On May 22, 2017, the U.S. Commodity Futures Trading Commission amended and supplemented several CFTC regulations to strengthen anti-retaliation protections for whistleblowers under the Commodity Exchange Act. These amendments, in general, make the CFTC’s whistleblower protections consistent with those afforded by Securities and Exchange Commission rules and reinforce the need for private fund managers that are registered as commodity pool operators or commodity trading advisors to take affirmative steps to avoid violating federal regulations regarding whistleblowing.

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In an interview with Corporate Disputes Magazine, partner Brian Daly discusses key issues facing commodities markets, including the impact of the current regulatory environment and common types of commodities-related litigation. He also discusses the steps companies can take when facing commodities-related litigation, and his expectations for how commodities litigation will develop over the next 12 months.

Click here to read the interview.

In recent weeks, the U.S. Commodity Futures Trading Commission has issued several final rules and rule proposals that directly affect hedge fund managers that trade in futures contracts (and in other commodity interests) and private equity fund managers with portfolio companies that may, as part of a hedging or raw materials acquisition effort, engage in commodity interest transactions. All fund managers should review these changes to determine if they present limitations on their business or require regulatory relief filings; registered commodity pool operators and commodity trading advisors, of course, should review all of the developments discussed.

Click here to read more about these developments.

n Sept. 17, 2015, the Commodity Futures Trading Commission issued an order against an online platform (and against its sponsor) for facilitating the trading of Bitcoin options contracts.[1] The Order is based on the activities of Francisco Riordan, the chief executive officer of Coinflip Inc., and of Coinflip itself in operating an unregistered online trading platform that enabled trading in Bitcoin-based derivatives.

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On Feb. 27, 2015, the Commodity Futures Trading Commission, Federal Deposit Insurance Corporation, Board of Governors of the Federal Reserve System, Office of the Comptroller of the Currency, and Securities and Exchange Commission (collectively, the “Agencies”) published a new FAQ on the Agencies’ rule promulgated under Section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which is commonly referred to as the “Volcker Rule.” The new FAQ now makes clear that the Volcker Rule does not necessarily prohibit non-U.S. banking entities from investing in third-party managed hedge funds and private equity funds, even where the ownership interests of such funds are marketed and sold to U.S. investors.

Click here to read more about this update.

On Oct. 15, 2014, the staff of the Commodity Futures Trading Commission issued a letter granting no-action relief to persons seeking to delegate their commodity pool operator authority to others.

The October letter expands upon the relief granted in an earlier (May 2014) letter in two respects:

  • Unlike the May letter, the October guidance provides self-executing relief (i.e., no application need be made, and no notice is required to be filed with the CFTC); and
  • The October letter also addresses some technical, but often problematic, impediments to accessing the relief granted through the May letter.

Click here to read more about the CFTC relief.

On Sept. 9, 2014, the U.S. Commodity Futures Trading Commission staff granted broad relief intended to remove an obstacle to the ability of market participants, under rules previously promulgated by the U.S. Securities and Exchange Commission, to utilize general solicitation and general advertising in conducting placements of hedge fund and private equity fund interests (and other securities). This relief has certain conditions and does not represent a resolution of all of the questions and concerns surrounding the use of general solicitation and general advertising, as highlighted here.

On May 12, the Commodity Futures Trading Commission staff issued guidance for so-called “CPO delegation” arrangements, which are situations where an individual or entity that could otherwise be obligated to register with the CFTC as a commodity pool operator (a “CPO”) seeks to delegate its commodity pool operator authority to another person.

Click here to read more details on the guidance.

Yesterday, the Commodity Futures Trading Commission (the “CFTC”) announced several important updates related to swap execution facilities (“SEFs”):

1. CFTC Website Location for MAT Swaps. The CFTC announced that it has published a centralized list of swaps subject to the swap execution mandate, or otherwise known as “MAT trades.” This dedicated webpage is intended to provide market participants notice of the swaps subject to the swap execution mandate and includes specific terms defining each such swap. To visit the webpage, click here.

2. Package Transactions. The CFTC issued no-action relief for “packaged transactions” until May 15, 2014 from mandatory trading on a SEF. Package transactions are transactions involving more than one swap or financial instrument where at least one swap is subject to the trade execution requirement. To read the no-action letter, click here.

3. SEF Jurisdiction. The CFTC also issued guidance (that supersedes previous guidance) to clarify that while a SEF must obtain consent to its jurisdiction from all market participants that either directly or indirectly effect transactions on its facility, such consent need not be obtained by the SEF through an affirmative writing. Rather, a SEF may comply with this requirement by providing in its rulebook that any person initiating or executing a transaction on or subject to the rules of the SEF directly or through an intermediary, and any person for whose benefit such a transaction has been initiated or executed, consents to the jurisdiction of the SEF. To read the CFTC guidance, click here.

4. Rule to Protect Counterparty Identities in Reporting. In order to protect the identities of counterparties trading on SEFs, the CFTC issued an interim final rule clarifying that a party to an anonymous trade executed on a SEF or designated contract market cannot access counterparty information in swap data repositories. Once published in the Federal Register, the interim final rule will have a 30-day public comment period. To read the prepublication rule, click here.

To view the full CFTC announcement, click here.

The Commodity Futures Trading Commission (the “CFTC”) announced its first two “made available for trade” determinations (each, a “MAT Determination”), which mandate that fund managers trade certain benchmark interest rate swaps on behalf of their funds and managed accounts through a swap execution facility (a “SEF”) or a designated contract market (a “DCM”). Once a product is subject to a MAT Determination, fund managers will not be permitted to trade such products over-the-counter. Fund managers must complete the onboarding process with an appropriate SEF or DCM if they intend to trade swaps subject to the MAT Determinations by Feb. 15 or 21, depending upon the particular interest rate swap. The MAT Determinations apply to funds that are “U.S. Persons,” which include: (1) funds that are incorporated or organized in the U.S.; (2) funds incorporated or organized inside or outside the U.S. that are managed by investment managers that have a “principal place of business” in the U.S.; and (3) funds with a “majority of U.S. investors.”

Click here for more information on the MAT Determinations.