Category: Policy and Research

Interest Rate Hedging Policy and Research

ISDA and Clarus Publish the Final Risk-Free Rate Adoption Indicator

Post author By Blank Rome LLP
Post date January 29, 2024

January 29, 2024, marks the end of an era for the interest rate derivatives (“IRD”) markets, since on this date the International Swaps and Derivatives Association (“ISDA”) and Clarus Financial Technology (“CFT”) published the final version of the ISDA-Clarus RFR Adoption Indicator.

As explained in the ISDA Research Note accompanying today’s publication, the indicator was developed by ISDA and CFT to track how much global trading activity is conducted in cleared over-the-counter and exchange-traded IRD that reference risk-free rates (“RFR”) in eight major currencies: USD, EUR, JPY, GBP, AUD, CHF, CAD, and SGD.

From its first publication in July 2020, the RFR Adoption Indicator allowed market participants to monitor the transition from overnight to risk-free rates (for example, USD LIBOR to SOFR).

Tags CFT, Clarus Financial Technology, interest rate derivatives, International Swaps and Derivatives Association, ISDA, RFR, risk-free rates

Bitcoin Blockchain and Digital Currencies Environmental Commodities Policy and Research

Crypto and Carbon and Governance…Oh My! (Was There Ever Really a Kansas for Digital Assets and Environmental Commodities?)

Post author By Blank Rome LLP
Post date November 17, 2023

Andrew P. Cross —

Reflections on CFTC Commissioner Johnson’s Speech at the Atlanta Economics Club

On November 13, 2023, Commodity Futures Trading Commission (“CFTC”) Commissioner Kristin Johnson delivered a keynote address to the Atlanta Economics Club titled “Policing the (Token) Economy: Introducing Corporate Governance and Market Structure Reforms in Crypto and Environmental Commodities Markets.”

The speech is an excellent resource for any market participant looking for a survey of both the historical context and potential future regulatory and enforcement landscape of the markets for digital assets and environmental commodities.

To the casual observer of the derivatives markets (should such an observer exist), the two asset classes may seem to be unrelated. However, they share several common attributes.

Tags CFTC, CFTC Commissioner, Commodity Futures Trading Commission, digital assets, Kristin Johnson, The Wizard of Oz

Derivatives Compliance Policy and Research Regulatory Review Swap Dealers

Regulatory Review for Week Ended September 22, 2023

Post author By Blank Rome LLP
Post date September 27, 2023

Andrew P. Cross —

This week’s BR Derivatives Report Regulatory Review highlights five regulatory actions issued by the U.S. Commodity Futures Trading Commission (“CFTC”).

1) CFTC Enforcement Order Issued 9/20/2023

CFTC Docket No. 23-44

Type of Market Participant Involved

Swap Dealer (“SD”)

Summary

Registered SD failed to:

Implement procedures to ensure that its pre-trade mid-market marks (“PTMMMs”) were accurate (i.e., consistent with the SD’s internal pricing methodologies);
Adequately train and monitor its associated persons regarding PTMMM disclosure requirements; and
Timely provide PTMMMs to counterparties on numerous occasions.

The order imposed a penalty of $650,000 and requires the FCM to remediate the compliance oversight failures.

Commentary

Although many non-SD counterparties do not find the receipt of pre-trade marks to be particularly valuable, SDs are nonetheless obligated to provide counterparties with these marks and supervise the process for doing so.

Bottom Line

SD external business conduct standards (“EBCs”) are a perennial source of enforcement orders—and penalties—for registered SDs. Accordingly, every market participant that may be required in the future to register—or decide to voluntarily register—as a swap dealer would do well to consider the costs of not only EBC compliance oversight but also what seems to be costs of inevitable compliance oversight failures.