On April 22, the Commodity Futures Trading Commission’s Division of Data, Division of Market Oversight and Division of Clearing and Risk (collectively, the Divisions) issued CFTC Letter No. 21-11, which (1) provides no-action relief to KalshiEX LLC (Kalshi), a designated contract market, and LedgerX, LLC (LedgerX), a derivatives clearing organization, from reporting to swap data repositories data for binary option transactions executed on or subject to the rules of Kalshi and cleared by LedgerX; and (2) exempts Kalshi and LedgerX from certain related recordkeeping requirements.
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Division of Clearing and Risk
CFTC Staff Issues Guidance Regarding Risk Assessment of Customer Accounts for Futures Commission Merchants
On March 29, the Division of Clearing and Risk (DCR) of the Commodity Futures Trading Commission issued guidance regarding the implementation of revised Regulation 39.13(g)(8)(ii). Regulation 39.13(g)(8)(ii) provides that a derivatives clearing organization (DCO) must require its clearing members to collect from their customers initial margin at a level that is at least equal to the DCO’s own initial margin requirements with respect to each product and portfolio and commensurate with the risk presented by each customer account. The regulation further requires that a DCO must set both (1) a baseline level of initial margin (“clearing initial margin”), which serves as the minimum amount its clearing members must in turn collect from their customers; and (2) an increased level of initial margin (“customer initial margin”) for categories of customers determined by a clearing member to have a “heightened risk profile.”
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CFTC Announces Organizational Changes
On October 29, the Commodity Futures Trading Commission announced certain reorganizational changes designed to enhance the CFTC’s operational effectiveness. Specifically:
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CFTC Grants Market Participants LIBOR-Transition Relief
On December 18, the Division of Swap Dealer and Intermediary Oversight (DSIO), the Division of Market Oversight (DMO) and the Division of Clearing and Risk (DCR) each issued a no-action letter providing relief to market participants in preparation for the transition away from the London Interbank Offered Rate (LIBOR) and other interbank offered rates (collectively with LIBOR, IBORs). The letters identify the terms and conditions pursuant to which counterparties may be eligible for relief in connection with amending swaps to replace provisions referencing discontinued IBORs with alternative benchmarks.
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CFTC Approves Final and Proposed Rules on Rulemaking, Capital Requirements for Swap Participants and Inter-Affiliate Swaps
At the US Commodity Futures Trading Commission open meeting on December 10, the CFTC approved one final and two proposed rules as follows:
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CFTC Grants DCO Registration to Eris Clearing
The Commodity Futures Trading Commission has issued an order granting registration as a derivatives clearing organization (DCO) to Eris Clearing, LLC. The order permits Eris Clearing to clear fully collateralized virtual currency futures contracts. These contracts will be listed for trading on Eris Clearing’s affiliate, Eris Exchange, LLC.
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CFTC Staff Provide Guidance, No-Action Relief With Respect to the Treatment of Separate Accounts by FCMs
The Commodity Futures Trading Commission’s Division of Swap Dealer and Intermediary Oversight and Division of Clearing and Risk have issued CFTC Staff Advisory 19-17 (the Advisory), providing 1) guidance with respect to CFTC Rule 1.56(b); and 2) time-limited no-action relief with respect to CFTC Rule 39.13(g)(8)(iii), as those rules relate to the treatment of separate accounts of the same customer (i.e., beneficial owner). The Advisory responds to several requests for guidance following the publication of Joint Audit Committee (JAC) Regulatory Alerts #19-02 and #19-03.
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CFTC’s Division of Clearing and Risk and Office of the Chief Economist Issue Clearinghouse Supervisory Stress Test Report
On May 1, the Commodity Futures Trading Commission’s Division of Clearing and Risk and Office of the Chief Economist jointly issued, CCP Supervisory Street Tests: Reverse Stress Test and Liquidation Stress Test (Stress Test), which is a two-part report covering the results of 1) a reverse stress test of central counterparties (CCPs) or clearinghouses resources; and 2) an analysis of stressed liquidation costs.
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CFTC Extends No-Action Relief to Shanghai Clearing Firm
On July 31, the Commodity Futures Trading Commission’s Division of Clearing and Risk extended no-action relief to the Shanghai Clearing House (SHCH). Originally set to expire on February 28, 2019, the relief is extended until July 31, 2021.
The no-action relief, originally granted in May 2016 and renewed several times, permits SHCH to continue to…
CFTC Extends No Action Relief for Shanghai Clearing House
On February 23, the Commodity Futures Trading Commission’s Division of Clearing and Risk (DCR) issued No-Action Letter 18-04, which extends relief previously granted to the Shanghai Clearing House (SHCH) under CFTC No-Action Letter 16-56 (as reported in the June 3, 2016, edition of Corporate and Financial Weekly Digest), and renewed in CFTC No-Action Letters 17-26 and 17-62. CFTC No Action Letter 17-62 expired on February 28.
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