Final Large-trader Reporting Rule Issued by CFTC | Practical Law

Final Large-trader Reporting Rule Issued by CFTC | Practical Law

The CFTC issued a final rule and related forms on large-trader commodity position reporting under the Commodity Exchange Act for banks and other parties in their capacities as clearing members, futures commission merchants (FCMs), swap dealers and foreign brokers.

Final Large-trader Reporting Rule Issued by CFTC

Practical Law Legal Update 2-551-5446 (Approx. 5 pages)

Final Large-trader Reporting Rule Issued by CFTC

by Practical Law Finance
Published on 12 Dec 2013 • USA (National/Federal)
The CFTC issued a final rule and related forms on large-trader commodity position reporting under the Commodity Exchange Act for banks and other parties in their capacities as clearing members, futures commission merchants (FCMs), swap dealers and foreign brokers.
On October 30, 2013, the CFTC issued a final rule under the Commodity Exchange Act (CEA) revising large-trader position reporting for market participants that hold large outstanding positions in commodity futures and swaps. The large-trader reporting framework currently in place under Part 20 of the CFTC's regulations is structured to collect information on positions in open contracts in any commodity (or commodity option) position held by any person on (or subject to the rules of) a board of trade which have not expired, been exercised or offset. The final rules impact Parts 15, 17, 18 and 20 of the CFTC Regulations (17 C.F.R. §§ 15.00 - 15.06, 17.00 - 17.04, 18.00 - 18.05, 20.1 - 20.11), which require the reporting information necessary to identify:
  • Persons who hold or control reportable positions (any open contract position that at the close of the market on any business day equals or exceeds the CFTC’s reporting levels specified in 17 C.F.R. § 15.03) in open contracts (via current Form 40).
  • Special accounts (any commodity futures or option account in which there is a reportable position) (via current Form 102).
These final rules modify the current reporting rules and forms as they pertain to positions in open contracts. Specifically, the rules require reporting parties to complete:
  • Updated Form 102A, under which futures commission merchants (FCMs), clearing members, foreign brokers and certain reporting markets may have reporting obligations, and which:
    • collects information about position-based special accounts (any commodity futures or option account with a reportable position) in the futures market;
    • requires clearing members to identify the individual trading accounts underlying these special accounts; and
    • generally must be submitted to the CFTC by 9 a.m. on the business day following the date on which a special account becomes reportable. Certain designated fields may be submitted by 9 am on the third business day following the day of reportability of the special account. Changes to information previously submitted on this form must sent to the CFTC according the schedule mentioned in the prior sentences and refresh updates are must be submitted annually. However, if a special account is not reportable as such for six months, neither change updates nor refresh updates are required.
  • New Form 102B, under which clearing members and certain reporting markets may have reporting obligations, and which:
    • requires transaction-based reporting of trading accounts volume threshold accounts (trading accounts that have daily trading volume that exceeds a specified level on a DCM or SEF in a single trading day. This requirements exists regardless of whether the accounts maintain positions at the end of the day;
    • requires that owners and controllers of volume threshold accounts provide identifying information; and
    • generally must be submitted to the CFTC by 9 a.m. on the business day following the date on which a volume threshold account becomes reportable. Certain designated fields may be submitted by 9 am on the third business day following the day of reportability of the volume threshold account. Changes to information previously submitted on this form must sent to the CFTC according the schedule mentioned in the prior sentences and refresh updates must be submitted annually. However, if a volume threshold account executes no trades in any product for six months on the reporting market originally reported, neither change updates nor refresh updates are required.
  • Updated Form 102S, under which SDs and clearing members may have reporting obligations, and which:
    • is required under 17 C.F.R. § 20.5;
    • collects information regarding position-based counterparty consolidated accounts with respect to 47 categories of non-financial, paired swaps listed in Part 20 of the CFTC Regulations; and
    • must be submitted within three days following the day a consolidated accounts first become reportable, as required under the old Form 102S. Any changes to information previously submitted on Form 102S just be sent to the CFTC by 9 am on the following business day and refresh updated must be submitted annually. However, if a consolidated account is not reportable as such for six months, neither change updates nor refresh updates are required.
  • New Form 71, which:
    • is used in conjunction with Form 102B;
    • the CFTC will send to parties, via a special call and at its discretion, asking for information on volume threshold accounts that are omnibus accounts in order to identify the ultimate owner and controller of these accounts; and
    • must be submitted by the date specified by the CFTC's notice.
  • Updated Form 40/40S, which:
    • the CFTC will send to parties, via a special call and at its discretion, at its discretion to collect information on reporting traders that are identified on other reporting forms; and
    • must be submitted by the date specified by the CFTC's notice.
The final rule becomes effective February 18, 2014. However, the rule's compliance date is August 15, 2014. Between the publication date of these final rules (November 18, 2013) and the effective date, the CFTC recommends that reporting parties work with the CFTC’s data and technology staff to test and implement any information technology standards or systems necessary to accommodate compliance with the final rules. In addition, the CFTC will conduct beta testing of each filing submission method prior to the compliance date. All reporting parties subject to the final rules must be in full compliance by the compliance date, including having submitted complete and accurate filings.
For details on the current large-trader reporting framework, see Practice Note, The Dodd-Frank Act: Swap Data Reporting and Recordkeeping: Swap Data Reporting: Large-trader Position Data Reporting for Physical Commodity Swaps.