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Opening Statement, Thirteenth Series of Proposed Rulemakings Under the Dodd-Frank Act
Commissioner Scott O’Malia
April 12, 2011
Thank you Mr. Chairman, and let me thank the team which has spent many long hours developing the margin rule proposal before us today.
Today we are voting on similar, but not identical margin rules as the prudential regulators.1 Despite endless attempts to conform the rules, the treatment of end-users couldn’t be further apart. The rules proposed by the prudential regulators will require that end-users pay initial and variation margin to banks. Alternatively, the Commission’s rule requires transactions between a swap dealer and an end-user to simply include a credit support agreement and nothing more. Unfortunately, this isn’t the only inconsistency between the rulemakings.
I am also concerned that we are moving forward on a margin rule without defining the new capital requirements. Throughout this entire rulemaking process, market participants have complained they can’t see the entire picture. Today’s rulemaking is no different. End-users will need to wait a couple more weeks before they see the entirety of the new capital and margin regime. I am pleased, however, that the comment period for each rulemaking will run simultaneously.
Mr. Chairman, I believe commercial end-users and many of the financial end-users will be dissatisfied with the lack of harmonization among the different regulatory bodies, and I will vote against today’s margin proposal.
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Source: CFTC.gov
Horizons launches two new Enhanced Income ETFs
April 12, 2011--Jovian Capital Corporation ("Jovian") (Toronto:JOV.TO) and its subsidiary AlphaPro Management Inc. ("AlphaPro"), the manager of the Horizons AlphaPro family of exchange traded funds, are pleased to announce the launch of the Horizons AlphaPro Enhanced Income Energy ETF ("AlphaPro HEE") and the Horizons AlphaPro Enhanced Income Gold Producers ETF ("AlphaPro HEP") (collectively, the "ETFs"). Each ETF offers Canadian investors access to an innovative covered call strategy on energy and gold company stocks respectively.
Both ETFs begin trading today on the Toronto Stock Exchange ("TSX")
|
Name of ETF |
TSX Ticker Symbol |
| Horizons AlphaPro Enhanced Income Energy ETF | HEE |
| Horizons AlphaPro Enhanced Income Gold Producers ETF | HEP |
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Source: Jovian Capital Corporation.
AdvisorShares files with the SEC
April 12, 2011--AdvisorShares has filed a post-effective amendment, registration statement with the SEC for the ROCKLEDGE SectorSAM ETF (NYSE Arca Ticker: SSAM).
view filing
Source: SEC.gov
US groups win partial victory on derivatives
April 12, 2011--Large US companies fighting to escape expensive rules on derivatives trading have won a partial victory, after regulators put forward plans to hit hedge funds and to spare non-financial companies.
The requirement to post margin, or collateral in the form of cash or government securities, against derivatives transactions has been the most hard-fought area of the Dodd-Frank financial reforms for large US companies. The likes of IBM and Boeing have argued it would tie up billions of dollars in collateral, hurting their businesses and the wider job market.
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Source: FT.com
US lacks credibility on debt, says IMF
April 12, 2011--The US lacks a “credible strategy” to stabilise its mounting public debt, posing a small but significant risk of a new global economic crisis, says the International Monetary Fund.
In an unusually stern rebuke to its largest shareholder, the IMF said the US was the only advanced economy to be increasing its underlying budget deficit in 2011, at a time when its economy was growing fast enough to reduce borrowing.
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Source: FT.com
Opening Statement, Public Meeting on Proposed Rules Under Dodd-Frank Act
April 12, 2011--Thank you all for joining us today for this important meeting regarding the implementation of the Dodd-Frank Act.
During the financial crisis, derivatives clearing organizations that have mandatory clearing and margin requirements met all their financial obligations without the infusion of any capital from the federal government. This was not the case in the world of uncleared swaps. Today staff presents us with a proposed rule laying out the margin requirements for uncleared swaps.
When reviewing this proposed rule on margin, it is important to remember that AIG wrote approximately $1.8 trillion worth of credit default swaps. AIG did not post initial margin or pay variation on many of these transactions because of their triple-A credit rating. Once the subprime crisis hit, AIG was subject to large margin calls that it could not pay. On the brink of a bankruptcy that had the very real possibility of causing a global financial meltdown, the U.S. government poured billions of dollars into AIG, the majority of which went to pay the counterparties on AIG derivatives deals. If AIG had been required to post initial margin or pay variation, in all likelihood, they never would have been able to enter into $1.8 trillion worth of swaps.
The story of DCO’s, who met all of their financial obligations, and AIG, who needed a massive government bailout to survive, illustrates the importance of margin in the cleared and uncleared world. In my opinion, companies like AIG simply cannot be allowed to amass swap positions so large without posting the necessary levels of initial and variation margin. Without margin requirements, positions of such magnitude will again threaten to destabilize the entire financial system.
I would like to once again thank the staff at the CFTC for all their hard work in regard to these very important proposed rules. Their dedication to their important work during this difficult time is what government service is all about.
Source: CFTC.gov
Opening Statement, Meeting of the Commodity Futures Trading Commission
April 12, 2011-- This meeting will come to order. This is a public meeting of the Commodity Futures Trading Commission to consider issuance of a proposed rulemaking under the Dodd-Frank Wall Street Reform and Consumer Protection Act regarding margin requirements for uncleared swaps for swap dealers and major swap participants.
The Commission will consider the proposed rulemaking relating to conforming amendments to current CFTC regulations that was advised on today’s meeting agenda at a later meeting.
Before we hear from the staff, I’d like to thank Commissioners Mike Dunn, Jill Sommers, Bart Chilton and Scott O’Malia for all their thoughtful work to implement the Dodd-Frank Act.
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Source: CFTC.gov
CFTC and SEC Staffs to Host Public Roundtable Discussion on Dodd-Frank Implementation
April 12, 2011--The staffs of the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) today announced that they intend to hold a two-day joint public roundtable on May 2-3, 2011, to discuss the schedule for implementing final rules for swaps and security-based swaps under the Dodd-Frank Wall Street Reform and Consumer Protection Act.
The Dodd-Frank Act gives the CFTC and SEC certain flexibility to set effective dates and a schedule for compliance with rules implementing Title VII of the Act, which involves oversight of swaps and security-based swaps, so that market participants have time to develop the policies, procedures, systems and processes needed to comply with the new regulatory requirements.
Public comments on Title VII have helped inform the Commissions as to what requirements can be met sooner and which ones will take more time. The roundtable is intended to supplement the comments received to date and help inform the Commissions as they proceed with rulemaking. The order in which the Commissions finalize the rules need not determine the order in which the rules become effective or the applicable compliance dates.
The roundtable will provide the public with the opportunity to comment on whether to phase implementation of the new requirements based on factors such as: the type of swap or security-based swap, including by asset class; the type of market participants that engage in such trades; the speed with which market infrastructures can meet the new requirements; and whether registered market infrastructures or participants might be required to have policies and procedures in place ahead of compliance with such policies and procedures by non-registrants.
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Source CFTC.gov
CFTC, FTC Agree to Share Information on Energy Investigations
Agreement Will Foster Cooperation on Investigations into Market Manipulation
April 12, 2011--As part of their ongoing efforts to keep markets that they oversee open and fair for American consumers, the Commodity Futures Trading Commission (CFTC) and Federal Trade Commission (FTC) today announced that they signed an agreement to foster further cooperation between the two agencies by helping them share nonpublic information.
The CFTC and FTC signed a Memorandum of Understanding (MOU) [see related document] that will facilitate sharing of non-public information on investigations being conducted by the agencies, including investigations into the oil and gasoline markets. The agreement will help the FTC enforce its petroleum market manipulation rule, which prohibits fraudulent manipulation of U.S. petroleum markets. Information-sharing also will help the CFTC in exercising its authority to pursue manipulation in the oil markets.
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Source: CFTC.gov
CFTC Issues Notice of Proposed Rulemaking on Swap Data Recordkeeping and Reporting Requirements for Pre-Enactment and Transition Swaps
April 12, 2011-- The Commodity Futures Trading Commission (“CFTC”) today announced that it has proposed rules establishing swap data recordkeeping and reporting requirements for counterparties to pre-enactment swaps (those executed prior to enactment of the Dodd-Frank Act) and transition swaps (those entered into between the enactment date and the future effective date for final rules concerning swap recordkeeping and reporting). A Notice of Proposed Rulemaking, Swap Data Recordkeeping and Reporting Requirements: Pre-Enactment and Transition Swaps, has been submitted to the Federal Register and will be published shortly.
The proposed rule provides clarity concerning what records must be kept and what data must be reported to swap data repositories with respect to these historical swaps. The rule proposes limited recordkeeping requirements for counterparties to historical swaps. For swaps in existence on or after the date of publication of the proposed rule, counterparties would be required to keep records of specified, minimum primary economic terms for the swaps.
The proposed rule is also designed to ensure that data needed by regulators concerning historical swaps is available to regulators through swap data repositories (“SDRs”) beginning on the effective date for swap data reporting.
Source: CFTC.gov
