CFTC Proposes Futures Reporting Regime for Event Contracts

The CFTC proposed an alternate framework for reporting data on fully collateralized event contracts. The proposal would let designated contract markets and brokers report the products under the futures and options regime rather than the swap reporting regime.

According to the rulemaking Notice, the proposal covers fully collateralized event contracts with a binary or variable payout structure - products the CFTC otherwise regards as swaps. The CFTC said such contracts share most characteristics of exchange-traded futures and options, including fungibility, offset, and standardized terms on a single marketplace, while lacking the bilateral, over-the-counter features of traditional swaps.

Markets, futures commission merchants, clearing members, and foreign brokers would be able to report covered event contracts under Parts 15 through 18 ("General Reporting Regulations") instead of the swap reporting requirements in Parts 38 ("Designated Contract markets,") 39 ("Derivative Clearing Organizations,") 43 ("Real Time Reporting,") and 45 ("Swap Data Reporting"). The proposal would add a new section to Part 16, titled "Covered Event Contracts," and apply a default reporting level of 25 contracts.

The CFTC said the framework would codify aspects of 16 staff no-action letters that the Division of Market Oversight and Division of Clearing and Risk granted beginning with Letters No. 17-31 through Letter No. 26-14. The no-action positions in these letters required that covered contracts be fully collateralized and cleared, and that the listing market publish trade time, contract, quantity, and price data promptly after execution. The CFTC said it will withdraw the letters once the rule becomes effective.