Clearinghouse legal and compliance matters
I support the proposed rule on legal and compliance matters for clearinghouses, which would revise procedures for derivatives clearing organization (DCO) applications, clarify procedures for the transfer of a DCO registration and add requirements for approval of DCO rules for portfolio margining of futures and securities in a futures account.
The rule is intended to ensure that sufficient resources are devoted to compliance with laws and regulations, which is a core component of sound risk management practices. It would fulfill the Dodd-Frank Act’s requirement that each DCO have a chief compliance officer who is responsible for establishing and administering compliance policies, as well as resolving certain conflicts of interest.
Finally, the proposed rulemaking would implement DCO Core Principles for compliance, rule enforcement, antitrust consideration and legal risk, which would promote compliance with the CEA and would enhance the integrity of the clearing and settlement process.
Clearinghouse recordkeeping and reporting
I support the proposed rulemaking concerning information management, recordkeeping and reporting requirements for derivatives clearing organizations. The requirements would enable the Commission to conduct financial risk surveillance more efficiently and effectively. Further, they would promote transparency to the regulators, enhancing the Commission’s ability to detect and resolve potential concerns before they escalate into major problems. The rule also fulfills Congress’s direction that clearinghouses be required to make settlement prices and open interest public in all their contracts on a daily basis.
The proposed reporting rules apply uniform standards to all DCOs, thereby helping to avoid inconsistency in DCO reporting. The recordkeeping requirements are rooted in sound business practices, and the public information requirements serve the public interest by promoting transparency and disclosure. By codifying the information-sharing core principle into the Commission’s regulations, the Commission would reaffirm its commitment to promoting cooperation among industry participants in carrying out risk management functions.
Designated contract market core principles
I support the proposed rulemaking to update our rules and guidance with regard to designated contract markets (DCMs). The Dodd-Frank Act updated the statutory language for core principles for contract markets, increasing the number to 23 and modifying existing core principles. Thus, it is important to update our rules and guidance to reflect those changes. Further, the Dodd-Frank Act allows DCMs to – for the first time – offer swaps in addition to futures and commodity options, and this proposal addresses that broader scope. I believe it is also important to update the rules and guidance for DCMs in light of the fact that we will be promulgating rules and guidance for swap execution facilities, and many of the core principles are similar. This rule will help to promote transparency and market integrity.
Swap dealer recordkeeping and reporting
I support the proposed rule regarding reporting, recordkeeping and daily trading records for swap dealers and major swap participants. The rule establishes the records to be maintained by swap dealers and major swap participants and the required reporting by such entities. This proposal will help increase transparency and promote market integrity. The proposed rules are consistent with the Congressional requirement that swap dealers and major swap participants comply with rigorous recordkeeping and real-time reporting regimes.
Joint proposal with the SEC on entity definitions
I support the joint proposed rule with the Securities and Exchange Commission on entity definitions. This rule fulfills Congress’s direction to further define the terms “swap dealer,” “major swap participant” and “eligible contract participant.” The proposed swap dealer definition closely follows the criteria laid out by Congress. This includes whether an entity makes a market in swaps, holds itself out as a swap dealer, is commonly referred to as a swap dealer or regularly enters into swaps as an ordinary course of its business. The major swap participant definition relies on Congress’s three-prong test, and the category is very clearly limited only to those entities that have risk large enough to pose a threat to the U.S. financial system.
Last Updated: January 18, 2011