Opening Statement of Commissioner Sharon Bowen, Commission Open Meeting
November 3, 2014
I want to echo the Chairman’s remarks and offer my thanks and appreciation to the staff for working on these two proposed rules and the proposed interpretation on volumetric options. Let me first talk about these two rules, which are tweaks to past Commission actions, but they are important all the same. I firmly believe that we need to get the little things right to get the big things right, and I feel we have gotten these small changes right. I’m proud to vote in favor of these two proposed rules.
One of the rules in front of us today is a proposed revision of the very important record-keeping rule, Rule 1.35. The current proposal is in response to requests from a number of parties. First, many affected market participants, including non-registrants, requested clarity on the meaning of “searchable and identifiable” in the context of pre-execution records. Second, non-registrants sought relief from the obligation to collect text messages. Third, CTAs asked for relief from the oral-recordkeeping requirement. In our proposed rule, the staff ably attempts to provide relief to market participants, including small end-users, from burdensome requirements, while ensuring that our enforcement staff is able to perform its vital function. We invite comment on the degree to which the proposal accomplishes this goal.
About the residual interest deadline, I understand that the market is now adjusting to the 6 p.m. deadline that goes into effect in two weeks. The staff study about that deadline, and any further changes to it, are a couple of years in the future. So today’s proposal would remove the December 2018 end point to this process. I look forward to hearing from the public about whether it makes sense to remove this end point in the context of this particular rule.
Finally, I want to talk briefly about the proposed interpretation on embedded volumetric optionality. I appreciate that a number of market participants and end-users want clarity regarding which volumetric options qualify as forwards and, therefore, are excluded from our jurisdiction. I am sympathetic to these concerns and agree we should try to make our guidance on this point clearer.
Yet, I worry that the current proposal as written goes too far and will cause too many options to be incorrectly regarded as forwards. I think the trade option exemption provides a much clearer and cleaner approach to address the issues raised regarding volumetric optionality. I hope the Commission can consider revising our trade option regulations soon.
With regards to the proposed interpretation before us today, however, I firmly believe that we need to receive public comment on whether this potential change to our guidance makes sense. In my concurring statement, I will lay out my concerns in more detail. I also want to note that the Federal Register notice contains several questions. I hope that the public will consider and respond to these questions. I believe your responses will provide some critical guidance about whether the Commission should make some changes to our proposed guidance on this subject. Thank you.
Last Updated: November 3, 2014