Blog

Looking Lackluster: FICC fined by SEC

In an order entered October 29, 2021, the Securities and Exchange Commission (“SEC”) fined Fixed Income Clearing Corporation (“FICC”) $8,000,000 and set additional documentation and compliance requirements for FICC’s operation over the next three years. FICC is a wholly owned subsidiary of The Depository Trust & Clearing Corporation and the only central counterparty for securities issued by...

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Looking askance: CFTC fines Bitfinex

The Commodity Futures Trading Commission (“CFTC”) fined iFinex Inc., BFXNA Inc., and VFXWW Inc. (collectively, “Bitfinex”) $1,500,000 for offering financed retail commodity transactions sans regulations by a board of trade designated or registered by the CFTC. Bitfinex violated a 2016 CFTC order when it offered those financed retail commodity transactions to U.S. customers that weren’t eligible...

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Looking askance: CFTC fines unregistered FCM/DCM

Payment Ventures, Inc., doing business as Kraken (“Kraken”), entered into an order with the Commodities Futures Trading Commission (“CFTC”) on September 28, 2021 in connection with Kraken’s actions as an unregistered commodity exchange or futures commission merchant for digital assets between June, 2020 and July, 2021. Offering a pointed example of former CFTC Chair Gary Gensler’s warnings now...

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Looking askance: CFTC fines FCM that fails to show negative prices on futures

The Commodity Futures Trading Commission (“CFTC”) fined Interactive Brokers LLC (“Interactive Brokers”) $1,750,000 and required Interactive Brokers to pay restitution of $82,570,000 to customers for trading system failures. Interactive Brokers failed to prepare its electronic trading system for negative futures prices, even after internally acknowledging that such negative pricing could and...

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Looking askance: two CFTC enforcement actions against SEFs

On 27 and 28 September 2021 the Commodity Futures Trading Commission (“CFTC”) entered into settlements with each of Refinitiv US SEF LLC (“Refinitiv”) and Respondent Symphony Communication Services, LLC (“Symphony”) for two disparate violations of regulations applicable to swap execution facilities. Refinitiv, although properly registered as a swap execution facility, failed to report swap...

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A Quick Look: CFTC advisory letter 21-14

Responding to concerns about calculations of required capital, staff in the Commodity Futures Trading Commission (“CFTC”) Market Participants Division advised that futures commission merchants and swap dealers, or standalone swap dealers, may compute uncleared swap margin amounts via a model that hasn’t been approved by the CFTC or the National Futures Association (“NFA”) when determining...

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A Quick Look: CFTC no-action letter 21-13

Commodity Futures Trading Commission (“CFTC”) staff in the Division of Clearing and Risk reaffirmed guidance from 2014 for a registered derivatives clearing organization, CX Clearinghouse, L.P. This no-action relief reaffirms the interpretive guidance in the CFTC staff’s letter 14-05, which derivatives clearing organizations have relied on when asserting that holding “funds in the form of the...

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A Quick Look: CFTC no-action letter 21-12

Staff in the Division of Data at the Commodity Futures Trading Commission (“CFTC”) granted interim no-action relief to derivatives clearing organizations acting under exemptive orders from the CFTC, or no-action relief from the CFTC’s Division of Clearing and Risk. ASX Clear (Futures) Pty Limited, Japan Securities Clearing Corporation, Korea Exchange, Inc., OTC Clearing Hong Kong Limited, and...

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A Quick Look: CFTC no-action letter 21-11

Staff in the Commodity Futures Trading Commission (“CFTC”) Divisions of Data, of Market Oversight, and of Clearing and Risk issued a no-action letter for a designated contract market’s binary options cleared by a registered derivatives clearing organization. The designated contract market (KalshiEX LLC) and derivatives clearing organization (LedgerX, LLC) had requested that the CFTC staff not...

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A Quick Look: CFTC No-Action Letter 21-10

Extending relief to floor brokers, the Commodity Futures Trading Commission (“CFTC”) Division of Market Oversight and Market Participants Division recognized the difficulty of complying with some regulations because of the COVID-19 pandemic. While this no-action letter repeats the CFTC staff’s “expectation that registrants will work to implement technological solutions that permit full...

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A Quick Look: CFTC letter 21-09

In a no-action letter aimed at swap dealers, the Commodity Futures Trading Commission (“CFTC”) Market Participants Division, Division of Clearing and Risk, Division of Data, and Division of Market Oversight offered Brexit-related no-action for some transaction level reporting requirements. Guidance published in the Federal Register by the CFTC on July 26, 2013, set forth when swap dealers...

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A Quick Look: CFTC no-action letter 21-08

Broader guidance for our market emerged in the Division of Clearing and Risk’s letter 21-08 about the CFTC’s regulation 39.13(g)(8)(ii). Referring back to its own interpretive letter 12-08, the Division of Clearing and Risk pointed out that the CFTC had adopted many of the staff’s 2012 interpretations regarding futures commission merchants’ initial margin requirements for clearing customers in a...

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A Quick Look: CFTC no-action letter 21-07

The CFTC’s Market Participants Division next issued an exemption via letter 21-07, permitting an introducing broker not to file a required CFTC form for 2020. Staff reasoned that because the broker in question had registered as an introducing broker with 21 days remaining in 2020, had a securities broker-dealer application pending with the Securities and Exchange Commission (“SEC”) and Financial...

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A Quick Look: CFTC no-action letter 21-06

In no-action letter 21-06, the Market Participants Division of the Commodity Futures Trading Commission (“CFTC”) agreed that a company with a primary business of biopharmaceutical royalty returns needn’t register as a commodity pool operator when hedging its debt with interest rate swaps. No-action letter 21-06 is perhaps most notable because it was given to a company, Royalty Pharma LLC,...

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A Quick Look: CFTC letters 21-03, 21-04, and 21-05

In determination letter 21-03, Market Participants Division staff approved a swap dealer capital model proposal from the National Futures Association (“NFA”). And the Market Participants Division joined the Division of Market Oversight to release two no-action letters extending record keeping relief for floor brokers, introducing brokers, and futures commission merchants on designated contract...

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A Quick Look: CFTC letter 21-2

In its second staff letter of 2021, the Commodity Futures Trading Commission (“CFTC”) Market Participants Division issued a no-action letter explaining that the Market Participants Division will not recommend enforcement action against a futures commission merchant (“FCM”) that invests customer funds in otherwise permitted investments under Regulation 1.25 with an interest rate benchmarked to...

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A Quick Look: CFTC’s first staff letter of 2021

In the first Commodity Futures Trading Commission (“CFTC”) staff letter of 2021, the CFTC’s Division of Clearing and Risk granted any DCO relief from daily reporting on individual customer accounts under the amended Regulation 39.19(c)(1) until January 27, 2022 as long as that DCO complies with the prior version of Regulation 39.19(c)(1). DCOs would otherwise have needed to report by the end of...

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