There has been a flurry of activity at the Commodity Futures Trading Commission (“CFTC”) in recent weeks.  As we reported previously, the CFTC approved three final rules, including the much-anticipated position limits rule, at its October 15 open meeting, and announced significant organizational changes to its operating divisions on November 3.  This post highlights additional significant actions by the CFTC in October and November and previews what is next for the CFTC under a Biden Administration.

Continue Reading CFTC News Roundup for October and November and a Look Ahead

I. The German Ringfencing Act

As a reaction to the financial crisis in 2007/2008 and to address risks in connection with the “too big to fail” phenomena, the German legislature issued the Ringfencing Act in 2014 (the “Act”).

In a nutshell, the Act forbids big CRR-credit institutions (depending on certain balance sheet thresholds) to engage in proprietary business (Eigengeschäft), proprietary trading (Eigenhandel) and credit/guarantee business with hedge funds (i.e., AIFs whose leverage exceeds three times their NAV).


Continue Reading Recent Developments on the German Ringfencing Regulation

During an open meeting on July 22, 2020, the CFTC Commissioners heard a staff presentation on three specific recommendations for changes to the margin requirements for uncleared swaps for swap dealers and major swap participants.  These changes would:

  • Align the timing and methodology for both the material swaps exposure calculations and the post phase‐in compliance periods with the Basel Committee on Banking Supervision and the International Organization of Securities Commissions and other global regulations;
  • Codify relief related to minimum transfer amounts as addressed by CFTC staff letters 17‐12 and 19‐25; and
  • Codify an alternative method for calculating the initial margin that must be collected from the counterparty, in which small swap dealers may rely on the initial margin models of a larger swap dealer counterparty.


Continue Reading CFTC To Consider Proposals for Refining Uncleared Margin Rules

At open meetings on Wednesday, July 22, and Thursday, July 23, the CFTC approved, by a 3-2 vote, two significant final rules implementing provisions in the Dodd-Frank Act.  The first rule imposes capital requirements on swap dealers (“SDs”) and major swap participants (“MSPs”) that are not subject to supervision by a banking regulator, as well as financial report requirements for all SDs and MSPs.  The second rule addresses the cross-border application of the SD and MSP registration thresholds and establishes a formal process for requesting comparability determinations for such requirements from the CFTC.  Each final rule is summarized below.
Continue Reading CFTC Adopts Final Rules on Capital Requirements and Cross-Border Application of the Registration Thresholds for Swap Dealers and Major Swap Participants

 – Final Report of the High Level Forum on the Capital Markets Union –

I. Capital Markets Union

The Capital Markets Union seeks to remove regulatory and non-regulatory obstacles to the free movement of capital across borders, thus creating new opportunities across the Single Market for businesses, savers and investors and increasing the financial and

On May 20th the U.S. Commodities Futures Trading Commission (the “CFTC”) Division of Enforcement (the “Division”) announced new guidance for Division staff to consider when recommending civil monetary penalties in an enforcement action (the “CMP Guidance” or the “Guidance”).  As a former CFTC regulator who brought dozens of cases over a 13 year career in

On June 8, 2020, the Federal Reserve Bank of New York (“FRBNY”) published revised FAQs and three updated transaction documents for the Term Asset-Backed Securities Loan Facility (“TALF”).  The three documents are the (i) Form of Issuer and Sponsor Certification as to TALF Eligibility for ABS, the Form of Indemnity Undertaking for ABS; (ii)

On June 8, 2020, the Federal Reserve Board (“Board”) announced changes to its Main Street Lending Program (“MSLP”) intended to allow more small and medium-sized businesses to participate in the MSLP.  The Board also published updated term sheets for each of the MSLP facilities reflecting these changes; to illustrate how these changes affect the term sheets, we have prepared a blackline of the updated Main Street New Loan Facility (“MSNLF”) term sheet against the most recent prior version released on April 30, 2020.  The Board notes that these changes are based on extensive feedback received from potential participants in the MSLP.  The announcement does not provide further specifics on the timing of the MSLP launch, but does state that the MSLP will be open for lender registration “soon” and that it will be actively buying loans “shortly afterwards.”

Continue Reading Federal Reserve Changes Terms of Main Street Lending Program to Expand Borrower Eligibility

On Wednesday, May 20, 2020, the Board of Governors of the Federal Reserve System (the “Board”) announced further details on the Term Asset-Backed Securities Loan Facility (“TALF”).  The Board’s announcement contains key documents and forms, including the Master Loan and Security Agreement; updated FAQs and a blackline reflecting changes made against the version published on May 12, 2020; and an initial list of TALF Agents.

Continue Reading Federal Reserve Publishes Additional Detail on TALF

On May 13, 2020, the Small Business Administration (“SBA”) released two FAQs, numbers 46 and 47, regarding two safe harbors from an SBA inquiry into a borrower’s statutorily required certification of economic necessity for a loan under the Paycheck Protection Program  (“PPP”).  FAQ 46 states that the SBA will deem any borrower that, together with its affiliates, received PPP loans with an original principal amount of less than $2 million to have made the required certification in good faith.  FAQ 47 relates to an existing safe harbor for PPP loans repaid by a specific date; the FAQ extends the deadline from May 14, 2020, to Monday, May 18, 2020.  Accompanying the FAQs was an interim final rule that memorialized an earlier FAQ (number 43) that had set the repayment deadline of May 14.

The net effect of the FAQs is that a borrower that, with its affiliates, has PPP loans of more than $2 million must decide whether to repay the loan by May 18, or to undergo SBA’s review of the good-faith basis for the certification of economic necessity when the borrower’s loan forgiveness application is filed.  The SBA has outlined the nature of its review in only general terms.  Borrowers with PPP loans of $2 million or less are generally safe from such a review.


Continue Reading The PPP Economic Necessity Certification: SBA Provides Additional Guidance