CFTC Issues Rulemaking Agenda; Commissioner Mersinger Dissents
As part of the administration's Fall 2022 Unified Agenda of Regulatory and Deregulatory Actions, the CFTC provided a detailed list of all the rules that it is considering over the next year.
Among the most notable, the CFTC is expected to propose rules addressing:
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the "made available to trade" process for mandatory trade execution of swaps;
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amendments to the regulation of "event" contracts under Reg. 40.11;
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treatment of separate accounts held by FCMs;
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investment of customer funds held in connection with cleared swaps and futures; and
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changes to aspects of Part 4 applicable to CPOs and CTAs.
The agency identified two substantive rules that it expects to finalize, relating to (i) DCO governance requirements (see previous coverage) and (ii) amendments to Form PF (see Fried Frank memorandum here).
CFTC Commissioner Summer K. Mersinger dissented, saying she was "deeply troubled" that:
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the CFTC did not include proposals recommended by the CFTC Global Markets Advisory Committee relating to margin for uncleared swaps (in particular, proposals to exclude certain "seeded" funds from treatment as affiliates and to expand the scope of money market funds that are eligible collateral), and
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the CFTC did not include proposals to amend rules that have been "unworkable, ambiguous, and/or inefficient and which have therefore been the subject of never-ending staff no-action relief or other workarounds. . ."
Commentary
The CFTC agenda is somewhat quiet in relation to the agency's recent past and especially in relation to the agenda put forth by its former Chair (who now runs the SEC).
Ms. Mersinger's comments are interesting. On margin, she is right to point out that the CFTC seems to have abandoned plans to act on two GMAC recommendations and offered little explanation. Ms. Mersinger, however, seems to focus on these technical aspects without questioning some of the bigger policy aspects of the rules. For example, particularly in light of a significant family office failure a year ago, is it still the right policy to require registered dealers to post margin to swap financial customers, even those that may take aggressive market positions?
Ms. Mersinger's second point on the overuse of no-action relief and other "workarounds" is part of her ongoing crusade against the use of staff statements to "correct" rulemaking flaws. That position is undoubtedly correct as a matter of basic policy. That said, it is debatable if, particularly given the resources required to accomplish formal rulemaking (e.g., cost-benefit analysis, APA and other administrative hurdles), it is in the best interest of the CFTC and markets to prioritize such matters versus triaging resources to more pressing matters. (One can certainly question, though Ms. Mersinger does not, if this CFTC agenda truly captures the most pressing regulatory matters facing markets today.)