FACTBOX-CFTC to-do list for implementing reforms

November 23, 2010

Nov 22 (Reuters) – The U.S. Commodity Futures Trading Commission faces the mammoth task of writing detailed regulations to implement reforms passed by Congress giving the agency oversight of the $600 trillion over-the-counter derivatives market.

Working from a list of 30 topic areas, the agency may end up writing 50 to 60 regulations, CFTC Chairman Gary Gensler has said.

The CFTC hopes to unveil the first drafts of most of the proposed rules by the end of the year to allow time for public comment and revisions before its July deadline for final regulations. Some rules have earlier deadlines.

Regulators have held hundreds of meetings with industry players as they consider the details. For a full list of meetings, see: http://r.reuters.com/hum65p

Below is a list of rule-making areas for the CFTC:


* Define thresholds to establish who will be deemed swap dealers and major swap participants — joint with Securities and Exchange Commission.

* Dealers and major participants mandated to clear most swaps, and trade them on open venues. Will face added capital and margin rules to reduce risks to the financial system.

* Estimated to affect 200 players who will be required to register as swap dealers, including 80 global and regional banks, 60 affiliates of existing swap dealers, 40 non-bank swap dealers, and 20 potential new market-makers.

* Only a “very small set of companies” expected to be deemed major swap participants.

* Registration could begin as early as April 15.

* New “back office” rules and firewalls to prevent conflicts of interest for dealers, major swaps participants.

* Related rules include business conduct standards, and segregation and bankruptcy treatment for cleared/uncleared swaps.

* Some compliance oversight could be handled by self-regulatory organizations like the National Futures


* Set up rules for protecting counterparty collateral for uncleared and cleared swaps. Some proposals made on Nov. 19, but CFTC seeking further comment in next 45 days.


* Determine who are “end users” — such as manufacturers and producers — that are exempt from mandatory clearing.

* Set process for review of swaps for mandatory clearing. Proposal open for comment until Jan. 3.

* Set limits on ownership and control of clearinghouses and other trading infrastructure by banks and other large players.

Proposal open for comment until Nov. 17 and must be finalized by January.

* Establish financial cushions for clearinghouses. Proposal open for comment until Dec. 13.

* Set core principles for clearinghouses.


* Rules for exchanges and new “swap execution facilities.”

* CFTC has said 30 to 40 entities expected to register to trade swaps.

* Key issue: how to handle “block trades.”

* New registration requirements for foreign boards of trade to replace “no-action letters” currently issued. Open for comment until Jan. 18.


* Establish timelines and process for mandatory real-time reporting of swaps trades, a key measure to promote market transparency that some fear could hurt liquidity in markets

that are already thin.

* Interim final rule for how to report data for swaps that predate the law was open for comment until Nov. 15.

* Establish swap data repositories, a new type of entity to maintain market data.


* Set speculative curbs for energy and metals markets by January, agricultural markets by April. Expected to be unveiled on Dec. 9 or Dec. 16.

* Proponents believe limits would tamp down excessive price-inflating speculation. Opponents say curbs could push trade offshore, force firms to restructure, and make markets less liquid and more volatile.

* CFTC must further define what constitutes a bona fide hedge — trades that will not be subject to limits.

* Proposed large trader reporting system to collect swaps position data, starting in about 6 to 10 months. System will be phased out once data repositories up and running. Open for comment until Dec. 2.


* Proposed new rule to police “fraud-based manipulation.”

Open for comment until Jan. 3.

* Asked for comments on what measures to take to address

disruptive trading practices and high-frequency trading by Jan.

3. Will also hold public meeting on the topic on Dec. 2.

* New system to protect and reward whistleblowers who

expose wrongdoing by April deadline.


* Formally define “swap” and “security-based swap” jointly

with SEC, and work out portfolio margining issues.

* Determine whether agricultural swaps should be treated like other products, or whether they need special treatment.

* Formally establish a definition for “agricultural

commodity.” Open for comment until Nov. 26.


* CFTC will have input into rules for investment advisor reporting, the Volcker Rule restricting banks’ proprietary trading activity.

* Propose new measures to protect consumer information.

* By January, it must reach agreement with the Federal Energy Regulatory Commission on areas where there is overlapping jurisdiction.


* Study feasibility of requiring use of standardized algorithmic descriptions for derivatives, with SEC.

* Study with SEC whether “stable value contracts” associated with employee benefit plans are swaps and whether they should continue to be exempt from clearing requirements.

* Every second year, report on growth/decline of derivatives markets in U.S. and abroad, and compliance costs.

* Within 12 months of setting position limits, study impact on curbing speculation and forcing trade offshore.

* Conduct interagency study on oversight of carbon markets.

(Reporting by Roberta Rampton; Editing by Walter Bagley)

((roberta.rampton@thomsonreuters.com; +202 898 8376; Reuters

Messaging: roberta.rampton.reuters.com@reuters.net))


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