We have published an update on the recent disclosure proposals under Section 14(j) of the Securities Exchange Act of 1934 (the “Exchange Act”).  The update can be accessed here.

In summary, the Securities and Exchange Commission (SEC) recently released long-awaited proposed rules, as mandated by Section 955 of the Dodd-Frank Act, that would require a public company to disclose whether the company permits its employees, officers or directors to purchase financial instruments or otherwise engage in transactions that “hedge” their exposure to risk related to the company’s equity securities that they hold.

This posting augments our update by providing an overview of the different types of hedging transactions referenced in Section 14(j) of the Exchange Act, as well as the SEC’s rule proposal and related preamble, proposed rule and related preamble, Disclosure of Hedging by Employees, Officers and Directors; Proposed Rule, 17 Fed. Reg. 8486 (February 17, 2015) (the “Proposing Release”).  The Proposing Release is available here.

The Use of Financial Instruments for Hedging Purposes


Continue Reading SEC Proposes Dodd-Frank Hedging Policy Disclosures and A Closer Look at Common Hedging Transactions

On November 26th, the Division of Clearing and Risk (the “Division”) of the Commodity Futures Trading Commission (“CFTC”) published No-Action Letter 14-144 (also referred to as “CFTC Letter 14-144”), in order to update the conditions that must be satisfied by corporate end-users to avail themselves of “treasury affiliate relief” from the central clearing and trade execution mandate, as originally provided for by No-Action Letter 13-22 (the”2013 No-Action Letter”).  In general, No-Action Letter 14-144 relaxes conditions and requirements of the 2013 No-Action Letter that market participants highlighted as making use of the relief under that letter impractical for many treasury affiliates.

This posting provides background on the treasury affiliate exception and an overview of the current conditions that must now be satisfied by a treasury affiliate in order to claim relief from central clearing.  The relief afforded by this letter is likely to be of interest to both end-user and swap provider counterparties, as there are conditions of the relief that apply to both “sides” of the trade.


Continue Reading Attention Corporate Treasurers and Swap Provider Banks: CFTC Updates End-User Exception For Treasury Affiliates

When does an airline have bragging rights about a delay?  When it is a delay in real-time reporting.

On November 6th, the Division of Market Oversight (the “Division”) of the Commodity Futures Trading Commission (“CFTC”) granted time-limited no-action relief to Southwest Airlines (“Southwest”) and its counterparties to allow additional time to comply with the real-time reporting requirements of Part 43 of the CFTC’s rules.  The relief is noteworthy for two reasons:

  • First, it is one of the first no-action letters to provide relief to a single commercial end-user; and
  • Second, it can be viewed as representing tangible proof of the CFTC’s commitment to work with end-users to address legitimate issues that they are facing in connection with the implementation of Dodd-Frank related rule changes.

Accordingly, all market participants may want to take note of the relief and the conditions upon which it was granted, which are summarized in the remainder of this posting.


Continue Reading CFTC to Southwest Airlines: You Are Now Free to Delay Your Real-Time Public Reporting

The CFTC recently announced that it will hold a meeting on November 3rd at 10:30 a.m. Eastern to discuss the following issues relating to end-users:

1) Clarification as to when an agreement, contract or transaction with embedded volumetric optionality falls within the forward contract exclusion from the definition of a swap;

2) Conforming the application of the CFTC’s recordkeeping requirements under CFTC Rule 1.35(a) to commodity interests and related cash or forward transactions with no-action relief previously provided by the Division of Swap Dealer and Intermediary Oversight (presumably in CFTC Letter 14-72)

3) The relationship between when end-users will be required to post collateral and changes to timing issues related to what is known as the “residual interest deadline” that applies to futures commission merchants (FCMs). 
Continue Reading CFTC End-User Meeting To Be Held November 3rd at 10:30 a.m. Eastern

ISDA recently published the results of a survey that it conducted to identify key issues and trends for the buy-side, derivatives end-user community.  The results are fascinating and, we blelieve, accurately reflect the experiences of many market participants and professionals that are involved in the over-the-counter (OTC) derivatives markets.  The following is a brief summary

The Global Markets Advisory Committee of the CFTC just annouced that it will consider two issues at an upcoming meeting:

1) Whether a clearing mandate is appropriate for NDFs, with a particular focus on how such a mandate would impact foreign exchange contracts; and

2) The CFTC’s jurisdiction with respect to derivatives contracts that reference

Margin Proposal Outline 09_08_2014 On September 2nd, the Federal banking regulators (OCC, Federal Reserve, FDIC, FCA and FHFA) issued a new rule proposal and request for comment on rules that would govern the posting of margin on non-cleared swaps.  The rules would apply, in pertinent part, to swap dealer banks (i.e, prudentially regulated banks that are registered as a swap dealer or a security-based swap dealer with the CFTC or SEC, respectively), a term that is used interchangably in this posting with the term “covered swap entity(ies)”.  This posting will provide a summary of these proposed rules and related commentary as to their significance for end-users.  Additional information can be found in the attached slide deck.
Continue Reading Banking Regulators Propose New Margin Rules for Non-Cleared Swaps