On March 17, 2020, the Division of Swap Dealer and Intermediary Oversight (DSIO) of the Commodity Futures Trading Commission (CFTC) issued five letters providing temporary regulatory relief to certain categories of market participants with respect to COVID-19. The letters apply to the various categories of registrants, namely futures commission merchants (FCM), introducing brokers (IB), swap dealers (SD), retail foreign exchange dealers (RFED), floor brokers and members of designated contract markets (DCM) and swap execution facilities (SEF). The CFTC has acknowledged that certain CFTC requirements, such as time-stamping and recording oral communications, have become challenging or impossible to comply with due to the displacement of personnel, social distancing, and other measures.
In the letters, the CFTC indicates that it will not recommend to the CFTC an enforcement action for specific types of activities as long as market participants establish and maintain a supervisory system that is reasonably designed to supervise the activities of personnel while acting from an alternative location during the current crisis. More specifically, by registrant category:
FCMs, IBs, and SDs
DSIO granted FCMs, IBs, and SDs no-action relief from CFTC regulations requiring recording of oral communications related to voice trading and other telephonic communications as well as time-stamping requirements when located in remote, socially-distanced locations. DSIO also granted 30 days of no-action relief to FCMs and SDs from the requirement to furnish chief compliance officer annual reports to the CFTC. Relief specific to FCMs and IBs is available in CFTC Letter No. 20-03. Relief specific to SDs is available in CFTC Letter No. 20-06.
In CFTC Letter No. 20-05, DSIO granted RFEDs similar relief from CFTC regulations requiring recording of oral communications related to voice trading and other telephonic communications as well as time-stamping requirements when in remote locations.
Similarly, in CFTC Letter No. 20-04, DSIO granted floor brokers relief from CFTC regulations requiring recording of oral communications related to voice trading and other telephonic communications as well as time-stamping requirements. DSIO also provided relief from the requirement to be located on the premises of a DCM, temporarily allowing floor brokers to engage in trading activities at remote locations that would otherwise require registration as an IB.
Members of DCMs and SEFs
DSIO also granted relief to members of DCMs and SEFs from time-stamping requirements in CFTC Letter No. 20-02.
Other Mayer Brown Regulatory Updates
The foregoing CFTC relief supplements other measures by the CFTC and National Futures Association (NFA), the US derivatives self-regulatory organization. See our Legal Update:
- COVID-19 Business Continuity Updates for Commodity Futures Trading Commission Registrants and National Futures Association Members
For CFTC firms dually registered with the SEC and FINRA, Mayer Brown has provided Legal Updates regarding similar regulatory actions by those agencies.
- US SEC Staff Publishes Guidance on Annual Shareholder Meeting Related to COVID-19
- COVID-19: FINRA Addresses U.S. Broker-Dealer Preparedness and Regulatory Relief in Regulatory Notice 20-08
- COVID-19: US SEC Staff Offers Relief for RIAs and Funds
The CFTC letters are part of an evolving COVID-19 response that is moving across regulatory agencies. Please visit our website to learn more.