In case you missed it: late last month, the Integrity Council for the Voluntary Carbon Market (“ICVCM”) launched its Core Carbon Principles (CCPs) and Program-level Assessment Framework (Framework). With the publication of these new standards (developed with the input of hundreds of stakeholders in the voluntary carbon markets), we now have a set of fundamental principles for high-quality credits that create a verifiable climate impact, and a framework for determining whether carbon credit programs are eligible to label themselves as being in compliance with the CCPs.Read More
On July 26, 2023, the Commodity Futures Trading Commission (“CFTC”) proposed an amendment (“Proposal”) to, among other things, expand the universe of eligible collateral for the CFTC’s initial margin (“IM”) requirements for uncleared swaps. The Proposal would result in swap dealers that are not subject to prudential regulation being able to use a broader range of money market funds (“MMFs”) and similar funds as collateral to meet their uncleared swap IM requirements under CFTC Regulation 23.156(a)(1)(ix).Read More
On September 27, 2022, the Commodity Futures Trading Commission (“CFTC”) announced the settlement of charges against the swap dealer (“SD”) and futures commission merchant (“FCM”) affiliates of 11 financial institutions totaling more than $710 million. The action, filed and settled on the same day and brought in tandem with a related Securities and Exchange Commission (“SEC”) action, charged the institutions with failing to meet certain CFTC recordkeeping requirements. Specifically, the Commission determined that the SDs / FCMs failed to stop their employees from communicating internally and externally using unapproved communication methods such as WhatsApp or Signal.Read More
By: Cheryl L. Isaac and Spencer D. Warkentin
On September 26, 2022, amidst a flurry of other enforcement actions, the Commodity Futures Trading Commission (“CFTC”) announced the settlement of its administrative action against Asset Risk Management, LLC (“ARM”) in the amount of $200,000. The CFTC found that ARM operated an unregistered swap execution facility (“SEF”) for a period of 5 years, from September 2017 to the present.Read More
On August 10, 2022, the Commodity Futures Trading Commission’s (CFTC) Division of Market Oversight (DMO) issued a no-action letter (NAL), CFTC Staff Letter No. 22-09 (NAL 22-09), temporarily extending relief regarding certain position aggregation requirements until the earlier of either August 12, 2025 or the effective date of any relevant rulemaking. This relief was first provided in CFTC Staff Letter No. 17-37 (NAL 17-37) on August 10, 2017, and subsequently extended in CFTC Staff Letter No. 19-19 (NAL 19-19) on July 31, 2019. The extended relief provided by NAL 19-19 was set to expire on August 12, 2022, two days before the issuance of NAL 22-09. The DMO stated that it would use the newly extended time to assess the impact of the relief, including whether it hinders the CFTC staff’s ability to conduct market surveillance, particularly in light of so many new contract markets and market participants becoming subject to the Position Limits for Derivatives Final Rule. The CFTC will also consider a rulemaking process to codify the relief set forth in NAL 22-09.Read More
On 2 June 2022, the Commodity Futures Trading Commission (CFTC) filed a complaint against crypto exchange Gemini Trust Company, LLC (Gemini) in the U.S. District Court for the Southern District of New York for allegedly making false or misleading statements of material facts to the CFTC related to the bitcoin futures contract that Gemini launched on its exchange in 2017. If successful in this litigation, the CFTC would impose a derivatives trading and registration ban on Gemini and its employees, in addition to civil monetary penalties and profit disgorgement.
According to the CFTC’s complaint, Gemini intended to self-certify its bitcoin futures contract, and it engaged with CFTC staff between July and December 2017 in connection with the self-certification. The bitcoin futures contract was to be cash-settled by reference to the underlying bitcoin price, determined by the daily bitcoin auction that took place on the Gemini Exchange. In its complaint, the CFTC alleges that the Gemini bitcoin futures contract and related spot auction were readily susceptible to manipulation.
Specifically, the CFTC alleges that:
- Gemini represented to the CFTC that Gemini required all transactions to be fully “prefunded”, despite the fact that Gemini was lending digital assets to traders on an unsecured basis at low rates;
- Gemini made false or misleading statements relating to self-trading and did not effectively prohibit self-trading from occurring in the Gemini bitcoin auctions (with about 70% of the total auction trading volume resulted from one market participant trading with itself in December 2016);
- Gemini entered into bespoke fee arrangements with certain market makers that were not available to all Gemini market participants and were not disclosed to the public; and
- Gemini provided false or misleading statements to the CFTC regarding trading volume and liquidity on the Gemini Exchange.
The CFTC emphasized in its complaint that the bitcoin futures contract was particularly significant because it was to be among the first digital asset futures contracts listed on a U.S. derivatives exchange. This action makes clear regulators’ intense focus of crypto assets, and the stakes are high: If the CFTC is successful, Gemini and its employees and agents would effectively be banned from U.S. derivatives markets, in addition to being subject to civil monetary penalties and profit disgorgement. CFTC Chairman Rostin Behnam has previously warned that the agency’s recent crypto-related enforcement actions were just the “tip of the iceberg,” and the Gemini lawsuit is evidence that there are more enforcement actions to come.
On 25 May 2022, the U.S. Commodity Futures Trading Commission’s (CFTC) block trade no-action relief, provided in CFTC No-Action Letter (NAL) 20-35, expired. As of that day, all swap execution facilities (SEFs) are required to comply with the amended definition of “block trade” provided under CFTC Regulation 43.2.
“Block trades” are large, privately negotiated (either directly or through a broker) swap transactions that meet certain quantity thresholds. Block trades must qualify for execution apart from the SEF’s order book or trading platform in accordance with the relevant SEF’s rules, pursuant to CFTC Regulations.Read More