CFTC Commissioner O’Malia on the Approval of CME Rule 1001

In his speech, CFTC Commissioner Scott O'Malia discussed the reasons he chose to abstain from participating in the CFTC's approval of CME Rule 1001. Commissioner O'Malia stated he believes that the CFTC failed to make any meaningful distinction between swap transactions submitted for clearing and those which were entered into on a bilateral basis and not cleared through a derivatives clearing organization. O'Malia also stated his belief that the ambiguity in Part 45 is unacceptable, and that Part 45 must be amended to reconcile its requirements with existing CFTC regulations and industry practice.

Furthermore, according to O'Malia, Part 45 must be amended to make clear that once a swap is submitted for clearing, it no longer exists, and two new equal and opposite swaps take its place. Likewise, O'Malia stated that Part 45 must be amended to clarify the reporting obligations for the derivatives clearing organizations and original counterparties once the two new swaps have been created. Finally, according to O'Malia, Part 45 must be amended so that continuation data (life cycle event data and valuation data) is only required to be provided for uncleared swaps.

View speech in full here (links externally to CFTC website).See also: Commissioner Sommers' Speech.