The Commodity Futures Trading Commission (CFTC) has approved a proposal designed to aid registrants and market participants by simplifying complex notification provisions.
The Commission unanimously approved the provision, which reduces certain intricate and prescriptive requirements that have been found to provide little or no benefit.
“The CFTC regulations implementing segregation notification are very specific about the manner in which counterparties must be notified of their right to segregate their funds and how funds must be held,” Matt Kulkin, director of the Division of Swap Dealer and Intermediary Oversight, said. “After four years of administering these rules, division staff has found that the prescriptive nature of the CFTC’s rules provides little benefit, if any, and yet, adds a level of complexity that deters end-user swap counterparties from exercising their right to choose to require their funds to be segregated.”
Kulkin said by allowing for more flexibility, the CFTC believes the proposal would encourage more end-user counterparties to elect to segregate their funds.
Officials said the proposal stems from the Commission’s 2017 Project K.I.S.S. initiative, which drew suggestions from the public for simplifying the Commission’s regulations and practices, removing unnecessary burdens and reducing costs.
By adding greater flexibility in how the swap parties can comply with the notification, segregation and custody requirements, officials said the Commission hopes to encourage more counterparties to take advantage of segregation and avoid unnecessary complication and interference with swap transactions essential for hedging and other commercial needs.