Statement of Commissioner Dawn D. Stump Regarding Final Rule: Amendments to Compliance Requirements for Commodity Pool Operators on Form CPO-PQR
October 06, 2020
Data is essential to our work here at the Commodity Futures Trading Commission, and as such I am pleased that we are devoting attention to improving and refining the information the agency requires. At our most recent meeting, the Commission finalized significant improvements to our swap data reporting rules. Today we continue to make progress regarding our data collection efforts and are moving in the right direction when it comes to CFTC Form CPO-PQR. I wish to thank the Division of Swap Dealer and Intermediary Oversight, Office of the Chief Economist, and Office of the General Counsel for their efforts in advancing this final rule before us.
When the Commission proposed these refinements in April of this year we took into consideration how various streams of information received here at the CFTC, including those that are more timely, standardized, and reliable, may be leveraged across divisions to develop a holistic oversight program. We also explained that the CFTC’s ability to make full use of the information through Form CPO-PQR had not met the Commission’s initial expectations. Consistent with the proposal and supported by public comment, the Commission will cease to require the submission of most of Schedule B and all of Schedule C of this form. These Schedules included the calculation and submission of both very detailed pool-specific information and aggregate information for all pools operated by certain Commodity Pool Operators (CPOs). While the information in these Schedules is complex and challenging to report, the Commission has not been able to utilize this granular data to identify trends or develop other analyses across CPOs or pools. In balancing our responsibility to be data driven while also prioritizing protecting the requisite data, we should strive to only collect information that we know has a demonstrable use-case. We must remain vigilant in safeguarding the data we collect, especially sensitive proprietary and personally identifiable information, such as that contained in Form CPO-PQR. The Data Protection Initiative that I initiated within the CFTC helps us better ascertain our regulatory data needs and assure robust internal protection measures. It makes sense for the Commission to refine the form based on the scope of our data intake needs, experience and past utilization of this information, and considering the sensitivity of said data.
I support these efforts to better tailor Form CPO-PQR, but I wish we had also adopted a similar approach for the Schedule of Investments. The Schedule of Investments required in today’s Form CPO-PQR is considerably more detailed than the former version as it was updated by the National Futures Association in 2010. I could perhaps support such additional information intake if it has proven to be of essential use to our regulatory responsibilities, but I do not feel that a tangible use-case has been demonstrated for all of the additional line items required by the current Schedule of Investments. In response to questions accompanying the proposed version of this rule, the Commission received multiple recommendations that it revert to the 2010 NFA version, but we are unfortunately not adopting that course. The Commission has not accomplished very much with the information in the Schedule of Investments and, at the same time, the NFA, who regularly utilizes this information, commented that the increased granularity of the current version has not improved their analysis. In parallel, the CFTC receives substantial data on its jurisdictional markets through frequent and detailed reporting of transactions and positions in both swaps and futures markets that it can instead leverage. A data collection should be based upon a prerequisite and actionable use-case and not aspirational concepts. The continued collection of the Schedule of Investments as-is represents a dislocation between data wants and needs.
It is unfortunate that the principles applied to rationalizing this reporting and the changes we are acting on today do not carry all the way through the final product. Though disappointed that we are not implementing all of the changes I desired, I am somewhat encouraged by the commitment in the final rule to reconsider today’s policy determination. In the final rule, the Commission instructs staff to evaluate the ongoing utility of the Schedule of Investments within 18-24 months after the compliance date. As part of this review, staff will consider improvements in other robust data sources at the CFTC’s disposal and development of applications that facilitate oversight of CPOs, and provide recommendations or a proposed rulemaking.
We must also acknowledge that many market participants within our regulatory purview also operate in areas overseen by the SEC. There has been some confusion surrounding the intended utility of various reports and forms that investment advisers supply to each regulator. For example, in addition to CFTC Form CPO-PQR, Form PF was the data collection mechanism designed to carry out the Congressional intent under the Dodd-Frank Act to procure information from private funds for systemic risk oversight. It is important that the CFTC will continue to engage with the SEC on potential modifications to the original Form PF, but so long as each form remains the two should be distinguished in purpose and tailored to the specific function. I wish to take this opportunity to commend my colleague, Commissioner Quintenz, on his continued leadership in advancing this conversation and the joint work with the SEC on Form PF.
Today’s final rule simplifies reporting requirements, reduces reporting burdens, and more closely aligns data collection with use-cases. I plan to vote to approve the improvements we have made here, but we can no longer hold market participants hostage to supplying data we are not utilizing. I hope to revisit the Schedule of Investments in a timely manner, maybe even sooner than the period of review in the rule. I again wish to thank the Staff for their hard work to date and eagerly anticipate their future efforts with Form CPO-PQR.
 See Statement of CFTC Commissioner Dawn D. Stump on Data Protection Initiative (March 1, 2019), available at https://www.cftc.gov/PressRoom/SpeechesTestimony/stumpstatement030119.