FIA and the FIA Principal Traders Group respond to the Request for Comment on the Trading and Clearing of “Perpetual” Style Derivatives issued by Staff of the Commodity Futures Trading Commission.
FIA agrees with the Commission that perpetual derivatives “may raise novel questions and concerns related to trading and clearing risk management.” FIA notes the importance of a clear and distinct definition of what constitutes a perpetual derivative. The definition will aid in determining whether a product is a swap, a future, or perhaps neither. Once appropriately classified, the regulatory landscape applicable to such will be clearer, and questions more readily answered.
From the associations’ perspective, this RFC should be the first in a series of steps that Staff and the CFTC take to better understand perpetual derivatives and how they should be defined and regulated. To that end, the association encourages the CFTC to gather information from its various advisory committees, industry participants, academics, and the broader public and then, if appropriate, propose rules (via notice and comment) to establish clear definitions and regulatory requirements. FIA acknowledges the self-certification process for listing new products. The process essentially permits designated contract markets and swap execution facilities to list perpetual derivatives with as little as 24 hours’ notice to the Commission, and without opportunity for public comment.
We encourage the Commission to consider what, if any, limitations, requirements, or obligations should exist under CFTC rules with regards to perpetual derivatives and to codify such limitations, requirements or obligations accordingly. Once rules are established, designated contract markets and swap execution facilities, per CFTC Rule 40.2, would be required to certify that the product to be listed complies with those rules.
Read full response here.
