By

Michael S. Sackheim

15 June 2017

CFTC Approves Amendments to Recordkeeping Rules

On May 23, 2017, the Commodity Futures Trading Commission (CFTC) unanimously approved proposed amendments to the recordkeeping obligations set forth in CFTC Regulation 1.31 (Recordkeeping Rule) which is applicable to all CFTC registered entities and other persons required to maintain records under the Commodity Exchange Act (CEA). The final amendments are intended to modernize the Recordkeeping Rule by making the form and manner in which regulatory records must be kept technology-neutral. The amendments provide recordkeepers with greater flexibility regarding the retention and production of CFTC regulatory records. The CFTC indicated that it does not believe the amendments impose any new recordkeeping requirements on any recordkeeper, and existing recordkeeping methods remain valid for compliance with the amended Recordkeeping Rule should a recordkeeper choose not to take advantage of the less-prescriptive, principles based approach of the amended Recordkeeping Rule. The final amendments also reorganized the Recordkeeping Rule for ease of understanding, including by adopting new definitions. The amendments represent a long-awaited and generally positive modernization of important CFTC rules that have often frustrated market participants. The effective date for the amended Recordkeeping Rule is August 28, 2017. (more…)

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26 September 2016

CFTC Issues Final Cybersecurity Rules on System Safeguards Testing Requirements

On September 8th, the Commodity Futures Trading Commission (“CFTC”) approved amendments (“Final Rules”) to its ”system safeguards rules.” The system safeguards rules obligate designated contract markets, swap execution facilities, and swap data repositories (for convenience, collectively referred to as “Exchanges”) as well as derivatives clearing organizations (“Clearinghouses”) to have in place cybersecurity programs of risk analysis and oversight. As part of such a program, Exchanges and Clearinghouses (collectively, “Covered Entities”) must conduct testing and review sufficient to ensure their automated systems are reasonably reliable and secure, and have adequate scalable capacity.

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28 April 2016

CFTC Asserts Jurisdiction Over Bitcoin Derivatives

This Article originally appeared in the Thomson Reuters FinTech Law Report, Volume 18, Issue 6 (2016).

On September 17, 2015, the Commodity Futures Trading Commission (“CFTC”) issued an order (“Coinflip Order”) settling charges brought against Coinflip, Inc., the operator of an online trading platform that facilitated the trading of derivatives on Bitcoin and other digital currencies, also referred to by the CFTC and other regulators as “virtual currencies” (“Bitcoin Derivatives”), including U.S. dollar cash-settled options. The CFTC found that Coinflip, Inc. had violated the Commodity Exchange Act (“CEA”) and CFTC rules by failing to register as a swap execution facility (“SEF”) or designated contract market (“DCM”). The direct impact of the Coinflip Order is minimal, as the platform itself had already shut down due to lack of volume. However, the Coinflip Order represents a watershed in the development of virtual currencies, as it is the first time that the CFTC has affirmatively asserted that Bitcoin and other virtual currencies are “properly defined as commodities” and that the CFTC has jurisdiction over Bitcoin Derivatives.

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