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Continuing a theme amidst the Commodity Futures Trading Commission (“CFTC”) staff letters in 2022, the sixth letter of 2022 reminded market participants to correct errors and give notice to the CFTC’s staff when errors in swap data are discovered and can’t be quickly corrected. Under 2020 CFTC revisions to 17 C.F.R. Parts 43 and 45, counterparties to swaps and derivatives clearing organizations...

Five entities that act like derivatives clearing organizations – ASX Clear (Futures) Pty Limited, Japan Securities Clearing Corporation, Korea Exchange, Inc., OTC Clearing Hong Kong Limited, and Shanghai Clearing House (“Relief DCOs”)– clear trades under exemptive orders or a no-action letter issued by staff at the Commodity Futures Trading Commission’s Division of Clearing and Risk. As market...

Financial regulators in Austria, Belgium, France, Greece, Italy, and Spain banned short sales of equities for two months in 2020 in response to Covid-19 market turmoil. Staff at the European Securities and Market Authority (ESMA) collected data on how equities responded to those short selling bans and discussed those responses in a 1 March 2022 Trends, Risks, and Vulnerabilities risk analysis....

In the Commodity and Futures Trading Commission (“CFTC”) staff’s third letter of 2022, the Division of Data gave no-action relief for swap data reporting amendments adopted by the CFTC in November, 2020. Those amendments were accompanied by technical specifications from the CFTC, and the CFTC revised those technical specifications in September, 2021. Provisionally registered swap data...

On January 5, 2022 the Market Participants Division of the Commodity Futures Trading Commission (“CFTC”) issued two no-action letters directed towards swap dealers permitting them to prepare annual audited financial statements in accordance with other countries’ reporting standards. In CFTC letter 22-01, directed to Goldman Sachs Financial Markets Pty Ltd (the “Australian Swap Dealer”), the...

On December 8, 2021 the Bank for International Settlements (“BIS”) released a report on “Project Jura”, a test run using distributed ledger technology (“DLT”) to move wholesale central bank digital currency from bank to bank across country borders. Banque de France and the Swiss National Bank joined BIS’s innovation hub to explore how DLT, which doesn’t rely on a central authority, might work...

In an order entered October 29, 2021, the Securities and Exchange Commission (“SEC”) fined Fixed Income Clearing Corporation (“FICC”) $8,000,000 and set additional documentation and compliance requirements for FICC’s operation over the next three years. FICC is a wholly owned subsidiary of The Depository Trust & Clearing Corporation and the only central counterparty for securities issued by...

The Commodity Futures Trading Commission (“CFTC”) fined iFinex Inc., BFXNA Inc., and VFXWW Inc. (collectively, “Bitfinex”) $1,500,000 for offering financed retail commodity transactions sans regulations by a board of trade designated or registered by the CFTC. Bitfinex violated a 2016 CFTC order when it offered those financed retail commodity transactions to U.S. customers that weren’t eligible...

Payment Ventures, Inc., doing business as Kraken (“Kraken”), entered into an order with the Commodities Futures Trading Commission (“CFTC”) on September 28, 2021 in connection with Kraken’s actions as an unregistered commodity exchange or futures commission merchant for digital assets between June, 2020 and July, 2021. Offering a pointed example of former CFTC Chair Gary Gensler’s warnings now...

The Commodity Futures Trading Commission (“CFTC”) fined Interactive Brokers LLC (“Interactive Brokers”) $1,750,000 and required Interactive Brokers to pay restitution of $82,570,000 to customers for trading system failures. Interactive Brokers failed to prepare its electronic trading system for negative futures prices, even after internally acknowledging that such negative pricing could and...

On 27 and 28 September 2021 the Commodity Futures Trading Commission (“CFTC”) entered into settlements with each of Refinitiv US SEF LLC (“Refinitiv”) and Respondent Symphony Communication Services, LLC (“Symphony”) for two disparate violations of regulations applicable to swap execution facilities. Refinitiv, although properly registered as a swap execution facility, failed to report swap...

CFTC fined Citi, Mizuho, and SocGen for failing to accurately report to swap data repositories or to counterparties.

Responding to concerns about calculations of required capital, staff in the Commodity Futures Trading Commission (“CFTC”) Market Participants Division advised that futures commission merchants and swap dealers, or standalone swap dealers, may compute uncleared swap margin amounts via a model that hasn’t been approved by the CFTC or the National Futures Association (“NFA”) when determining...

Commodity Futures Trading Commission (“CFTC”) staff in the Division of Clearing and Risk reaffirmed guidance from 2014 for a registered derivatives clearing organization, CX Clearinghouse, L.P. This no-action relief reaffirms the interpretive guidance in the CFTC staff’s letter 14-05, which derivatives clearing organizations have relied on when asserting that holding “funds in the form of the...

Staff in the Division of Data at the Commodity Futures Trading Commission (“CFTC”) granted interim no-action relief to derivatives clearing organizations acting under exemptive orders from the CFTC, or no-action relief from the CFTC’s Division of Clearing and Risk. ASX Clear (Futures) Pty Limited, Japan Securities Clearing Corporation, Korea Exchange, Inc., OTC Clearing Hong Kong Limited, and...

Staff in the Commodity Futures Trading Commission (“CFTC”) Divisions of Data, of Market Oversight, and of Clearing and Risk issued a no-action letter for a designated contract market’s binary options cleared by a registered derivatives clearing organization. The designated contract market (KalshiEX LLC) and derivatives clearing organization (LedgerX, LLC) had requested that the CFTC staff not...

Extending relief to floor brokers, the Commodity Futures Trading Commission (“CFTC”) Division of Market Oversight and Market Participants Division recognized the difficulty of complying with some regulations because of the COVID-19 pandemic. While this no-action letter repeats the CFTC staff’s “expectation that registrants will work to implement technological solutions that permit full...

In a no-action letter aimed at swap dealers, the Commodity Futures Trading Commission (“CFTC”) Market Participants Division, Division of Clearing and Risk, Division of Data, and Division of Market Oversight offered Brexit-related no-action for some transaction level reporting requirements. Guidance published in the Federal Register by the CFTC on July 26, 2013, set forth when swap dealers...

Broader guidance for our market emerged in the Division of Clearing and Risk’s letter 21-08 about the CFTC’s regulation 39.13(g)(8)(ii). Referring back to its own interpretive letter 12-08, the Division of Clearing and Risk pointed out that the CFTC had adopted many of the staff’s 2012 interpretations regarding futures commission merchants’ initial margin requirements for clearing customers in a...

The CFTC’s Market Participants Division next issued an exemption via letter 21-07, permitting an introducing broker not to file a required CFTC form for 2020. Staff reasoned that because the broker in question had registered as an introducing broker with 21 days remaining in 2020, had a securities broker-dealer application pending with the Securities and Exchange Commission (“SEC”) and Financial...

In no-action letter 21-06, the Market Participants Division of the Commodity Futures Trading Commission (“CFTC”) agreed that a company with a primary business of biopharmaceutical royalty returns needn’t register as a commodity pool operator when hedging its debt with interest rate swaps. No-action letter 21-06 is perhaps most notable because it was given to a company, Royalty Pharma LLC,...

In determination letter 21-03, Market Participants Division staff approved a swap dealer capital model proposal from the National Futures Association (“NFA”). And the Market Participants Division joined the Division of Market Oversight to release two no-action letters extending record keeping relief for floor brokers, introducing brokers, and futures commission merchants on designated contract...

In its second staff letter of 2021, the Commodity Futures Trading Commission (“CFTC”) Market Participants Division issued a no-action letter explaining that the Market Participants Division will not recommend enforcement action against a futures commission merchant (“FCM”) that invests customer funds in otherwise permitted investments under Regulation 1.25 with an interest rate benchmarked to...

In the first Commodity Futures Trading Commission (“CFTC”) staff letter of 2021, the CFTC’s Division of Clearing and Risk granted any DCO relief from daily reporting on individual customer accounts under the amended Regulation 39.19(c)(1) until January 27, 2022 as long as that DCO complies with the prior version of Regulation 39.19(c)(1). DCOs would otherwise have needed to report by the end of...