Commodity Futures Trading Commission Open Meeting
Commodity Futures Trading Commission
Open Meeting
Tuesday, November 5, 2019
Opening Statements & Introduction
Chairman Heath P. Tarbert
After providing a brief overview of the agenda items, Tarbert noted his support and stressed the importance of comity regarding the interaction between the Commodity Futures Trading Commission (CFTC) and foreign regulators. He stressed that comity is a two-way street and that reciprocity in terms of cross-border regulatory harmonization is important.
Commissioner Brian Quintenz
In his opening statement, Quintenz praised the Commission for taking up the proposed rule to amend regulation 160.30. He noted that the Foreign Boards of Trade (FBOT) registration under consideration speaks to crux of the debate regarding cross-border regulatory relations with the European Union.
Commissioner Dawn P. Stump, Commissioner, Rostin Behnam & Commissioner Dan M. Berkovitz
All three commissioners praised the opportunity to engage on the two agenda items, noting their importance.
Agenda Item 1: Proposed Rule – Correcting Amendment to Commission regulation 160.30 (Privacy of Consumer Financial Information)
Tarbert summarized the regulation which requires every futures commission merchant, retail foreign exchange dealer, commodity trading advisor, commodity pool operation, introducing broker, major swap participant and swap dealer subject to the jurisdiction of the CFTC to adopt policies and procedures that address administrative, technical and physical safeguards for the protection of customer records and information. He stated that this amendment further stipulates that these policies and procedures accomplish three items: 1.) provide for the security and confidentiality of customer information; 2.) guard against threats to customer information; and 3.) guard against any unauthorized use of customer information that could result in potential distress to customers. Tarbert concluded that this amendment reflects the CFTC’s foundational goal of ensuring the protection of market participant information and that this goal is increasingly important as derivatives markets become more data driven. Quintenz, Berkovitz and Stump all voiced their support for the proposed rule.
Final Vote
The proposed rule was approved in a 5-0 unanimous vote.
Agenda Item 2: Foreign Board of Trade Applications (FBOT) Applications of Euronext Amsterdam, Euronext Paris and European Energy Exchange
Tarbert noted that in applying to become registered FBOTs, a status which would allow these entities to provide U.S. customers direct access to their electronic trading systems as well as eligible derivative contracts, all three applicants have credibly demonstrated that they are subject to comprehensive, and comparable, regulatory supervision in their home country and that their derivative contracts are not overly risky. Tarbert stated that both Euronext Amsterdam and Euronext Paris are governed by the European Securities and Markets Authority (ESMA) and that they both clear trades through LCH, a CFTC registered clearinghouse. He said that all three applicants meet fitness and financial soundness requirements as well as comply with International Organization of Securities Commissions (IOSCO) governing trading principles. He continued that he supports the approval of all three applications and that their approval would further promote vibrant derivatives markets and signal the CFTC’s continued willingness to support comity and deference to home country regulations. He emphasized that when considering deference, comparable and comprehensive regulations should be treated as an initial threshold that is followed by reciprocity. Tarbert concluded that while the CFTC is supportive of deference to foreign counterpart regulations, language has been added to each registration order that allows the CFTC to revoke registration if concerns arise regarding international comity and cross-border regulatory harmonization.
Quintenz stated that while he does not disagree with the substance of the applications, he does find fault with the timing of providing final approval to these applicants. He noted that in light of their European counterparts’ refusal to stand by or re-affirm their 2016 commitments to the common approach (CFTC- EC CCP Agreement) to the regulation of cross-border central counterparties (CCPs) in the context of the ongoing discussing regarding EMIR 2.2 , he does not support acting on these final registrations. Quintenz said that while the possibility still exists for a successful outcome to the EMIR 2.2 cross-border dialogue, he has not seen satisfactory reassurance thus far. He concluded by stating his dissent.
Behnam outlined his support for these registrations and his belief that by approving them, the CFTC can further demonstrate their willingness to work with their foreign counterparts within the boundaries of international comity. He stated that while he supports the approval of these registrations, he would like to engage in further discussion surrounding actions that will ensure equal deference and reciprocity in terms of cross-border regulation.
Stump provided a historical perspective illuminating the CFTC’s treatment of FBOTs. She stated that these applications are consistent with the CFTC’s treatment of FBOTs throughout history and would signal that the CFTC continues to lead in establishing international comity and deference. She noted her support for approving all three applications.
Berkovitz echoed many of the comments of his fellow commissioners concerning international comity as well as the benefits of reciprocity and harmonization. He stated the CFTC requires optionality to respond appropriately to whatever regulatory development may arise in the future. He said that these registrations provide the optionality and ability to respond as appropriate concerning the treatment of U.S. entities operating overseas.
Final Vote
The CFTC Commissioners approved each registration in a 4-1 vote, with Quintenz opposing on each.
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