CFTC Commissioner O'Malia Criticizes No-Action Letters Regarding Data Reporting Rules (Parts 43, 45 and 46) (with Lofchie Comment)

CFTC Commissioner Scott O'Malia released a statement in which he criticized the process which granted relief to end users from CFTC Rules Part 43, 45 and 46. He described the process by which the letters were issued as "arbitrary and ad-hoc" and the various terms of the letters as "confusing."Commissioner O'Malia went on to say that unanswered concerns regarding data reporting requirements, coupled with the Commission's refusal to allow extensions for market participants to bring the IT infrastructure up to date, has led to the end user "suffering" the most. O'Malia also stated that the Commission currently does not have a plan to address its own data and technology challenges.

Lofchie Comment: In the news item regarding Letter 13-10, I had suggested that end users write to their Congressperson to question whether the CFTC actually had the technology to receive and store the information it was requiring, never mind how to make use of it. Commissioner O'Malia pretty much makes clear that the CFTC does not have the technology to make use of the required information. His letter also makes clear that end users are going to have to develop or buy technology, at an unknown expense, in order to comply with the CFTC rule requirements. From a policy standpoint, why is it worthwhile to go to all of this trouble to require end users to provide data as to swaps that were in effect in 2011? Given that financial markets and financial regulations will have completely changed in the years between the time the transactions were entered into and the time, if ever, when the CFTC is able to actually use this information, how could it possibly be worth the bother and expense? Perhaps there is some theoretical value in this information. But I also will point out that today's dueling budget requests for the CFTC would seem to indicate that the CFTC is going to have a far lower budget than it desires. If that is the case, doesn't it make sense to abandon rule requirements that seem on their face to fail any cost-benefit test, even from the standpoint of the regulator, never mind the regulated?

View Statement in full here (links externally to CFTC website).News items as to the criticized letters: CFTC Provides No-Action Relief (Letter 13-10) from Swap Data Reporting Requirements to Swap Counterparties that Are Not SDs or MSPs (with Lofchie Comment); CFTC Conditional No-Action Relief for Swaps between Affiliates as to Recordkeeping, Reporting and Clearing (Letter 13-09) (with Lofchie Comment) CFTC Issues No-Action Relief (Letter 13-08) from Reporting and Recordkeeping for Trade Options.