CFTC Praised for Relief to Market Participants

The Commodity Futures Trading Commission (CFTC) has issued a raft of no-action letters granting market participants relief from several regulatory requirements.

The CFTC’s Division of Swap Dealer and Intermediary Oversight (DSIO) issued the letters providing temporary, targeted relief to futures commission merchants (FCMs), introducing brokers, swap dealers, retail foreign exchange dealers, floor brokers, and other market participants in response to the COVID-19 (coronavirus) pandemic. “The spread of coronavirus has caused compliance with certain CFTC requirements to be particularly challenging or impossible because of displacement of registrant personnel from their normal business sites due to social distancing and other measures,” the Commission says in a release.

FCMs, swap dealers, retail FX dealers and introducing brokers have been provided with relief from regulations requiring recording of oral communications related to voice trading and other telephonic communications as well as time-stamping requirements when located in remote, socially-distanced locations. DSIO has also granted 30 days of no-action relief to FCMs from the requirement to furnish annual compliance reports to the CFTC.

In addition to those relief measures, floor brokers have also been granted relief from the requirement to be located on the premises of a designated contract market and to register as introducing brokers, which might otherwise have been triggered in connection with trading activities undertaken at remote, socially-distanced locations. Members of Designated Contract Markets and Swap Execution Facilities have also granted temporary, targeted no-action relief to members of designated contract markets and swap execution facilities from time-stamping requirements when located in remote, socially-distanced locations.

In a related move, the CFTC’s Division of Market Oversight (DMO) has granted Swap Execution Facilities (SEFs) relief from the voice recording regulations that will make them unable to comply with certain audit trail requirements, recordkeeping requirements related to maintaining a complete audit trail, and monitoring requirements related to audit trail reconstruction. The relief expires on June 30, 2020.

SEFs have reprioritised and reallocated personnel that otherwise would have been involved in the preparation and submission of reports such as the annual compliance report, and as such DMO says it will provide an extension of the time to submit filings in order to allow SEFs to continue to focus on supporting orderly and resilient markets while implementing recommended practices to curtail the spread of COVID-19.

DMO has also granted temporary, targeted no-action relief to certain Designated Contract Markets (DCMs) from audit trail and related requirements. This relief was necessary, CFTC says, due to the displacement of market participants, such as floor brokers, from trading floors and other designated premises from which they may enter orders. This relief also expires on June 30, 2020.

“These prudent, targeted, and temporary actions will help facilitate orderly trading and liquidity in our derivatives markets,” says Heath Tarbert, chairman of the CFTC. “The CFTC remains squarely focused on promoting their integrity, resilience, and vibrancy through sound regulation. At my direction, the CFTC has pivoted our approach to take this challenge head on and we have dedicated appropriate resources to adapt to market developments.”

The action was praised by FIA president and CEO Walt Lukken, who says, “I applaud the CFTC’s responsiveness in issuing several no-action relief letters today that will help our member companies keep the markets functioning during this global pandemic. These actions by the CFTC demonstrate that chairman Tarbert, and commissioners Behnam, Berkovitz, Quintenz and Stump, understand the challenges companies face with a dispersed and remote workforce.  We also appreciate the chairman’s willingness to listen to industry concerns and to adjust as necessary during this ongoing situation.

“Now more than ever, our markets must stay open and functioning to allow commercial companies the ability to manage risk and discover prices,” Lukken adds. “FIA will continue to work with the CFTC and other global regulators to ensure that the global pandemic does not impair the important societal functions that markets provide.”

Colin Lambert

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