Bridging the Week by Gary DeWaal



Last week, the New York State Department of Financial Services enacted a requirement that all financial intermediaries engaging in a virtual currency business with a connection to New York State must first obtain a newly established BitLicense unless expressly exempted. In addition, the CFTC chairman provided insight into where the Commission may be headed in connection with its possible oversight of proprietary traders and algorithmic trading systems, while multiple respondents were fined for violations of Reg SHO, TRACE, position limits or non-disruptive trading requirements. Two firms, however, disputed CFTC allegations regarding their alleged manipulative conduct. As a result, the following matters are covered in this week’s Bridging the Week:

  • NYDFS Issues BitLicense Framework for Regulating Virtual Currency Firms (includes My View);
  • EC Delays Implementation Date for Capital Hits to European Banks for Exposure to Non-Recognized Foreign Clearinghouses;
  • Kraft Foods and Mondelez Global Seek to Dismiss Parts of CFTC’s Manipulation Complaint;
  • CFTC Chairman Says Commission Considering Registration of Proprietary Traders With Direct Market Access; Commissioner Giancarlo Issues 'Ode to FCMs' (includes My View and Hard to Believe);
  • Merrill Lynch Agrees to US $11 Million Payment to Resolve SEC Short Sale Charges;
  • CME Group Requires Profit Disgorgement as Part of Position Limit Violation Settlements; Traders Settle for Alleged Spoofing-Type Conduct on Both CME Group and ICE Futures U.S.;
  • Goldman Sachs Agrees to US $185,000 Fine With FINRA Related to Alleged TRACE Reporting Deficiencies;
  • CFTC Staff Grants Relief From IB and CTA Registration to Foreign Underwriters in Connection With Swap Activities of US-Based International Financial Institutions (includes Legal Weeds);
  • Leap Second is Coming June 30; Are You Ready? (includes Compliance Weeds); and more.

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Article Version:

NYDFS Issues BitLicense Framework for Regulating Virtual Currency Firms

The New York State Department of Financial Services issued final regulations requiring a so-called “BitLicense” and establishing minimum standards for all financial intermediaries who engage in a virtual currency business activity from New York or to a NY resident.

The regulations impact a wide spectrum of potential businesses, although they exclude merchants and consumers who use virtual currencies in connection with transactions for goods or services, persons chartered under the NY banking law and approved to engage in a virtual currency business activity, and persons who engage in the mere “development and dissemination of software in and of itself.” This appears to exclude virtual currency miners, although the regulations are not entirely clear. According to Benjamin Lawsky, the departing superintendent for the NYDFS,

[S]tudents or other innovators who are simply developing software and are not holding onto customer funds are not required to apply for a BitLicense.

In general, the new regulations require all financial intermediaries engaging in a virtual currency business to apply and obtain a so-called BitLicense, and to maintain certain minimum standards and programs to help ensure customer protection, cybersecurity and anti-money laundering compliance.

Under the regulations, what constitutes a virtual currency should be broadly construed and includes any digital unit that is utilized as a medium of exchange or as a form of digitally stored value. However, virtual currencies do not include certain digital units that are used solely with online gaming platforms or as a part of a customer affinity or rewards program (with some restrictions), or that are used as part of prepaid cards.

Likewise, virtual currency business activity is broadly defined and includes (1) receiving virtual currency for transmission or transmitting virtual currency except where the transaction is for non-financial purposes and only involves a nominal amount; (2) storing or holding virtual currency for others; (3) buying and selling virtual currency as a customer business; (4) engaging as a customer business in the conversion or exchange of (a) fiat currency or other value into virtual currency, (b) virtual currency into fiat currency or other value, or (c) one form of virtual currency into another form of virtual currency; or (5) controlling, administering or issuing a virtual currency.

Applications for a BitLicense require extensive information about the applicant and its principals. Among the required information is a description of the firm’s proposed business activities, all relevant written policies and procedures, and fingerprints and a third-party prepared background report on each principal. Fingerprints and a photograph will also be required for each employee who may have access to customer funds.

Each virtual currency firm must have and enforce written compliance policies addressing anti-fraud, anti-money laundering, cybersecurity, privacy and information security. Virtual currency firms must maintain at all times “such capital in an amount and form as the superintendent determines is sufficient to ensure the financial integrity of the [l]icensee and its ongoing operations.”

Virtual currency firms are required to maintain and keep certain records in their original or native file format for at least seven years and submit themselves to examination by the NYDFS. They are also required to file quarterly unaudited financial statements and one annual financial statement that is certified. Such firms must appoint a chief compliance officer, a chief AML officer and a chief information security officer with specified responsibilities. Certain minimum risk disclosures are required to be made to all customers.

All virtual currency firms must apply for a license within 45 days of the unspecified effective date of the regulations or cease operating as a virtual currency firm. Material changes in business must be pre-approved by the NYDFS.

The NYDFS may grant perpetual licenses or two-year conditional licenses. All licenses can be revoked after a hearing upon a showing of “good cause.”

Nothing in the new NYDFS provisions regulates virtual currencies themselves.

(Click here for background on recent virtual currency regulatory developments in the November 13, 2014 advisory, "Recent Key Bitcoin and Virtual Currency Regulatory and Law Enforcement Developments" by Katten Muchin Rosenman LLP.)

My View: The NYDFS is the first US regulator to impose a specific requirement for virtual currency firms to obtain a BitLicense in order to conduct business and to require licensees to adhere to express minimum standards. It only can be hoped that other states contemplating regulations adopt equivalent requirements so interstate commerce involving virtual currency is not unnecessarily burdened. That being said, one thing that is particularly remarkable about the NYDFS BitLicense regulations are the requirements of licensees t0 maintain cybersecurity programs containing proscribed elements. In particular, the NYDFS expressly requires virtual currency firms to adhere to many of the best practices recommended (but not yet mandated) by other regulators, including identifying internal and external cyber risks, establishing procedures to protect the firm’s electronic systems and customer data, appointing a chief information security officer to oversee the firm’s cyber security program, requiring penetrating testing and audit trails, and requiring firms to maintain a business continuity and disaster recovery plan. Even financial service firms that are not involved in a virtual currency business should review these requirements to evaluate whether their own cybersecurity program would pass muster.

Briefly:

  • EC Delays Implementation Date for Capital Hits to European Banks for Exposure to Non-Recognized Foreign Clearinghouses: The European Commission has agreed to postpone the date when European banks must take onerous capital hits for transacting futures or swaps business through non-EU clearinghouses that have not been recognized as subject to equivalent oversight by the EC. The new effective date is December 15, 2015 (as opposed to June 15). Under the European Capital Requirements Regulation, a European bank must take a capital charge if it or its subsidiaries transact business through a non-qualifying clearinghouse. A clearinghouse is qualified if it is an EU-based clearinghouse and has been expressly authorized by the European Securities and Markets Authority, or is a non-EU-based clearinghouse and has been recognized as subject to equivalent regulation. Currently, the EC does not recognize the United States as having equivalent regulation over US-based clearinghouses. However, it has deemed clearinghouses in Hong Kong, Japan, Singapore and Australia as subject to equivalent oversight. (Click here for a description of additional consequences of non-recognition in the article, “Non-Recognition of US CCPs as Subject to Equivalent Regulation May Require European-Based Funds to Restrict Trading in US Centrally Cleared Derivatives” in the May 31, 2015 edition of Bridging the Week.)
     
  • Kraft Foods and Mondelez Global Seek to Dismiss Parts of CFTC’s Manipulation Complaint: Kraft Foods Group and Mondelez Global moved in federal court in Illinois to dismiss certain charges brought against them by the Commodity Futures Trading Commission earlier this year. The CFTC had alleged that certain of the firms’ wheat trades on the Chicago Board of Trade entered during 2011 for the alleged purpose of hedging were in fact placed for the purpose of artificially lowering prices in the related cash market. This activity, claimed the CFTC, was a violation of federal law and the Commission’s rules. (Click here for details regarding the CFTC’s original allegations in the article “Manipulation Is Not Hedging Says CFTC in Federal Court Lawsuit Against Kraft Foods Group and Mondelez Global” in the April 5, 2015 edition of Bridging the Week.) Kraft and Mondelez sought to dismiss one count of the Commission’s complaint that relied on the CFTC’s newly gotten anti-manipulative or deceptive device or contrivance authority under the Dodd-Frank Wall Street Reform and Consumer Protection Act. According to Kraft and Mondelez, “[a]t its core, the CFTC’s complaint accuses [the firms] of fraud and manipulation for seeking to purchase wheat at the best price it could in the face of difficult market conditions.” However, say the firms, “[t]hese decisions and consequences do not transform [the firms’] conduct into a fraud or a manipulation.” Among other things, the firms alleged that the Commission’s pleadings do not describe how they allegedly deceived the market –as required– and thus the relevant count should be dismissed. The firms also said that the Commission’s claims under its traditional manipulative authority should also be dismissed because the CFTC failed to plead that the firms’ conduct caused an artificial price and they had the requisite specific intent. The firms claimed the CFTC’s argument is effectively “when faced with higher wheat prices in one market and lower wheat prices in another, [the firms’ were] required by law to purchase wheat in the more expensive market.” This theory is wrong, claimed the respondents, and this count should be dismissed too.
     
  • CFTC Chairman Says Commission Considering Registration of Proprietary Traders With Direct Market Access; Commissioner Giancarlo Issues 'Ode to FCMs': In a speech before the Sandler O’Neill Global Exchange and Brokerage Conference in New York last week, Timothy Massad, Chairman of the Commodity Futures Trading Commission provided some insight into regulatory initiatives the Commission is considering in response to the increased automation of trading and reliance by traders on algorithmic trading systems. Among other things, said Mr. Massad, the CFTC is considering whether proprietary traders with direct access to markets should be required to register with the CFTC if they engage in algorithmic trading. The CFTC is also considering whether it should mandate by rule certain pre-trade risk controls such as message and execution throttles, kill switches and controls to prevent erroneous orders that have already been implemented by exchanges and many market participants themselves, offered Mr. Massad. Finally, Mr. Massad indicated that the Commission is considering whether clearing members should be required to manage the risks of their direct access customers who employ algorithmic trading. Separately, in his opening statement at last week’s CFTC’s Market Risk Advisory Committee, Commissioner J. Christopher Giancarlo bemoaned that “[t]he number of [future commission merchants] has dramatically fallen in the past 40 years: from over 400 in the late 1970s, to 154 before the 2008 financial crisis, and down to just 72 today.” According to Mr. Giancarlo, this decline in the number of FCMs has particularly hurt farmers, ranchers and manufacturers. According to Mr. Giancarlo, “[w]ith fewer firms serving a bigger market, risk is being more concentrated in large bank-affiliated firms, increasing the systemic risk that [the Dodd-Frank Wall Street Reform and Consumer Protection Act] promised to reduce.” He implied that the reduction in the number of FCMs – particularly smaller FCMs – has arisen because of increased costs associated with complying with many new “complex regulations” that were implemented without “a true analysis of the effect on FCMs and end-users.” (Click here for an alternative view on the state of the FCM industry in the article, “The FCM Business Is Not All Doom and Gloom Reports Tabb Group” in the May 3, 2015 edition of Bridging the Week.)

My View: In passing any new regulations, the Commission must continue to be mindful of the limitation of its resources. To the extent that tasks can be performed or already are performed by self-regulatory organizations, it appears more productive to heighten oversight of the SROs than to double-up on the requirements on market participants.

Hard to Believe: Reflecting on Commissioner Giancarlo’s 'Ode to FCMs' prompted me to recall that Shakespeare had also lamented about the state of futures commission merchants many years ago in an early draft of Hamlet’s famous soliloquy in Act 5, Scene 1, prior to amending  it to its more customarily remembered version: “Alas poor FCMs, I knew them, Horatio; entities of seemingly infinite capacity, of most excellent clearing services. They hath carried our trades a thousand times; and now, how abhorred in my imagination it is! My gorge rises at it. Where are those firms we have transacted with now? Your names? Your logos? Your flashes of ingenuity that were wont to make our business folk buoyant? Not one now to assist in our clearinghouse access.” Of course, it is possible that I have Shakespeare confused with someone else. 

  • Merrill Lynch Agrees to US $11 Million Payment to Resolve SEC Short Sale Charges: Two Merrill Lynch entities —Merrill Lynch, Pierce, Fenner & Smith Incorporated and Merrill Lynch Professional Clearing Corporation—  agreed to pay aggregate sanctions of approximately US $11 million to the Securities and Exchange Commission to resolve administrative charges related to their alleged violation of Regulation SHO – the SEC’s regulation governing the short sales of securities. Under Reg SHO, a broker-dealer accepting a short sale of an equity security from a customer (or engaging in a short sale in its own proprietary account) must first borrow the security, enter into a bona fide arrangement to borrow the security, or have reasonable grounds to believe the security can be borrowed before the delivery date. Broker-dealers comply with this so-called “locate requirement” by maintaining so-called “easy to borrow” lists, which set forth equity securities they reasonably believe they can borrow. The SEC charged the Merrill Lynch entities with violating Reg SHO from 2008 to the present by amending their ETB lists during the course of days by effectively removing equity securities, but not stopping its electronic execution platforms from relying on the ETB lists as if not changed. In addition, under Reg SHO, ETB lists should not be older than 24 hours. The SEC also charged the Merrill Lynch entities with sometimes relying on outdated ETB lists from 2008 until 2012 because of a system design error. Apparently, if the firm failed to include an equity security on its ETB list, the system would assume the last known number of shares for that security were still available –whether true or not. In such circumstance, a current ETB list would contain information within and outside 24 hours. To resolve this matter, the Merrill Lynch entities agreed to pay a fine of US $9 million, engage a compliance consultant to review the firms’ Reg SHO policies and procedures, and to pay disgorgement and prejudgment interest of almost US $2 million. Last year the Financial Industry Regulatory Authority settled a disciplinary proceeding with the same two Merrill Lynch entities for their failure to comply with certain Reg SHO requirements within the same time period as well as supervisory lapses. The firms agreed to pay an aggregate fine of US $6 million to resolve that matter. (Click here for details in the article, “Merrill Lynch Fined US $6 Million by FINRA for Reg SHO Violations and Supervisory Lapses” in the November 2, 2014 edition of Bridging the Week.)
     
  • CME Group Requires Profit Disgorgement as Part of Position Limit Violation Settlements; Traders Settle for Alleged Spoofing-Type Conduct on Both CME Group and ICE Futures U.S.: Two unrelated firms were each fined US $25,000 and required to disgorge profits related to position limit violations involving futures traded on the New York Mercantile Exchange, part of the CME Group. Hayman Capital Management LP was charged with violating position limits on one day in January 2015 involving February 2015 crude oil futures. Prosperity Steel United Singapore PTE Ltd. was also charged with violating position limits on three trade dates involving March 2014 Henry Hub Natural Gas Futures Contracts. Both firms subsequently liquidated their overage positions, with Hayman Capital realizing profits of US $709,000 and Prosperity US $574,000. Both firms agreed to pay the fines and disgorge their profits to settle their CME Group disciplinary matters. Separately, ICAP Corporates, LLC agreed to pay a fine of US $40,000 for not reporting certain block trades timely to NYMEX, incorrectly reporting the accurate time of certain block trades, and incorrectly reporting certain exchange for swap transactions as block trades. This occurred, claimed NYMEX, in connection with “multiple” block trades from January 2012 through June 2013. Three traders –two on CME Group exchanges (Stephen Duggan and Himanshu Kalra) and one on ICE Futures U.S. (Igor Oystacher)– also agreed to settle allegations of spoofing-type conduct for fines and/or trading access prohibitions. In connection with Mr. Oystacher’s alleged violation, the relevant IFUS business conduct committee expressly acknowledged that the alleged wrongful trading activity “resulted in no financial gain to [Mr.] Oystacher.” However, the committee determined “that such activity may have disrupted the marketplace.”
     
  • Goldman Sachs Agrees to US $185,000 Fine With FINRA Related to Alleged TRACE Reporting Deficiencies: Goldman, Sachs & Co. agreed to pay a fine of US $185,000 to resolve allegations by the Financial Industry Regulatory Authority that it engaged in a pattern of late reporting of certain required securities under FINRA’s Trade Reporting and Compliance Engine (TRACE) program during various times in 2013 and 2014. Under TRACE, broker-dealers have an obligation to report transactions in certain fixed income securities within certain time frames (typically 15 minutes; click here for precise time frames). This information is then generally made available to the public. FINRA had alleged that, during three surveillance periods, it had found that between 2.8 and 3.47 percent of certain required securities were not reported by Goldman Sachs within the required time frames. As a result, FINRA also alleged that the firm failed to have an adequate supervisory system “reasonably designed” to ensure compliance with its TRACE obligations. In addition to paying a fine, Goldman Sachs agreed to make three reports to FINRA during the next year regarding the effectiveness of its relevant procedure and the steps taken by supervisory personnel to ensure the firm’s compliance with its TRACE requirements.
     
  • CFTC Staff Grants Relief From IB and CTA Registration to Foreign Underwriters in Connection With Swap Activities of US-Based International Financial Institutions: The Division of Swap Dealer and Intermediary Oversight of the Commodity Futures Trading Commission granted relief from its introducing broker and commodity trading advisory registration requirements to certain market participants outside the United States who engage in certain over-the-counter swaps activities while acting as underwriters in connection with non-US offerings of structured notes for international financial institutions that maintain US offices. (IFIs are entities that extend loans and grants to developing countries for economic and social development activities, including such organizations as the International Monetary Fund, the International Bank for Reconstruction and the Multilateral Investment Guarantee Agency, among other similar organizations.) Ordinarily any person, including non-US persons, who solicits or accepts orders for the purchase or sale of a swap from any US person and does not accept any money, securities or property as collateral or to guarantee such instruments must register as an IB, absent an exemption. Likewise, any person who for compensation or profit advises any US person to trade a swap ordinarily has to register as a CTA, unless there is an exemption. There is an available exemption from CFTC registration requirements for non-US based persons who act as IBs or CTAs in connection with swaps, provided “any such commodity interest transaction is submitted for clearing” through a registered futures commission merchant. However, non-cleared OTC swaps are not cleared through FCMs. Notwithstanding, given the “unique attributes and status of IFIs, and in consideration of international comity,” DSIO granted registration relief to the requesting non-US market participants, particularly since the CFTC has taken the position that “IFIs should not be subject to mandatory clearing.” The relief is available until the date any equivalent final rule or CFTC order is effective.

Legal Weeds: Although there may be introducing brokers in connection with swaps activities, the CFTC’s IB rules do not neatly apply to swaps activities –particularly in connection with over-the-counter, non-cleared swaps. One CFTC rule – CFTC Rule 1.57 (click here to access) expressly sets forth requirements for all IBs, including that they must “[o]pen and carry each customer’s and option customer’s account with a carrying futures commission merchant” and transmit for execution all customer and option customer orders to a carrying FCM or a floor broker. These requirements, and others, make no sense in the context of OTC swaps. CFTC staff is applauded for deriving a common sense result in the circumstance of non-US persons handling swaps for international financial institutions located in the United States. However, the CFTC should reconsider its entire regulation of IBs to more appropriately align the current scope of IBs' authorized activities with an appropriate regulatory scheme.

And even more briefly:

  • Australian Futures Clearinghouse Applies for Exemption From DCO Registration: ASX Clear (Futures) Pty. Limited –an Australia-based clearinghouse– has petitioned the Commodity Futures Trade Commission for an exemption from the Commission’s requirement that it register as a designated clearing organization. ASX Clear (Futures) seeks such exemption in order to clear certain Australian dollar-denominated interest rate swaps for certain US end-user clients. ASX Clear (Futures) has currently been offering such IRS products to certain US-based clearing participants (as well as their parent companies and affiliates) pursuant to previously granted no-action relief by CFTC staff. In general, ASX Clear (Futures) argues it should be granted its requested relief because it is subject to comparable and comprehensive oversight as a CFTC-registered DCO by the Australian Securities & Investment Commission and it complies with internationally accepted standards as established under the Principles for Financial Market Infrastructure. Comments in connection with ASX Clear (Futures)’s petition are due by June 17. (Click here for a discussion of the PFMIs in the article, “Europe and US Receive Good Grades for PFMI Implementation; Japan Receives the Best Grade” in the March 1, 2015 edition of Bridging the Week.)
     
  • CFTC Stays ICE Futures U.S. Attempt to Increase Position Limits and Accountability Levels for Eight Financial Power Futures Contracts: The Commodity Futures Trading Commission stayed for 90 days a proposed increase in accountability levels and position limits for certain power contracts traded on ICE Futures U.S. IFUS had proposed increases in accountability levels and position limits for eight daily-settled futures contracts based on electricity prices published by the New York State Independent System Operator that were to be effective May 27, 2015. The CFTC will now open the proposed increases to public comment.
     
  • Joint Form of Financial Regulator Organizations Questions Whether Financial Firms Are Adequately Assessing Clearinghouse Risk: The Joint Forum –an organization of financial service regulatory organizations established under the Basel Committee on Banking Supervision– issued recommendations to financial services regulators regarding their oversight of the credit risk management of financial service firms. Among other recommendations, regulators “should consider whether firms are accurately capturing central counterparty exposures as part of their credit risk management.” The Joint Forum also recommended that regulators “be cautious” against financial services firms’ over-reliance on internal models for credit risk management; reliance on “search-for-yield” behaviors in the current low interest rate environment; and the increasing need for high quality liquid collateral to meet margin requirements. The Joint Forum consists of the Basel Committee on Banking Supervision, the International Organization of Securities Commissions and the International Association of Insurance Supervisors.
     
  • MAS Consults on Regulatory Framework for Intermediaries Dealing in OTC Derivatives: The Monetary Authority of Singapore is seeking comment of its proposed regulatory scheme for over-the-counter intermediaries. Among other initiatives, MAS proposes to collapse its current approach of separately regulating dealing in securities, dealing in futures contracts and leveraging foreign exchange trading into a new collective regulated activity that also includes dealing in OTC derivatives contracts. The new regulated activity would be termed “dealing in capital markets products,” although requirements related to transactions in OTC products would recognize “differences between the traditional securities market … and the OTC derivatives market, including the roles that intermediaries play in these markets.” Comments are due by July 3, 2015.
     
  • FCA Seeks Views on Proposal to Require Non-Discriminatory Access to Regulated Benchmarks: The UK Financial Conduct Authority seeks comment on its proposal to require reasonable and non-discriminatory access to regulated benchmarks. FCA claims that its proposed rules are consistent with requirements of the Markets in Financial Instruments Directive that will come into force in 2019 and will govern access to benchmarks by clearinghouses and trading venues. According to FCA, its proposed rules “state that benchmark administrators must ensure that access and licenses to use benchmarks are made available on fair, reasonable and non-discriminatory terms and conditions (including prices), and that access should be provided within three months following a written request.” Different fees can be charged to different users, proposes FCA, but the differences must be justified based on reasonable commercial grounds (e.g., based on quantity, scope or proposed field of use). Comments are due by August 3, 2015.
     
  • DTCC Adds Its Voice to the Debate on CCP Default Loss Waterfalls: The Depository Trust and Clearing Corporation added its voice to the debate about how best to enhance the resiliency of clearinghouses (CCPs) through publication of its own white paper entitled “CCP Resiliency and Resources.” In general, DTCC called for regulators to institute transparent stress testing of CCPs utilizing standardized frameworks and “customized testing scenarios that target the diverse products cleared by different CCPs.” Although DTCC did not reference the term “skin in the game” in its white paper, it did support its CCPs’ (National Securities Clearing Corporation and Fixed Income Clearing Corporation) contribution of “meaningful first-loss layers in their default waterfalls.” (Click here for another view in the article, “CME Group Adds Its View to “Skin in the Game” Debate” in the January 25, 2015 edition of Bridging the Week.)
     
  • OFAC Removes Certain Cuba Nationals From SDN List: The Office of Foreign Assets Control has updated its Specially Designated Nationals List to remove certain enumerated Cuba-associated entities and persons.

And finally:

  • Compliance Weeds: Leap Second is Coming June 30; Are You Ready?: On June 30, 2015, an extra second will be added to Coordinated Universal Time (UTC) to align with mean solar time. This means that the last minute of the day will have 61 seconds. As June 30 is a Tuesday, this addition of a “leap second” will occur during active trading hours (00:00:00 UTC is equivalent to 20:00:00 or 8 p.m. NY time). Since the majority of computer systems utilize the Network Time Protocol that incorporates UTC, electronic trading, clearing operations and other relevant systems will be impacted by this leap second event. In response, many exchanges have amended their trading operations for the relevant dates (June 30 and July 1) and requested certain behaviors from their users (e.g., CME Group has requested customers to refrain from entering queries and transactions during certain specific time periods). All financial services firms –especially smaller firms– should ensure they are considering the impact of the leap second on their operations. (Click here for an overview of the leap second issue by the Futures Industry Association; sample exchange rules are included in the section “For more information” below.)

For more information, see:

Australian Futures Clearinghouse Applies for Exemption From DCO Registration:
http://www.cftc.gov/ucm/groups/public/@otherif/documents/ifdocs/asxclearfutdcoexemptpetition.pdf

CFTC Chairman Says Commission Considering Registration of Proprietary Traders With Direct Market Access; Commissioner Giancarlo Issues 'Ode to FCMs':

Giancarlo:
http://www.cftc.gov/PressRoom/SpeechesTestimony/giancarlostatement060115#SpTeMBL
Massad:
http://www.cftc.gov/PressRoom/SpeechesTestimony/opamassad-24

CFTC Grants Relief From IB and CTA Registration to Foreign Underwriters in Connection With Swap Activities of US-Based International Financial Institutions:
http://www.cftc.gov/ucm/groups/public/@lrlettergeneral/documents/letter/15-37.pdf

CFTC Stays ICE Futures U.S. Attempt to Increase Position Limits and Accountability Levels for Eight Financial Power Futures Contracts:
https://www.theice.com/publicdocs/futures_us/exchange_notices/ICE_Advisory_05_15_004_NYISO_Zone_G_PositionLimits_Stay.pdf

CME Group Requires Profit Disgorgement as Part of Position Limit Violation Settlements; Traders Settle for Alleged Spoofing-Type Conduct on Both CME Group and ICE Futures U.S.:

CME Group
Stephen Duggan:
http://www.cmegroup.com/tools-information/lookups/advisories/disciplinary/CBOT-12-9134-BC-STEPHEN-DUGGAN.html#pageNumber=1
Hayman Capital Management, LP:
http://www.cmegroup.com/tools-information/lookups/advisories/disciplinary/NYMEX-15-0071-BC-HAYMAN-CAPITAL-MANAGEMENT-LP.html#pageNumber=1
ICAP Corporates, LLC:
http://www.cmegroup.com/tools-information/lookups/advisories/disciplinary/NYMEX-12-8963-BC-ICAP-CORPORATES-LLC.html#pageNumber=1
Himanshu Kalra:
http://www.cmegroup.com/tools-information/lookups/advisories/disciplinary/COMEX-12-9004-BC-HIMANSHU-KALRA.html#pageNumber=1
Prosperity Steel United Singapore PTE Ltd.
http://www.cmegroup.com/tools-information/lookups/advisories/disciplinary/NYMEX-14-9758-BC-PROSPERITY-STEEL-UNITED-SINGAPORE-PTE-LTD.html#pageNumber=1
ICE Futures U.S.:
Igor Oystacher:
/ckfinder/userfiles/files/IFUS%20Oystacher.jpeg

DTCC Adds Its Voice to the Debate on CCP Default Loss Waterfalls:
http://www.dtcc.com/~/media/Files/Downloads/WhitePapers/CCP-Resiliency-Resources-White-Paper.pdf

FCA Seeks Views on Proposal to Require Non-Discriminatory Access to Regulated Benchmarks:
http://www.fca.org.uk/static/fca/documents/consultation-papers/cp15-18.pdf

EC Delays Implementation Date for Capital Hits to European Banks for Exposure to Non-Recognized Foreign Clearinghouses:
http://europa.eu/rapid/press-release_IP-15-5102_en.htm

Goldman Sachs Agrees to US $185,000 Fine With FINRA Related to Alleged TRACE Reporting Deficiencies:
http://disciplinaryactions.finra.org/Search/ViewDocument/54069

Joint Form of Financial Regulator Organizations Questions Whether Financial Firms Are Adequately Assessing Clearinghouse Risk:
http://www.bis.org/bcbs/publ/joint38.pdf

Kraft Foods and Mondelez Global Seek to Dismiss Parts of CFTC’s Manipulation Complaint:
https://www.law360.com/dockets/download/556cc574cd136f771c00016b?doc_url=https%3A%2F%2Fecf.ilnd.uscourts.gov%2Fdoc1%2F067115842695&label=Case+Filing

Leap Second is Coming June 30; Are You Ready?

CME Group:
http://www.cmegroup.com/company/files/leap-second-faq.pdf
LME:
https://www.lme.com/~/media/files/notices/2015/2015_06/15%20168%20a164%20-%20leap%20second%20impact%20and%20the%20lmeselect%20trading%20system%20-%20cancels%20and%20replaces%2015%20166%20a162%20docx.pdf

MAS Consults on Regulatory Framework for Intermediaries Dealing in OTC Derivatives:
http://www.mas.gov.sg/~/media/MAS/News%20and%20Publications/Consultation%20Papers/Policy%20Consultation%20on%20Regulatory%20Framework%20for%20OTC%20Intermediaries%20ERA%20and%20Marketing%20of%20CIS%203%20Jun%2015.pdf

Merrill Lynch Agrees to US $11 Million Payment to Resolve SEC Short Sale Charges:
http://www.sec.gov/litigation/admin/2015/34-75083.pdf

NYDFS Issues BitLicense Framework for Regulating Virtual Currency Firms:

Overview of Benjamin Lawsky:
http://www.dfs.ny.gov/about/speeches/sp1506031.htm
Regulation:
http://www.dfs.ny.gov/legal/regulations/adoptions/dfsp200t.pdf

OFAC Removes Certain Cuba Nationals From SDN List:
http://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20150604.aspx

The information in this article is for informational purposes only and is derived from sources believed to be reliable as of June 6, 2015. No representation or warranty is made regarding the accuracy of any statement or information in this article. Also, the information in this article is not intended as a substitute for legal counsel, and is not intended to create, and receipt of it does not constitute, a lawyer-client relationship. The impact of the law for any particular situation depends on a variety of factors; therefore, readers of this article should not act upon any information in the article without seeking professional legal counsel. Katten Muchin Rosenman LLP (Katten) may represent one or more entities mentioned in this article. Quotations attributable to speeches are from published remarks and may not reflect statements actually made. Views expressed by the author are not necessarily the views of Katten or any of its directors or officers.

 


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