling the trade must have standards in place that can be considered comparable to the CFTC’s. While this may seem simple enough, the requirement has so far only been met by the UK, according to the commission.

It also may be some time before other European countries are considered up to par by the Commission, as the EU isn’t planning to have its trading rules in place until 2016.

This new cross-border trading agreement is quite the turnaround for the CFTC— which was actually sued for its overbearing foreign trading policies toward the end of last year. This is no doubt due in part to former chairman Gary Gensler stepping down, and it will be interesting to see how the market fares with a more lenient CFTC.

Blythe Masters Joins CFTC Advisory Committee

JP Morgan’s commodities chief, Blythe Masters, is now a member of a CFTC advisory committee, according to an announcement made yesterday by the Commodity Futures Trading Commission.

Masters has been working in the swaps industry for well over a decade, and helped JP Morgan begin using credit default swaps to hedge bank risks.

She will be taking part in a discussion the CFTC advisory committee will be having next week over the Commission’s cross-border regulation policy.

The policy, which has been bemoaned by both foreign and domestic banks, says that trades made by foreign banks still fall under CFTC rules if U.S.-located personnel arrange, execute or negotiate the transactions.

The CFTC was sued by several banks recently for this policy, and it seems the Commission is now seeking to amend its guidelines.

Masters is joining the CFTC advisory committee just as JP Morgan is selling of its physical commodities business. The reason for the bank’s decision to sell off its multi-billion dollar operation seems to be the amount of headaches many of the new rules have created for banks in recent times.

The CFTCs apparent change of heart over cross-border regulation has come quickly after former chairman Gary Gensler stepped down, and it seems likely that banks will see a softer side of the CFTC over the next few months, and possibly years because of this.

US an EU Close to Deal on Cross-Border Derivatives Rules

The US and European Union have been working on an agreement over cross-border derivatives rules for a while now, and are finally closing in on a deal, according to Bloomberg.

The agreement will relieve EU trading platforms from being affected by US derivative trading rules, at least for the time being.

The deal is being handled by the Commodity Futures Trading Commission (CFTC) and European Union officials, and while it seems they’ve come to an agreement over cross border-trading rules, nothing will be finalized until February 15th.

The US’s policy on cross-border trading had been a point on contention for many large banks, some of which have recently sued the CFTC over its ability to police trades that are made from banks outside of the country.

The CFTC claimed that any trades made by an outside bank that was essentially at all linked to a US trader would have to do so according to the CFTC’s rules. This policy however, was causing foreign banks to stop trading with the US and creating fragmentation within the market, according to banks involved with the issue.

This turnaround for the CFTC seems to mark the beginning of a different type of Commission, quite possibly caused by Gary Gensler stepping down as CFTC chairman. Gensler was known for policing the derivative market very strictly, and it seems likely that the CFTC will loosen up a bit with him gone.

EU Official Calls for Strong Financial Transaction Tax

According to Reuters, the EU’s chief tax official is calling on countries within the Union to implement a strong financial transaction tax, rather than watering it down with various exemptions. The official suggests implementing the rules on a more gradual scale instead.

The EU official, Algirdas Semeta, feels that a deal for regulating financial transaction taxes could be ready to go within the first half of this year, even with countries looking for exemptions for things like interbank securities repurchase deals and pension fund transactions.

Derivatives and securitised debt, which played major roles in the financial crisis of 2008 are also being considered for exemption from the financial transaction tax, with policymakers claiming that including them could harm funding for companies, hurting the economy.

The deal is currently being worked on by 11 countries within the EU, which will serve as a means to have banks repay the money that they borrowed during the crisis.

Semeta fears that if members agree upon a financial transaction tax that is filled with too many exemptions, the transactions may begin to shift abroad.

EU Reaches Agreement on New Financial Regulations

According to Reuters, after months of discussions and arguments, the EU has finally begun to come together over how it plans to regulate the swaps industry.

After agreeing to work with the US over working out global standards to police the $600 trillion dollar derivatives industry, which is thought to have played a major role in the financial crisis of 2008, the EU has fallen behind the US’s Commodity Futures Trading Commission in creating and implementing new rules for the system.  An understandable issue, while the CFTC is a US only entity, the EU has to convince whole separate countries to agree before implementing rules.

Though this marks another step taken towards financial stability, it seems there is still a long way to go, and it may take some time before even the next step is made.

The EU has only about three more months to discuss policy before the European Parliament begins to campaign for May elections. And, after which, the EU will have to wait until October for a new European commission to continue.

This should make for an interesting few months as the EU scrambles to get laws in place that synch up to the CFTC’s, which is refusing to acknowledge any rules from foreign regulators that the Commission does not find up to par with its own.

EU and CFTC struggle to come together over free-trade agreement

It’s been several months since the CFTC and foreign regulators agreed to begin working together to standardize derivative trading rules. However, while foreign regulators have been slow to hammer out the details of standard policing procedures, the CFTC has plowed ahead without them, attempting to institute all of the rules mandated by the Dodd-Frank act.

According to Reuters, this is getting many foreign regulators annoyed, as they claim that the CFTC’s policies are hindering talks over the Transatlantic Trade and Investment Partnership.  Michel Barnier, the European official who is supervising Europe’s financial regulation, feels that the CFTC’s lack of communication is beginning to cause problems in the financial market, breaking up derivatives liquidity and causing transaction costs to increase.

Barnier has said that without an agreement over derivatives policy, and an ability to work with each other’s rules, continuing EU-US free-trade negotiations will be very difficult.

While the EU is hoping to include financial regulation in the free-trade agreement, the US is unsure if they will be able to incorporate it. However, without an agreement over derivatives trading, regulators are worried about a “balkanization” of the market, which would lead to more transactions being done outside of the proper facilities, causing a lack of transparency in the market, and undermining the whole goal of these new rules.

It may not be too late however, as Barneir and CFTC chairman Gary Gensler are currently talking, and are hoping to reach an agreement by the end of the year.

Guidance and Policy Statement Regulations on Cross Border Swaps Released

Following the vote on guidance and regulation on Friday, the Commodities Futures Trading Commission (CFTC) released the manuscript of the guidelines regarding cross border swaps today, July 16th 2013.

Cross border swaps have become a hot issue in the CFTC for some time now, but was resolved following last Friday’s vote, which passed the new regulations as well as a 75 day guidance period. As of 6 pm, July 16th 2013, the manuscript has not been published to the Federal Registry.

The full document, which is about three hundred pages long, can be found on the CFTC website.

Wetjen Advocates Legal Advice Before Interim Expiration

The Commodity Futures Trading Commission’s interim relief for cross-border swaps is due to expire on July 12th, but in a speech at a London Futures Industry Associated expo, CFTC Commissioner Mark Wetjen made it clear he thinks the CFTC should provide legal advice and assurance until that point.

The approach Mark Wetjen advocated for is purportedly to ease the transition into the time after the relief expires. Furthermore, by including coordination with internal and international regulatory bodies, firms could adapt to the new compliance model before the deadline. Wetjen echoed the concerns many have had about the regulatory policy, and mentioned that the cross-border guidance must be ‘clear and workable.’

In the address, Wetjen outlined three very clear objectives that he hoped to achieve with this relief and guidance. The first was to protect the US taxpayer and financial systems, and cited the mobility of risk associated with derivatives and the need for global regulation to monitor this mobility. The second objective is to protect the US financial system but also not stifling competition. Lastly, Wetjen hopes that this period of transition will ensure the policy is unambiguous, and gives firms a reasonable time period for compliance.

With the current relief package expiring July 12, Wetjen also hoped to have final guidelines released before the deadline, and open it up for comment.