On Jul. 26, CFTC proposed amendments to rules on registered entities
CFTC proposed amendments to rules on provisions common to registered entities.
The proposed amendments are intended to clarify, simplify and enhance the utility of the part 40 regulations for respondent market participants and the Commission.
Commissioners Johnson, Pham, and Goldsmith Romero issued statements in support.
Background
CFTC part 40 (17 CFR 40) implements Section 5c(c) of the Commodity exchange act.
Governs how registered entities submit self-certifications, and requests for approval, of their rules, rule amendments, and new products, and CFTC's review and processing.
Rule Proposal
Amends inconsistent definitions of dormant swap execution facility in more clear terms
Rules of a dormant DCM, dormant SEF, dormant DCO, or dormant SDR would need to be approved in connection with the entity being reinstated as a DCM, SEF, DCO or SDR
Products would need to be approved or self-certified in order to be listed for trading.
Also proposes to remove certification cover sheet requirement and related references.
clarifies intent that rule 40.2(a)(3)(v) requires an explanation and analysis of the product’s underlying commodity, as well as both the product’s terms and conditions.
Removes two business day deadline for entity to respond to CFTC request re approval.
Makes clear in that Commission may at any time extend its review period for any period of time, provided that it does so with written agreement of the registered entity.
CFTC Commissioners' Statements
Commissioner Johnson supports the proposed amendments; comprehensive changes have not been made to part 40 for over a decade despite notable market events.
Cites development of blockchain, cryptocurrency, digital assets, and carbon credits.
Per Commissioner Romero, CFTC experienced a trend of submissions lacking enough information for CFTC regulatory responsibility; hopes that this proposed rule fixes that.
Proposal will help achieve purposes of heightened review standard for digital assets.
Also extend heightened review to self-certified climate and environmental products.
Third, Commissioner Pham supports the proposal; important to continuously improve.
Consultation
Comments on proposed rule are due 60 days after publication in federal register.
Jul. 26, 2023 CFTC Chairman Behnam Statement
On Jul. 26, 2023, CFTC issued statement by Chairman Behnam in support of proposal.
Jul. 26, 2023 CFTC Chairman Pham Statement
On Jul. 26, 2023, CFTC issued remarks from Chairman Pham on the rule proposal.
Urges registered entities to do their best to assist CFTC to make review efficient.
Sep. 2023 CFTC Federal Register
On Sep. 6, 2023, CFTC published proposed amendments in the federal register for a 60 day comment period; comments must be received on or before Nov. 6, 2023.
Nov. 2023 FIA Response Letter
On Nov. 3, 2023, FIA submitted response letter to CFTC proposed rulemaking.
Response asks CFTC to include mandatory public comment period in 40.10 for SIDCOs; the letter also supports several other technical features in the proposal.
Sep. 2024 CFTC Final Rule
On Sep. 12, 2024, CFTC approved a final rule to amend Part 40 of CFTC’s regulations.
Amendments govern how registered entities submit self-certifications, and requests for approval, of their rules, rule amendments, and new products for trading and clearing.
Amendments intended to clarify, simplify and enhance the utility of those regulations.
The CFTC final rule will be effective 30 days after publication in the federal register.
On same day, Commissioner Summer K. Mersinger delivered dissenting statement in fear the final rules formalize a steady erosion of the CFTC'ss self-certification process.
States the self-certification process is a fundamental pillar of the agency’s principles.
Questions the exercise of amending a regulation if revisions do not change existing expectation under the current version of the regulation and believes it erodes trust.
