Category: Policy and Research

Subscribe to Policy and Research RSS Feed

CBOE and CME Self-Certify Bitcoin Futures, Cantor Self-Certifies Bitcoin Binary Options and NFA Issues Investor Alert

It was a busy morning at the intersection of derivatives and virtual currencies.  Here is an overview of what happened and some thoughts about what it means for the world of virtual currencies.… Continue Reading

FinTech Highlights from CFTC Chairman Giancarlo’s Testimony Before House Agricultural Committee

Yesterday, CFTC Chairman Christopher Giancarlo testified before the House Agricultural Committee. The following are highlights of “Fin Tech” issues addressed during the course of that testimony. Continue reading “FinTech Highlights from CFTC Chairman Giancarlo’s Testimony Before House Agricultural Committee” from the FinTech Report here. Good day.  Good to stay current on these very current events. DR2.… Continue Reading

Summary: ISDA Webinar on the Use of DLT and Smart Contracts in Market Infrastructure for Derivatives Processing

Earlier today, the International Swaps and Derivatives Association (ISDA) sponsored a webinar, “The Foundations of an Efficient Market Infrastructure,” that focused on an initiative by ISDA’s Market Infrastructure and Technology Committee to facilitate the adoption of emerging technologies (DLT, smart contracts)into the trading, documentation and processing of derivatives. The focus of the conference was on derivatives processing and … Continue Reading

Repo Market Infrastructure Update – May 2017

There were two important market infrastructure developments in May:  (1) the approval of the Depository Trust and Clearing Corporation’s (DTCC) Centrally Cleared Institutional Triparty Service (CCIT Service); and (2) the establishment of BNY Mellon Government Securities Services Corp., a new wholly owned subsidiary of The Bank of New York Mellon Corporation (BNY Mellon).… Continue Reading

Advisers Corner: SEC Staff Compliance Guidance For Robo Advisors

On February 23, 2017 the Staff of the SEC’s Division of Investment Management released “suggestions” on how robo-advisers meet their obligations under the Investment Advisers Act of 1940 (“Advisers Act”).   The Staff noted that their guidance was intended for robo-advisers that “provide services directly to clients over the internet” but noted that the guidance could … Continue Reading

Defending Bankruptcy Exemptions for Repos and Sec Lending

One great thing about a new Congress is that bills pending at the end of the prior Congress must be reintroduced. This wipes the slate clean of problematic proposals and reduces the risk of something slipping through without sufficient debate. For example, the proposed Bankruptcy Fairness Act of 2016 (BFA) expired with the 114th Congress. … Continue Reading

Mutual Fund Corner: Proposed IRS Guidance on RIC Commodity Exposure

The Internal Revenue Service (IRS) recently issued a notice of proposed rulemaking which, if adopted, could affect the analysis for determining whether or not an investment produces qualifying income for purposes of the income test under Subchapter M of the Internal Revenue Code.  The proposed guidance starts by setting forth the standards for the income … Continue Reading

Release 10666 and the Problem of Swaps

In an earlier post, I noted that Release No. IC-10666 was issued before interest rate swaps were invented. This may have been unfortunate, because swaps present unique challenges to Release 10666’s approach to asset segregation. I believe that difficulty with applying Release 10666 to swaps has contributed to inconsistency in the segregation requirements for different derivatives. Swaps: … Continue Reading

Should Asset Segregation Do Double Duty?

I’ve been discussing comments on the SEC’s proposed Rule 18f-4 in light of the SEC’s initial regulation of derivatives in Release No. IC-10666 (“Release 10666”). As explained in my first post, the objectives of the proposed rule include limiting the “speculative character” of funds that use derivatives and assuring they have sufficient assets to cover … Continue Reading

10666 and All That

[Click here for the obscure title reference.] Release No. IC-10666 (“Release 10666”), issued in 1979 under the direction of my partner Marty Lybecker, was the starting point for the SEC’s regulation of derivatives under Section 18 of the Investment Company Act. This release would provide the basis for proposed Rule 18f‑4’s regulation of “financial commitment transactions.” Many … Continue Reading

Could the Use of Derivatives Create a “Toxic Brew?”

This post continues my consideration of some conceptual questions underlying the SEC’s proposed Rule 18f-4. The following comment on the proposal caught my attention: Congress is stating [in Section 1(b) of the Investment Company Act] that there is a problem when leverage unduly increases the “speculative character” (what we now call risk) of the investments. … Continue Reading

Limitations on the Limitation of Leverage in Investment Companies

A CLE presentation gave me an excuse to read many of the comment letters regarding the SEC’s proposed Rule 18f-4, which would regulate the amount of “senior security transactions” in which an investment company could engage. I filed a personal comment letter responding to the SEC’s initial concept release in 2011. The proposed rule and … Continue Reading

Attention FinTech and Blockchain Firms: Financial Innovation Was the Talk of the Week in Regulatory Circles

In a span of 48 hours this week, two noteworthy developments occurred on the U.S. regulatory front: A major bank regulatory agency, the Office of Comptroller of Currency (the “OCC”), published Supporting Responsible Innovation in the Federal Banking System: An OCC Perspective; and A commissioner from the Commodity Futures Trading Commission (the “CFTC”), J. Christopher … Continue Reading

A Compendium of 2015 Regulatory Activity by the SEC In Respect of Security-Based Swaps

Links to Text of Rules Final Rules: http://www.sec.gov/rules/final.shtml Proposed Rules: http://www.sec.gov/rules/proposed.shtml 2015 Timeline Final Rules (F) and Proposed Rules (P) (F) February 2015 Finalized Registration and Governance Rules that Apply to SBS Data Repositories (F) February 2015 Finalized SBS Data Reporting Rules (P) February 2015 Proposed Rules to Implement the Finalized Reporting Rules, Establish Certain … Continue Reading

European Commission Adopts Clearing Mandate

Last week, the European Commission (EC) adopted Regulatory Technical Standards (RTS) that provide a clearing mandate for certain interest rate OTC derivatives.  The RTS have been subject to significant discussion and come in the wake of Dodd-Frank’s fifth anniversary and nearly three years after the Commodity Futures Trading Commission (CFTC) adopted similar requirements in the … Continue Reading

Tri-Party Repo Data: January

The Federal Reserve Bank of New York released their monthly statistics of the U.S. tri-party repo market for January 2015. As of January 12, 2015, the total collateral in the U.S. tri-repo market decreased $59.05 billion to $1.579 trillion. Most of the decrease was in U.S. Treasury collateral which decreased $58.78 billion to $582 billion. … Continue Reading

Extension of Relief for Oral Record Keeping Requirements for Registered Commodity Trading Advisors (CTAs) who are Members of a SEF or DCM

On December 16, 2014 the staff of the CFTC issued a no-action letter (CFTC Letter 14-147 or the “December Letter”) extending relief from certain oral record keeping requirements under Rule 1.35(a).  As background, Rule 1.35(a) requires that registered CTAs that are members of swap execution facilities (SEFs) or designated contact markets (DCMs) are required to … Continue Reading

Highlights from CFTC’s Global Markets Advisory Committee Discussion on Bitcoin

On October 9, 2014 the CFTC’s Global Markets Advisory Committee held a meeting focused on the clearing of Non-Deliverable FX Forwards and also with respect to bitcoin.  This post will focus exclusively on the discussion related to bitcoin. A few highlights from the discussion on bitcoin include the following: Thomas Leahy from the CFTC staff … Continue Reading

Issues and Trends of Interest to Buy-Side Derivatives End-Users: ISDA Publishes Survey

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 of … Continue Reading
LexBlog