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CFTC Approves Two Final Rules and Two Proposed Rules at June 25 Open Meeting

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— The Commodity Futures Trading Commission at its open meeting today approved two final rules, withdrew a previously proposed rule and supplemental proposal, and advanced two proposed rules on the following matters:

Proposed Rule: Electronic Trading Risk Principles

On a 4-1 vote, the Commission approved a proposal to amend Part 38 of CFTC regulations to address the risk of electronic trading causing a market disruption on a designated contract market’s (DCM) trading platform. The proposed regulations include three principles applicable to DCMs, and concern (i) the implementation of exchange rules applicable to market participants to prevent, detect, and mitigate market disruptions and system anomalies associated with electronic trading; (ii) the implementation of exchange-based pre-trade risk controls for all electronic orders; and (iii) the prompt notification of the Commission by DCMs of any significant disruptions to their electronic trading platforms.

Comments for this proposed rule must be received on or before the latter of 60 days from the date of the Commission vote, or 30 days following publication in the Federal Register.

Withdrawal Notice: Proposed Rule and Supplemental Proposal for Regulation AT

On a 3-2 vote, the Commission approved the withdrawal of the Regulation Automated Trading Proposed Rule and Supplemental Proposed Rule and rejected certain policy approaches relating to the regulation of automated trading.

Proposed Rule:  Margin Requirements for Uncleared Swaps for Swap Dealers and Major Swap Participants (Phase VI Compliance Date Extension)

The Commission unanimously approved a proposal to amend the margin requirements for uncleared swaps for swap dealers and major swap participants for which there is no prudential regulator (CFTC Margin Rule). The proposal would delay the compliance date for the initial margin requirements for smaller entities not covered by the May 28, 2020 interim final rule, which delayed certain entities’ compliance date of September 1, 2020, to September 1, 2021, in recognition of the challenges faced by the entities as a result of the COVID-19 (coronavirus) pandemic. The proposal would delay the smaller entities’ compliance date of September 1, 2021, to September 1, 2022, to mitigate the potential for a market disruption that could result from a large number of entities that would come into the scope of compliance by September 1, 2021, under the revised compliance schedule.

This proposed rule has a 60-day comment period following publication in the Federal Register.

Final Rule: Post-Trade Name Give-Up on Swap Execution Facilities

The Commission unanimously approved a final rule that adopts amendments to Part 37 of CFTC regulations to prohibit post-trade name give-up for swaps executed, pre-arranged, or pre-negotiated anonymously on or pursuant to the rules of a swap execution facility (SEF) and intended to be cleared. The final rule provides an exception for package transactions that include a component transaction that is not a swap intended to be cleared, including but not limited to U.S. Treasury swap spreads.

This final rule is effective 60 days after publication in the Federal Register, however, to give SEFs time to modify their operations to comply with the new rule, the CFTC is implementing the following phased compliance schedule based on the regulatory treatment of different swaps.

  • The compliance deadline for swaps subject to the trade execution requirement under section 2(h)(8) of the Commodity Exchange Act (CEA) is November 1, 2020.  
  • The compliance deadline for swaps not subject to the trade execution requirement under section 2(h)(8) of the CEA is July 5, 2021. 

Final Rule: Exemption from the Swap Clearing Requirement for Certain Affiliated Entities – Alternative Compliance Frameworks for Anti-Evasionary Measures (Inter-Affiliate Exemption 50.52)

The Commission unanimously approved a final rule that adopts amendments to the Commission’s inter-affiliate exemption conditions under CFTC regulation 50.52, which exempts certain affiliated entities within a corporate group from the swap clearing requirement under the applicable provision of the CEA. The amendments make permanent certain temporary alternative compliance frameworks intended to make an anti-evasionary condition workable for international corporate groups in the absence of foreign clearing regimes determined to be comparable to CFTC requirements.

This final rule is effective 30 days after publication in the Federal Register.

In advance of today’s meeting, the Commission approved a final rule on a 3-2 vote modifying regulations implementing the Volcker Rule’s prohibition on banking entities investing in or sponsoring hedge funds or private equity funds—known as covered funds. The vote concluded on Wednesday, June 24 and coincided with the rule’s approval by the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of Comptroller of the Currency, and the Securities and Exchange Commission. [See CFTC Press Release No. 8187-20] This final rule is effective October 1, 2020.

Additional information on these rulemakings, including statements by the Chairman and Commissioners, can be found here.

Regulator Information

Abbreviation: CFTC
Jurisdiction: USA

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