Commissioners Criticize CFTC Approach to SEF Documentation Rule
CFTC Commissioners Caroline D. Pham and Summer K. Mersinger criticized the CFTC's failure to amend CFTC Rules requiring that derivatives transaction execution facilities ("DTEFs") comply with specified "core principle" requirements ("CFTC Rule 37.6(b)") in light of long-standing staff relief.
The CFTC had conditionally approved an application for a trading facility to register as a swap execution facility ("SEF"). In the Order, the CFTC included provisions that capture aspects of previously granted CFTC no-action relief relating to the requirement in CFTC Rule 37.6(b) that an SEF obtain master agreements governing SEF-executed transactions from participants.
Ms. Mersinger stated that the lack of agency action "undermines the integrity of the Commission's regulatory framework, and runs counter to a "core value" of the Commission - clarity through transparency to market participants about our rules and processes."
Commentary
The Commissioners are undoubtedly correct that it would be better if the CFTC implemented formal changes to the SEF documentation requirement in light of nearly a decade of no-action relief. But this is a technical matter, and given the long-standing relief, it is unlikely a subject high on most market participants' list of pressing issues. While not made explicit, it seems more likely that the Commissioner's statements point to a broader policy concern about the CFTC's approach to staff actions.