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"Position Points"
Statement of Commissioner Bart Chilton, Meeting of the Commodity Futures Trading Commission
December 16, 2010
On Tuesday, in remarks to Americans for Financial Reform, I discussed a proposal that could serve as an interim step prior to the implementation of mandatory position limits required by the new financial reform law. I detailed this "Position Point" proposal yesterday in testimony before Congress. I have also spoken with the heads of exchanges and market participants about Position Points. Here are the details of my proposal:
Once a trader reaches a specific Position Point, it triggers a new level of heightened regulatory scrutiny.
A Position Point is reached when a trader has an aggregate, on-exchange position limit of 10% of the first 25,000 contracts of open interest in one of 28 commodities (in energy, metals, and agricultural commodities), then 2.5% of open interest above 25,000 contracts.
This triggers a special call of that trader’s swaps positions.
If the swaps positions, netted with on-exchange positions, reduced the aggregate to below the Position Point, there is no regulatory action.
If the swaps positions, netted with on-exchange positions, increases the aggregate to above the Position Point, then regulators use all available authorities, as appropriate, to reduce those positions.
Source: CFTC.gov
Opening Statement, Eighth Series of Proposed Rulemakings Under the Dodd-Frank Act
Commissioner Scott O’Malia
December 16, 2010--Mr. Chairman, I am grateful this is the final rulemaking for 2010. As you noted, we have noticed 30 proposed rulemakings, four advanced notices, two interim final rules, and one final rule. While I am thankful that we have just a few more rulemakings left to complete in the new year, I recognize we are only halfway through the process – and it’s probably the case that the easiest portion is past us.
The next step is to digest the mountain of comment letters that I hope market participants will provide. Of course, I am assuming they have had time to read and consider the thousands of pages of proposed rules. For this process to be meaningful, we must ensure that the public has adequate time to digest each rulemaking and we must be mindful that they are working through a cumulative burden of thousands of pages of text and hundreds of questions posed by staff.
Since it is the holiday season, and I have already shared Macey’s list, I figure its time I shared my own wish list with the Commission. I have always operated under the premise that you don’t get what you don’t ask for.
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Source: CFTC.gov
NASDAQ OMX to Acquire FTEN
A Market Leader in Real-Time Risk Management Solutions
Decemeber 15, 2010-The NASDAQ OMX Group, Inc. has agreed to acquire FTEN, Inc. (FTEN), a leading provider of Real-Time Risk Management (RTRM) solutions for the financial securities market. Financial terms of the deal were not disclosed.
FTEN is a market leader in RTRM and is well positioned to grow as the industry is becoming more focused on solutions for effectively managing risk. Market participants are seeking tools that provide real-time, low latency enterprise-wide risk management, market awareness and control. FTEN's technology provides broker-dealers and their clients the ability to manage risk more effectively in real-time, which leads to better utilization of capital as well as improved regulatory compliance.
This acquisition is expected to add a significant product resource to NASDAQ OMX, allowing it to offer an industry-leading service to its clients. NASDAQ OMX will offer FTEN solutions to its global base of broker-dealers and the international exchange community.
Eric Noll, Executive Vice President of Transaction Services at NASDAQ OMX, said: "FTEN's customer base is comprised of some of the leading broker dealers in the global market and its offerings are the most comprehensive in terms of functionality, asset class and market spread. As part of NASDAQ OMX, FTEN will be able to increase its penetration globally, greatly broadening its distribution network beyond the U.S. to a worldwide solution, while expanding its U.S. customer base."
Ted Myerson Chief Executive Officer of FTEN, said: "We recognized early on that demand for pre-trade risk management tools would dramatically increase as the regulatory environment evolved and the need for comprehensive risk controls moved from niche to mainstream. We are proud to have developed a solution that has given us a strong market position. The transaction with NASDAQ OMX gives us the ability to broaden the scope of customers we can reach in the U.S. and tap into its international network of exchange partners."
Source: The NASDAQ OMX Group
Testimony before the Subcommittee on General Farm Commodities and Risk Management, U.S. House Agriculture Committee, Washington, D.C.
Commissioner Bart Chilton
December 15, 2010-Mr. Chairman, Ranking Member Moran, members of the Subcommittee, thank you for the opportunity to be with you today.
In the last decade, we saw the U.S. futures industry grow five-fold when the rest of the world grew three-fold. In several years we saw over $200 billion come into regulated U.S. futures markets. This new money was primarily from speculators, much of which was held by speculators I call "massive passives," those with a known, fairly price-insensitive trading strategy.
Then, in 2008, we saw a huge commodity bubble. Wheat was at $24. Today it is around $8. Crude oil spiked to $147.27 and gas was at $4 per gallon. Then the economy and commodity prices all fell off a cliff. Did the new speculators, including the massive passives, contribute to that price volatility—volatility that had farmers and ranchers, small and large agri-businesses and other businesses alike all paying higher prices than they should?
Researchers at Oxford, MIT, Princeton and Rice all say speculative interests had an impact on prices. Some have said the speculators drove prices. In fairness, some on the other side of the issue say there was no impact whatsoever. My take is somewhere in the middle. Speculators didn't drive prices, but they tagged along and helped to push them to levels, high and then low, that we would not have seen without them.
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Source: CFTC.gov
Horizons BetaPro Launches Canada’s First Volatility Tracking ETFs
December 16, 2010--BetaPro Management Inc. (“BetaPro”), the manager of the Horizons BetaPro family of exchange traded funds, is pleased to announce the launch of two new exchange traded funds (“ETFs”), the Horizons BetaPro
S&P 500 VIX Short-Term Futures™ ETF (“HBP Single VIX ETF” or “HUV”) and the
Horizons BetaPro S&P 500 VIX Short-Term Futures™ Bull Plus ETF (“HBP Double
VIX ETF” or “HVU”) (together, the “VIX ETFs”) which track the performance of the S&P 500 VIX Short-Term Futures™ Index (the “S&P VIX S-T Index”).
These are the first Canadian ETFs tracking the S&P VIX S-T Index, and the HBP Double VIX ETF is the first two-times leveraged ETF tracking the S&P VIX S-T Index to be offered in the world.
The HBP Single VIX ETF is designed to provide investment results, before fees, expenses, distributions, brokerage commissions and other transaction costs, that endeavour to correspond to the performance of the S&P VIX S-T Index. Any U.S. dollar gains or losses as a result of the HBP Single VIX ETF’s investments will be hedged back to the Canadian dollar to the best of its ability.
The HBP Double VIX ETF is designed to provide daily investment results, before fees, expenses, distributions, brokerage commissions and other transaction costs, that endeavour to correspond to twice the daily performance of the S&P VIX S-T Index. Any U.S. dollar gains or losses as a result of the HBP Double VIX ETF’s investments will be hedged back to the Canadian dollar to the best of its ability. The HBP Double VIX ETF does not seek to achieve its stated investment objective over a period of time greater than one day.
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Source: BetaPro Management Inc.
Treasury International Capital System
December 15, 2010--The Treasury International Capital System data has been updated and is now available.
view updates
Source: U.S. Department of the Treasury
Advantage Futures Partners with ELX to Offer FCM Services
December 15, 2010--ELX Futures, L.P. (ELX), a leading electronic futures exchange offering a faster, more efficient global alternative to trade U.S. Treasuries and Eurodollar futures contracts, announced today that Advantage Futures LLC, a premier technology-focused futures brokerage firm, will become an authorized Participant and offer Futures Commission Merchant (FCM) services for ELX.
Neal Wolkoff, Chief Executive Officer of ELX Futures, said, “We are pleased to partner with Advantage Futures and welcome their significant customer base to our electronic trading platform. This is an exciting time for ELX and this new FCM relationship further cements our reputation as a competitive alternative in electronic futures trading.”
Joseph Guinan, Chairman and CEO of Advantage Futures, said, “As a leading high-volume clearing firm with a diverse and growing client base, Advantage continues to seek new opportunities for our clients. We received great interest in ELX Futures and we are pleased to partner with ELX to offer clearing and execution services.”
Source: ELX Futures
Agencies Seek Comment on Market Risk and Basel II Advanced Approaches
December 15, 2010--Three federal bank regulatory agencies today announced they are seeking comment on a notice of proposed rulemaking that would revise the market risk capital rules for banking organizations with significant trading activity.
The proposed rule would implement changes approved by the Basel Committee on Banking Supervision to its market risk framework. The Federal Reserve, the Office of the Comptroller of the Currency (OCC), and the Federal Deposit Insurance Corporation (FDIC) believe the proposed revisions would better capture positions for which the market risk capital rules are appropriate, reduce procyclicality in market risk capital requirements, enhance the rules’ sensitivity to risks that are not adequately captured by the current regulatory measurement methodologies, and increase market discipline through enhanced disclosures.
The Federal Reserve, OCC, and FDIC request comments on the notice within 90 days of its publication in the Federal Register, which is expected soon.
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Source: Office of the Comptroller of the Currency
SEC Proposes Rules for Resource Extraction Issuers Under Dodd-Frank Act
December 15, 2010--The Securities and Exchange Commission today voted to propose rules mandated by the Dodd-Frank Act to require resource extraction issuers to disclose payments made to the U.S. or foreign governments.
Under the proposed rules, any resource extraction issuer would be required to disclose payments made to governments if the issuer:
Is required to file an annual report with the SEC, and
Engages in the commercial development of oil, natural gas, or minerals. The rules would apply to domestic and foreign issuers and to smaller reporting companies that meet the definition of resource extraction issuer.
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Source: SEC.gov
SEC Proposes End-User Requirements Under Dodd-Frank Act for Security-Based Swaps Exempt From Mandatory Clearing
December 15, 2010-- The Securities and Exchange Commission today voted unanimously to propose requirements of end-users when they engage in a security-based swap transaction that is not subject to mandatory clearing.
The proposed rule, required under the Dodd-Frank Act, specifies the steps that end-users must follow to notify the SEC of how they generally meet their financial obligations when engaging in a security-based swap transaction exempt from the mandatory clearing requirement.
The SEC also sought comment on whether to provide an additional exemption for certain financial institutions that would permit those institutions to use the exception to mandatory clearing that is available to end-users.
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Source: SEC.gov
