CFTC Proposes Rule Requiring Registered Futures Association Membership

by Shannon Allen

The Commodity Futures Trading Commission (“Commission”) seeks comment on a proposed regulation amendment that would require “all persons registered” with the Commission as “introducing brokers (“IBs”), commodity pool operators (“CPOs”), and commodity trading advisors (“CTAs”)” to join and maintain membership in “at least one registered futures association (“RFA”).”

The proposed amendment would remove existing gaps in regulatory oversight programs by the Commission and the National Futures Association (“NFA”).  In addition, it would advance the Commission’s goal to establish an oversight regime that “levels the playing field” by guaranteeing “consistent treatment of all its registered intermediaries . . . .”  Subject to Commission oversight, the NFA is the frontline regulator of its members and requiring membership in an RFA would allow the NFA to “ensure compliance” with Section 17 of the Commodity Exchange Act (“CEA”) . . . .”  Appropriate and effective implementation of programs required by Section 17 of the CEA could be obstructed without the membership mandate.  Thus, the Commission believes that “such membership is necessary . . . to ensure . . . market oversight . . . is applied consistently to all registered intermediaries.”

This proposed rule:

• would give the Commission the ability to delegate particular oversight responsibility for intermediaries, including IBs, CPOs, and CTAs, to an RFA;
• would facilitate more efficient use of agency resources;
• would benefit the public by ensuring integrity of the swaps market and its participants; and
• may lead to an increase in market participation.

The Commission seeks comment on all aspects of this proposed rulemaking, and has listed specific requests for comment including, but not limited to the following:

1. Has the Commission accurately identified the benefits of this proposed regulation?
2. Are there other benefits to the Commission, market participants, and/or the public that may result from the adoption of the proposed regulation that the Commission should consider?
3. Should entities who are currently registered with the Commission but otherwise qualify for a Rule 4.14(a)(9) exemption be required to become members of NFA? If not, why?
4. Will this proposal impact, positively or negatively, the risk management procedures or actions of intermediaries?
5. Is the proposed collection of information necessary for the proper performance of the functions of the Commission?
6. Is the Commission’s estimate of the burden of the proposed collection of information accurate?
7. Are there ways to enhance the quality, utility, and clarity of the information to be collected?

Interested parties are invited to submit comments, identified by RIN number 3038-AE09, by January 17, 2014, by only one of the following methods:

•  Mail, hand delivery or courier: Melissa D. Jurgens, Secretary of the Commission, Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st Street NW., Washington, DC 20581;
• Federal eRulemaking Portal: http://www.regulations.gov;
• Fax: to the Office of Information and Regulatory Affairs at (202) 395-6566; or
• Email: OIRAsubmissions@omb.eop.gov.