CFTC Extends No-Action Relief for FCMs Regarding Acknowledgement Letters from Certain Depositories (CFTC Letter 14-127)
Commentary by Bob Zwirb
The CFTC Division of Swap Dealer and Intermediary Oversight ("DSIO") announced an extension of previous no-action relief that provided additional time for futures commission merchants ("FCMs") to comply with CFTC rules requiring FCMs to obtain acknowledgement letters from certain depositories.
CFTC rules require that an FCM deposit customer funds only with depositories that have provided it with an acknowledgement letter in which such depositories agree to provide the DSIO Director with direct, read-only electronic access to transaction and account balance information for FCM customer accounts.
Many depositories to FCMs have not provided acknowledgement letters because the CFTC mandated online access agreements required by some depositories are still under review. According to the CFTC, DSIO's review of such agreements will not be completed by October 17, 2014, the expiration date for the previous no-action relief.
Therefore, DSIO extended this relief until December 31, 2014.
See: CFTC Letter 14-127.
Related news: CFTC Issues Temporary No-Action Relief for FCMs Regarding Acknowledgement Letters from Certain Depositories (CFTC Letter 14-91) (July 11, 2014).
Commentary
This action by the CFTC, which represents a second extension of the original July compliance date, illustrates the inefficient deadline-setting process that has plagued so much of its Dodd-Frank rulemaking. Rather than waiting until the necessary elements were in place, the CFTC instead set an initial deadline that, even when viewed ex ante, was unrealistic. They followed it with a series of no-action extensions that allowed insufficient time. There should be a better way to go about this - one that respects the interests of market participants who try in good faith to plan for these new requirements. As the current CFTC management continues to deal with the problems left with it by prior management, one solution may be to issue no-action letters that provide for indefinite, or at least realistic, extensions.