In an open meeting on Wednesday, the CFTC approved three final rules, a delegation order, and opened a proposed rule to public comment. The Commission also provided a rough outline for Dodd-Frank implementation in the new year.
The three proposed rules dealt with protection of cleared swaps customer collateral, the registration of swap entities, and business standards for swap entities. The proposed rule contained the CFTC’s version of the Volcker rule, and the delegation order allowed the NFA to register swap entities.
The customer collateral protection rule has been influenced by the MF Global meltdown. Though it allows commodity brokers to pool customer collateral, it forbids them from co-mingling those funds with their own resources. In the event of bankruptcy, clearing-members are only permitted to collect collateral from the defaulting firm, not from individual accounts. However, this provision, clearly aimed at reassuring commodities investors affected by MF Global, is not completely secure. As Commissioner Scott O’Malia was quick to point out, “it benefits cleared swaps customers, and not futures customers (who are bearing the brunt of MF Global). This rulemaking would not have prevented a shortfall in the customer funds of the ranchers and farmers that transact daily in the futures market. Nor would it have expedited the transfer of positions and collateral belonging to such customers in the event of a collapse similar to that of MF Global.”
The CFTC made waves last fall when it declined to issue a proposal for the Volcker Rule last fall with the SEC, FDIC, and OCC. However, the Commission’s proposal does not significantly differ from the earlier drafts issued by the other agencies. The rule is open to comment for 60 days.
Chairman Gensler’s Dodd-Frank timeline divides the year from January to March and April onwards. In the first part of the year, the Commission intends to finalize eleven new rules, including the end-user exemption and commodity options. After April, the CFTC will address eleven more, including the block trade rule, extraterritoriality, and SEFs.