Factbox: CFTC unveils more Dodd-Frank rules

(BestGrowthStock) – The U.S. Commodity Futures Trading Commission on Tuesday unveiled six more new rules as it works to take oversight of the $615 trillion over-the-counter derivatives market mandated in the recently enacted Wall Street reform bill.

The agency is working on rules in 30 topic areas, and some analysts estimate it will eventually propose as many as 80 detailed regulations.

The CFTC proposed rules on Tuesday to prevent manipulation and disruptive trading practices.

Here are details of the other new rules:

REVIEW PROCESS FOR MANDATORY SWAPS CLEARING

Goal: to implement a process to review swaps to determine whether they are required to be cleared.

Comment period: 60 days

* Clearinghouses can continue to clear the same kinds of swaps they already clear, but must file a written request to the CFTC to add new types, showing they have enough financial resources and the ability to manage the risk.

* Lays out the type of information the clearinghouse needs to provide.

* CFTC has 90 days to review swap submissions, and will provide 30 days for public comment.

* CFTC required to review swaps not accepted for clearing on ongoing basis to determine whether certain swaps should be required to be cleared.

* If the CFTC finds a swap that should be accepted for clearing but has not been, it could issue a public report, and take actions such as setting margin or capital requirements for the parties to the swap.

* CFTC could postpone a clearing requirement on its own or at the request of a counterparty to the swap until it completes a review of the swaps and the clearing arrangement.

APPROVAL OF NEW RULES BY REGISTERED ENTITIES

Goal: to establish new framework for certifying and approving new products and rules submitted to the CFTC by registered entities — so-called “Part 40” regulations.

Applies to: exchanges, clearinghouses, swap execution facilities, swap data repositories.

* Have to submit self-certification at least 10 business days before effective date of rule or rule change, and new rule or amendment would become effective unless CFTC objects.

* Proposed rules would need to be posted on entities’ websites at time of filing.

* Clearinghouses deemed “systemically important” by regulators would have to provide 60 days’ advance notice of any proposed rule changes that could “materially affect the nature or level of risks”.

REMOVING REFERENCES TO CREDIT RATINGS

Goal: to remove references to credit ratings found in CFTC regulations and replace with other appropriate standards of creditworthiness.

Comment period: 30 days

Applies to: futures commission merchants, clearinghouses, commodity pool operators, commodity trading advisors

* Customer funds can be held in foreign banks with more than $1 billion of regulatory capital.

* Commodity pool operators can still describe “creditworthiness” by a particular investment rating, but proposed rules would stress they have more responsibility assessing the risk of the instruments.

INVESTMENT OF CUSTOMER FUNDS

Goal: to reduce risk for customers’ invested funds.

Applies to: futures commission merchants, clearinghouses.

* Based on a proposal first made in May 2009.

* Narrows the scope of investment choices.

* Raises certain standards imposed on permitted investments individually and on a portfolio basis.

* Does not limit collateral that may be used by customers of futures commission merchants.

* Proposes asset-based, issuer-based, and counterparty concentration limits.

* Limited to investing a maximum of 10 percent of their segregated client funds in money market mutual funds.

* Limited to investing a maximum of 2 percent of segregated client funds in any one family of funds.

(Reporting by Ayesha Rascoe and Roberta Rampton; Editing by Dale Hudson)

Factbox: CFTC unveils more Dodd-Frank rules