Eligible Contract Participants and Other Related Definitions

The Asset Management Group (AMG) of SIFMA provides comments to the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) on the Notice of Proposed Rulemaking (NPR) further defining, among other terms, the term “eligible contract participant” (ECP) specifically with regard to the proposed application of the ECP definition in CFTC Rule 1.3 to commodity pools, CFTC: RIN 3235-AK65; SEC: File No. S7–39–10.

SIFMA AMG focuses primarily on the further definition of ECPs and the resulting impact on market participants if the rule is adopted as currently drafted.  ECPs must meet certain eligibility requirements in order to participate in certain markets.  Congress proposed these limitations in order to protect unsophisticated investors from pooling together to gain access to complex markets.  However, the SIFMA AMG believes the CFTC went past Congressional intent and, in doing so, created significant fundamental and operational burdens for certain entities – particularly for commodity pools.  SIFMA AMG recommends modifications to the proposed rule including a safe harbor for highly regulated entities and the ability of a commodity pool operator to reasonably rely on the representations of its investors as ECPs to avoid looking through the investor base for non-ECPs on a daily basis.