CFTC Commissioner Chilton Sets Out a Rule Making Timeline (with Lofchie Comment) (and YouTube Video)

At the Houston energy conference at which he spoke (link here to related news item), CFTC Commissioner Chilton laid out a projected timetable for the completion of swap rules by the CFTC. December 31, 2012 GoalsFinal Rules:

• Clearing Requirement Determination [this may go on November 15]
• Cooperative Clearing Exemption
• Inter-affiliate Clearing Exemption
• SEF Rules
• Block Trading Rule for Swaps
• DCMs – Core Principle 9
• Disruptive Trade Practices Interpretation
• Records of cash commodity, futures, option, and swap transactions (Rule 1.35)
• CPO Harmonization
• RTO/ISO Exemptive Relief
• 201(f) Exemptive Relief
• Segregation for Uncleared Swaps
• Systemically Important Clearing Organizations –recovery time

Proposed Rules and Orders:

• Guarantees of Swaps
• Position Limits

Relief Expires:

• Registration Relief for Certain IBs
• Temporary Relief from the De Minimis Threshold
• CPOs and CTAs doing FX
• Cross-Border Interim Relief
• Alternative Schedule for Compliance with Rule 1.74

March 13, 2013 Goals: Final Rules:

• Capital for SDs and MSPs
• Margin for Uncleared Swaps
• Governance and Conflict of Interest (DCMs, DCOs SEFs)
• Guarantees of Swaps
• Identity Theft
• Volcker Rule

Proposed Rules and Orders:

• Stress Testing under Section 165
• Systemically Important Clearing Organizations – Liquidity

Relief Expires:

• Part 23, Subpart F – Internal Business Conduct Books and Records requirements
• RTO/ISOs
• 201(f) electric utilities
• ECP Status, Swap Guarantee Arrangements, Jointly and Severally Liable Counterparties, Amounts Invested on a Discretionary Basis, Anticipatory ECPs
• Cleared Swaps in Agricultural and Exempt Commodities and EFSs

June 1, 2013 Goals: Final Rules:

• Cross-Border – Exemptive Order and Interpretive Guidance, any remaining issues

Lofchie Comment: Leaving aside whether the CFTC can meet this timeline, there is a significant policy question as to whether the better rule making approach is to adopt rules a few at a time (the CFTC approach) or to adopt them in whole even if that entails some delay (the SEC approach). For market participants, it is hard not to favor the SEC approach as that allows consideration of an entire package of rules. Further, it seems unfair to require firms to register as swap dealers without telling them either the capital charges or the jurisdictional reach of the rules.

See: Chilton Estimated Timeline on Dodd-Frank Implementation ("Red Zone").See also: Really Unrelated Music Video.