On March 17, 2020, Chairman Heath Tarbert of the U.S. Commodity Futures Trading Commission (CFTC) released a video statement identifying the CFTC’s actions to address the COVID-19 pandemic.1 Chairman Tarbert provided five key objectives: (i) monitoring derivatives markets and their participants; (ii) using the CFTC’s regulatory framework to promote orderly and liquid markets; (iii) responding swiftly to changing conditions with practical, targeted relief; (iv) communicating consistently and transparently with all stakeholders; and (v) maintaining the CFTC’s commitment to advancing strategic policy goals.
In the statement, Chairman Tarbert indicated that the CFTC will be taking nearly a dozen actions by the end of the week to provide flexibility to market participants. The first of these actions was taken on March 17 when the CFTC’s Divisions of Swap Dealer and Intermediary Oversight (DSIO) and Market Oversight (DMO) released a series of no-action letters providing temporary, targeted relief to certain CFTC-registered entities and members of CFTC-regulated trading facilities.2 The relief follows a series of COVID-19-related notices that the National Futures Association (NFA) sent to its members over the past few weeks, including relief of its own. Additional relief from both the CFTC and NFA may be forthcoming as they coordinate with market participants on issues raised and areas of concern.
Notably, the CFTC has not yet issued relief extending the deadlines for commodity pool operators (CPOs) to file annual audited financial statements or to furnish monthly or quarterly reports to pool participants, although the Investment Adviser Association (IAA) has reported that DSIO is considering such relief. On March 17, the IAA reported that it had been informed that firms seeking an extension to file pool financial statements with NFA on Form PFS must individually file extension requests using NFA’s EasyFile system. NFA will be able to grant a CFTC Regulation 4.22(f) extension only if the firm files the request before the statement’s due date; otherwise, the firm must obtain relief from the CFTC. Also, the CFTC has not issued any relief to CFTC Regulation 4.13(a)(3)-exempt CPOs whose funds may exceed the de minimis trading thresholds if they have to increase their use of futures or swaps for hedging purposes during this time of extreme market volatility, particularly if their net asset values have decreased substantially.
The CFTC is the primarily regulator of the U.S. exchange-traded and over-the-counter derivatives markets, and NFA is the self-regulatory organization for the U.S. futures and swaps industry. A number of businesses and individuals trade in these markets and have complex and often time-sensitive obligations under CFTC and NFA rules. The volatility of these markets, the speed with which the facts on the ground are changing and the practical realities of social distancing may make compliance with many of these rules impractical or impossible. The CFTC and NFA have both indicated a desire to provide whatever relief is necessary to mitigate the damage caused by a situation that is beyond anyone’s ability to control, and providing this relief will be important to ensure that market participants can continue to operate their businesses in this challenging environment.
The tables that follow summarize the actions of the CFTC and NFA to address COVID-19.
Please click here to view the tables.
1The statement is posted to the CFTC’s dedicated COVID-19 page at https://www.cftc.gov/coronavirus.
2See CFTC Press Release 8132-20, CFTC Provides Relief to Market Participants in Response to COVID-19 (March 17, 2020), available at https://www.cftc.gov/PressRoom/PressReleases/8132-20, and CFTC Press Release 8133-20, CFTC Issues Second Wave of Relief to Market Participants in Response to COVID-19 (March 17, 2020), available at https://www.cftc.gov/PressRoom/PressReleases/8133-20?utm_source=govdelivery.
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