October 26, 2020

Volume X, Number 300

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October 26, 2020

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October 23, 2020

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CFTC Approves Margin Requirement Rules & Staff Provides Reporting Relief

CFTC Approves Certain Final Rules Amending Margin Requirements for Certain Uncleared Swaps and Exemptions From Registration for Certain Foreign Intermediaries

On October 15, at the same open meeting in which it approved the final rule on position limits, the Commodity Futures Trading Commission unanimously approved two other unrelated final rules.

The first final rule extends the compliance date one year, from September 1, 2021 to September 1, 2022, for margin requirements for uncleared swaps for swap dealers and major swap participants for which there is no banking regulator. This rule will be effective 30 days after publication in the Federal Register.

The second final rule amends the registration exemptions available under CFTC Regulation 3.10(c) (collectively, 3.10 Exemption) for certain foreign-located persons, in connection with their US commodity transactions on behalf of persons located outside the United States. Among other things, these amendments: (1) clarify that non-US commodity pool operators (CPOs), whether CFTC registered or not, acting for non-US pools may claim 3.10 Exemption status for those pools on a pool-specific basis, even if such CPOs operate pools pursuant to other available registration exemptions; (2) provide a safe harbor under which non-US CPOs operating offshore pools can rely upon 3.10 Exemption status for such pools, provided they meet certain operating and offering-related conditions; and (3) allow US affiliates of non-US CPOs to contribute initial capital to offshore pools without affecting the ability of those pools to claim 3.10 Exemption status. This rule will be effective 60 days after publication in the Federal Register.

The CFTC press release from the October 15 meeting, which includes links to the voting drafts for both of the above final rules, is available here.


CFTC Staff Provides Reporting Relief for Swaps Related to Certain Upcoming DCO Auctions

On October 13, the Division of Market Oversight (DMO) of the Commodity Futures Trading Commission issued two no-action letters that provide limited relief from swap transaction and pricing data reporting requirements for specific derivatives clearing organizations (DCOs) and market participants that take part in upcoming DCO auctions intended to assist in transitioning certain cleared swaps away from discounting using the Effective Federal Funds Rate and instead using the Secured Overnight Financing Rate (such auctions, Transition Auctions). This transition in discounting methods is an important step in the broader initiative to transition swaps that reference interbank offered rates, like the London Interbank Offered Rate (LIBOR), to swaps that reference alternative benchmark rates. In effect, the relief delays reporting requirements, until November 19, for swap transaction and pricing data under CFTC Regulation 43.3 with respect to swaps executed as part of either (1) LCH Limited’s Transition Auction on October 16; or (2) CME Inc.’s Transition Auction on October 19.

The CFTC press release, which includes links to both no-action letters, is available here.

©2020 Katten Muchin Rosenman LLPNational Law Review, Volume X, Number 290
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About this Author

Kevin M. Foley, Finance Lawyer, Katten Llaw Firm
Partner

Kevin M. Foley has extensive experience in commodities law and advises a wide range of clients, both in the United States and abroad, on compliance with the Commodity Exchange Act and the rules of the Commodity Futures Trading Commission (CFTC) affecting traditional exchange-traded products, as well as the over-the-counter markets involving swaps and other derivative instruments. His clients include futures commission merchants, derivatives clearing organizations, designated contract markets, foreign boards of trade and an industry trade association.

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312-902-5372
Elizabeth Organ Financial Markets and Funds Katten Muchin Rosenman New York, NY
Associate

Elizabeth Organ represents clients across the financial services industry, with a focus on regulatory compliance and advice. Liz's background positions her to provide valuable legal counsel on transactional and regulatory matters relating to commodities and derivatives, investment management, and cryptoassets and distributed ledger products.

Helping clients address complex regulatory and legal challenges

Liz assists clients with a range of financial services regulatory matters, collaborating with legal staff, business executives and regulators alike to pursue favorable results for clients. She takes a pragmatic approach toward the provision of legal advice and seeks to address issues from multiple perspectives, including commercial considerations.

Liz holds a certification in Financial Risk Management (FRM) from the Global Association of Risk Professionals (GARP). As such, she has a deep, risk-management based understanding of the products and tools used by the financial services firms she advises.

Prior to joining Katten, Liz was an associate in the Financial Industry practice of a major international law firm, where her focus was on regulatory and transactional matters involving investment advisers, asset managers, and banks and other financial institutions.

While in law school, Liz served as an intern in the Division of Enforcement of the US Commodity Futures Trading Commission (CFTC) and in the Office of the Director of the Consumer Financial Protection Bureau. Prior to law school, she worked as a research analyst at the Federal Reserve Bank of Dallas and as a risk analyst at Energy Future Holdings.

212.940.6561
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