The U.S. Commodity and Futures Trading Commission (CFTC) continues to have a tumultuous week at home, abroad, and even within its own organization, all while dealing with the aftermath of Hurricane Sandy.
CFTC’s Division of Clearing and Risk Issues Extension
The U.S. Commodity and Futures Trading Commission (CFTC) has issued a no-action letter to temporarily delay the compliance date for segregation requirements mandated by the Commission’s Part 22 rules. The delay is meant to give Futures Commission Merchants (FCMs) time to focus on business continuity and disaster recovery in the wake of Hurricane Sandy.
The delay, issued by the CFTC’s Division of Clearing and Risk, is meant to provide relief to FCMs that are otherwise focused on business continuity and disaster recovery efforts in the wake of Hurricane Sandy. The Commission’s Part 22 rules mandate segregation requirements for cleared swaps and associated cleared swaps customer collateral. The rules will be delayed from November 8, 2012 to November 13, 2012.
CFTC Slammed by G20, FSB
The delays stemming from Hurricane Sandy may ironically provide reprieve for the CFTC, too, which has been under attack this week for tardiness and lack of clarity.
Earlier this week the G20’s regulatory arm, the Financial Services Board (FSB), issued a report that reprimanded the CFTC for taking too long to implement regulation on OTC derivatives.
“Market infrastructure is in place and can be scaled up. Regulatory uncertainty remains the most significant impediment to further progress and to comprehensive use of market infrastructure,” the report said.
Most derivatives are traded in New York and London, but the CFTC has recently issued confusing extraterritoriality rules that attempt to regulate derivatives across borders. This cross-border regulation has been slow, leading to uncertainty while upsetting regulators in Japan, France, Britain, and elsewhere.
“This risks delaying the full and timely implementation of the G20 objectives,” the FSBs statement said.
Commissioner O’Malia Slams CFTC, Questions November 15 Deadline
Speaking with the Futures Industry Association (FIA) in Chicago on Wednesday, Commissioner Scott O’Malia slammed the CFTC, calling its regulation of energy derivatives a “train wreck.” O’Malia was referring to a reprieve that the CFTC was slow to grant CME Group on October 12. The reprieve gave CME and other market participants until the end of the year before counting energy swaps toward an $8 billion threshold that would trigger higher capital requirements. The reprieve was granted at the last minute.
O’Malia also raised serious doubts about whether new swaps rules that ensure backing by clearinghouses will be completed by November 15.
“I don’t think we are going to be able to get through this,” O’Malia said. “There is a lot to be negotiated,” he added. “That’s way too soon.”