SIFMA Letter to CFTC Regarding Potential Applicability of Commodity Pool Regulation to Securitization Transactions

SIFMA issued a letter outlining the principal problems it concludes are posed for securitization markets in the absence of generalized relief from the proposed expansion of commodity pool regulation under the CEA. The problem raised in the letter is that the expanded scope of the definition of "Commodity Pool" under Title VII of the Dodd-Frank Act, which includes "swaps" as commodity interests, raises a question as to whether securitization entities that have entered or will enter into swaps could be viewed as commodity pools.

In the letter, SIFMA expressed concern over the broad interpretation of the term "Commodity Pool," insofar as the CFTC does not distinguish between trading vehicles (which should be regulated as pools) and passive holding vehicles (which should not), appears to give no weight to the words "operated for the purpose" in the statutory definition of commodity pool (see link to the statute below) and has expressed the view that entering into a single swap would make an entity a "Commodity Pool." SIFMA further requested a meeting with CFTC to discuss interpretative guidance and other relief from the expansion of the CFTC's authority.

Cross-Reference(s): Dodd-Frank Act; CEA Section 1(a)(10) (defining the term "commodity pool"); CFTC Reg. 4.13(a)(3). See also the recent Cadwalader Memo on this Topic: The Dodd-Frank Act May Require Registration as a "Commodity Pool Operator" and a "Commodity Trading Advisor" for Entities Associated with Securitization Transactions.

View letter in full here (links externally to SIFMA website).