CFTC investigators are reviewing over one million e-mails and instant messages as part of an investigation into possible price manipulation of ISDAfix interest-rate swaps. The electronic communication search comes just a few months after the records were collected under subpoena for evidence that the world’s largest banks rigged the ISDAFIX swaps rate.

According to Bloomberg.com, the CFTC investigators are investigating whether brokers are colluding with dealers who stand to profit from inaccurate quotes.

This is the second investigation into the manipulation of benchmark rates within the past year. In 2012, regulators fined three banks over $2.5 billion for rigging the London interbank offered rate (LIBOR), which is tied to over $300 trillion of securities worldwide.

As part of the CFTC’s probe, investigators are preparing to interview bankers and brokers in the coming weeks.

CFTC LAW | Forex, Futures and Derivatives Regulatory News - Provided by Shipkevich PLLC

With the CFTC’s approval of the SEF rules last Thursday, swap users and would-be SEFs are targeting early December as the time when all swap users will be transacting standardized swaps on SEFs.

According to Reuters, the exact date is still a moving target until the CFTC publishes the rules in the Federal Register. Reuters reports that many firms expect December 9 to be the exact date, citing the final phase of the clearing mandate on September 9 as the key date.

At this point in time, sixty days after the CFTC publishes the rules in the Federal Register — which will likely be June 1 — these new would-be SEFs will receive provisional registration to execute standardized swaps while the CFTC reviews their applications.

Looking ahead, the next wave of the Dodd-Frank clearing mandate for over-the-counter derivatives begins on June 10. Participants that are already clearing, or will begin clearing on June 10, will be executing SEFs before December 9 because the CFTC requires that firms must begin using SEFs 30 days after they begin clearing.

Since the final phase of the clearing mandate is set to take place on September 9, an early December date has been marked as the time when electronic execution and clearing of OTC swaps will begin operating in unison.

CFTC LAW | Forex, Futures and Derivatives Regulatory News - Provided by Shipkevich PLLC

CFTC LAW | Forex, Futures and Derivatives Regulatory News - Provided by Shipkevich PLLC

At 10:00 a.m. on Thursday, the CFTC held an open meeting to consider trade execution rules and interpretive guidance regarding anti-disruptive trading practices authority.

The final rules being that were voted on included: Procedures to Establish Appropriate Minimum Block Sizes for Large Notional Off-Facility Swaps and Block Trades (Swaps Block Rule); Process for a Designated Contract Market or Swap Execution Facility to Make a Swap Available to Trade under Section 2(h)(8) of the Commodity Exchange Act (CEA); Swap Transaction Compliance and Implementation Schedule; Trade Execution Requirement Under Section 2(h) of the CEA (Made Available to Trade Rule); Core Principles and Other Requirements for Swap Execution Facilities (SEFs); Anti-disruptive Practices Authority – Interpretive Guidance and Policy Statement.

The CFTC voted 3-2 to pass the Swaps Blocks Rule. The CFTC also voted 3-2 to approve the Made Available to trade rule. The agency voted 4-1 to pass the SEF rules. Lastly, the Commissioners voted unanimously to approve the Interpretive Guidance and Policy Statement on Disruptive Practices.

CFTC LAW | Forex, Futures and Derivatives Regulatory News - Provided by Shipkevich PLLC

The Commodity Futures Trading Commission (CFTC) intends to will reveal it’s new rule on speculative positions limits within the next six weeks. The news comes after the agency’s previous attempt to have the rule passed was rejected in a September 2012 court ruling.

The original rule approved by the CFTC in October 2011 would have capped the holdings of futures and options for 28 commodities and their derivatives. The rule was intended to keep “excessive speculation” from provoking run-ups in commodity prices.

However, the International Swaps and Derivatives Association (ISDA) and the Securities Industry and Financial Markets Association (SIFMA) filed a lawsuit to block the rule from taking effect. On September 28, a federal court vacated the rule with Judge Robert Wilkins of the US District Court for the District of Columbia saying the CFTC failed to demonstrate the rule was “necessary and appropriate.”

In response to the ruling, the CFTC appealed the court ruling and began working on a new rule. According to Risk.net, Commissioner elaborated on the new rule, saying: “We may get it in late May, but I suspect it’s probably going to be in June.”

According to sources at Risk, the new proposal will almost certain be opposed by traders and many energy market participants, much in the same way that they fought against the first rule back in October.

O’Malia, who voted against the original positions limits rule in 2011, said of the new rule, “I don’t know what it says yet, and I’m dying to know how we learned from our mistakes with the previous rule.”

CFTC LAW | Forex, Futures and Derivatives Regulatory News - Provided by Shipkevich PLLC

The Commodity Futures Trading Commision (CFTC) is investigating a large number of trades in energy and metal markets to determine whether traders illegally used over-the-counter swaps markets to trade futures.

According to Reuters, the CFTC has asked the largest banks for data going back to 2010 as part of the agency’s probe. The CFTC’s inquiry, which is known as a “special call”, was into exchanges of futures for swaps (EFS).

Up until last year, a large amount of off-exchange energy and metal derivatives were traded as EFS via the ClearPort mechanism of CME Group Inc. In the ClearPort system transaction, the swap existed for a mere fraction of a second, instantly converting to a futures contract after execution.

After 2008’s Wall Street meltdown, there was a spike in EFS trades, as the oil industry adopted clearing as a way to minimize counterparty risk in over-the-counter trades.

However, under the Dodd-Frank Act, the transactions are deemed as swaps, even if it is just for a solitary moment. As a result, EFS trading has been diminished.

One industry executive told Reuters, “In a way they’re fighting last year’s war.”

Many industry participants worry that the request for more data is a sign that the CFTC is not comfortable with the industry’s brisk move to convert hundreds of energy, metals and agricultural swap contracts into futures, in order to avoid new regulations.

CFTC LAW | Forex, Futures and Derivatives Regulatory News - Provided by Shipkevich PLLC

The Commodity Futures Trading Commission (CFTC) is considering making adjustments to the Enhancing Protections Afforded Customers and Customer Funds Held by Futures Commission Merchants and Derivatives Clearing Organizations proposed rule.

According to CNBC, it is still unclear what changes the CFTC will make to the rule, which will require futures brokers to keep excess funds that exceed total customer deficits on hand at all times. However, the fact that the agency is contemplating changes to the rule shows that the CFTC is surely taking the industry criticism of the rule into account.

On Thursday, at an annual meeting of the American Cotton Shippers Association in New Orleans, Commissioner Wetjen said, “The staff responsible for this rule, they’re prepared to go in a different direction. We’re looking at a way where we continue to look at customer protection, but in a way that’s less costly. We want to avoid driving people out of the market.”

The proposed rule would require the funds of futures clearing merchants (FCMs) to exceed the sum of customer deficits at all times. The rule was proposed after the misuse of customer funds by MF Global and Peregrine Financial, both failed brokerages. Regulators argue the rule will help to guard customer money by impeding the use of one customer’s extra funds to cover the shortfalls of another.

Critics of the proposed rule contend that the new rule would strain smaller customers or brokerages that don’t have access to the amount of capital needed to meet the excess margin requirements.

At the cotton shippers meeting, Scott Parsons, managing principal at the Delta Strategy group, said, “”Either the FCM will have to front the money, or the fear is that this cost will be passed down to the ultimate customers and smaller customers will be hurt.”

The CFTC has yet to set a date to make adjustments to the proposed rule. However, CNBC reported that the earliest possible date would be two to three months from now, at the earliest, as the CFTC is currently occupied with finalizing the SEF rules.

CFTC LAW | Forex, Futures and Derivatives Regulatory News - Provided by Shipkevich PLLC

The Commodity Futures Trading Commission (CFTC) will vote next week on the Swap Execution Facilities (SEF) rules overseeing derivatives under the Dodd-Frank Wall Street Reform Act.

On May 9th, the CFTC issued a notice saying a formal vote will take place on May 16^th to finalize the SEF rules that were proposed nearly two years ago. SEFs are venues for executing swaps that were created under the Dodd-Frank Act in order to allow of greater transparency.

The proposed SEF rules have been the source of many debates within the industry. Details surrounding one of the issues, whether voice broking (trading over the phones) will still be allowed, have yet to be revealed.

Another issue of debate has been the request for quotation (RFQ) model. The original proposal required that buyers submit at least five RFQs in order to trade swaps.

Those who opposed the five RFQ minimum argued that the bank that eventually executes the client trade will struggle to hedge the position because four rival banks will already know the details of the deal.

According to the Financial Times, the final SEF rules will decrease the RFQ minimum to two before increasing to the minimum to three after a 12-month period.

CFTC LAW | Forex, Futures and Derivatives Regulatory News - Provided by Shipkevich PLLC

The Commodity Futures Trading Commission (CFTC) is reportedly contemplating lowering the number of price quotes a buyer is required to request before trading swaps.

According to Bloomberg News, three people briefed on the matter, who requested anonymity because the rule is still under consideration, confirmed the CFTC is looking to cut the number of quotes considered sufficient for interest rate, credit and other trades through swap–execution facilities.

Last year the five commissioners of the CFTC, led by chairman Gary Gensler, tried to implement a plan to require five quotes under Dodd-Frank Act regulations, which are intended to boost transparency. However swap dealers, such as Deutsche Bank AG and JPMorgan Chase & Co. lobbied against the proposed five-quote minimum, arguing that the requirement is unnecessary and will raise trading costs while lowering liquidity on facilities that use request-for-quote-systems.

Yesterday, Tim Cameron, managing director and head of the asset management group at the Securities Industry and Financial Markets Association, said in a statement, “Requiring portfolio managers to widely broadcast their trading position could negatively impact the prevailing price of their trades, making it more expensive and difficult to hedge their clients’ risk.”

The new plan that the CFTC is considering will have buyers request two quotes in the first year and three quotes in the following year.

The quotes requirement has been a major source of debate since the Dodd-Frank requirements were enacted.

While swap dealers would welcome a lowering of price quote requirements, there are those who think the rules should stay the same. One group in particular is the Americans for Financial Reform, a coalition that includes the AFL-CIP labor federation, as well as other unions and consumer groups.

The coalition sent a letter to the CFTC on February 27, saying, “Reducing Sef requirements so that they could be fulfilled by an essentially bilateral transaction, which could involve just one or two RFQ counterparties, would nullify most of the intended benefits of the Dodd-Frank Act provisions on derivatives market execution.”

CFTC LAW | Forex, Futures and Derivatives Regulatory News - Provided by Shipkevich PLLC

The Commodity Futures Trading Commission (CFTC) is reportedly “seriously” looking into whether Bitcoin may fall under its scope.

Bitcoin, which was founded in 2009 as a decentralized, digital currency, has seen a spike in value in recent months, as concerns grow over traditional bank deposits and currencies.

Bart Chilton, commissioner of the CFTC, told the Financial Times Bitcoin “is for sure something we need to explore.” Chilton told the publication, “It’s not monopoly money we’re talking about here — real people can have real risk in these instruments, and we need to ensure that we protect markets and consumers, even in what at first blush appear to be ‘out there’ transactions.”

Potential regulation is one of the biggest challenges that Bitcoin faces, but the U.S. government has not said much in regards to the digital currency.

In March, an arm of the U.S. Treasury Department said that “companies that exchange or transfer virtual currency, like Bitcoin, will be considered money-service businesses,” according to Fox Business. This means the firms must provide information to the government in order to prevent money laundering.

It’s probable that new regulation would seek to make Bitcoin become more transparent. Additionally, there is the possibility that regulators could opt to ban Bitcoin.

However, one source told the Financial Times that Bitcoin would not be under authority unless it becomes the basis for a derivatives contract. “Leveraged Bitcoin transactions settled in more than two days, known as ‘rolling spot’ transactions, would similarly fall under the CFTC’s oversight,” the Financial Times wrote.

Despite the source’s statement that Bitcoin would not fall under CFTC jurisdiction, Chilton does not share the same sentiment. “In essence, we’re talking about a type of shadow currency, and there is more than a colorable argument to be made that derivative products relating to Bitcoin falls squarely in our jurisdiction,” Chilton said.

CFTC LAW | Forex, Futures and Derivatives Regulatory News - Provided by Shipkevich PLLC