The Commodity and Futures Trading Commission (CFTC) unanimously approved a final rule to amend its recordkeeping obligations for certain market participants including farmers, ranchers and grain elevator operators.
The Commission voted to finalize amendments to CFTC Regulation 1.35, a recordkeeping rule regarding commodity interests and cash or forward transactions. The new rule requires these market participants to keep track of only the final terms of the agreement, providing a cost-effective solution to recordkeeping. Previously, participants were required to keep track of all communication leading up to a trade, which created unnecessary paperwork.
CFTC chairman Timothy Massad says the final rule will reduce recordkeeping obligations for commercial end-users and “strikes the appropriate balance between the costs of recordkeeping and the benefits to market oversight.” In a statement, Massad added that commercial end-users were not the cause of the crisis and should not bear the burdens of reforms designed to rein in systemic risk.
The final rule clarifies that members of exchanges and swap execution facilities not registered with the Commission—typically, end-users—do not have to keep pre-trade communications or text messages. Further, it simplifies the requirements for keeping records of final transactions. The amended rule also states that commodity trading advisors do not have to record oral communications regarding their transactions, Massad explains.
Normal course of business
Todd Kemp, National Grain and Feed Association, vice president for marketing, shared that the final rule “takes a common-sense approach that reflects many months of work and input from the grain, feed and processing industry and others.” Kemp says as he understands the rule, market participants can satisfy recordkeeping requirements simply by maintaining records generated in the normal course of business.
CFTC commissioner Christopher Giancarlo added that after several comment periods, significant legislative interest from Congress and months of negotiating, the CFTC listened to the concerns of market participants. “Fixing this regulation was one of the first issues that I raised with my fellow Commissioners upon my arrival at the CFTC,” Giancarlo says. “I believe we have now produced a more workable rule that will not impose needless regulatory costs on America’s agricultural producers, grain elevator operators or energy producers, to name a few.”
Giancarlo says he visited many agricultural and energy producers in Illinois, Indiana, Iowa, Minnesota, Texas, Louisiana and Kentucky. “The common refrain I hear again and again is that Washington does not listen to everyday Americans. It imposes rules and regulations without regard to their obvious impact on ordinary people.”
He added that he believes this rule benefits from listening to those with concerns and is a step in the right direction. “I am hopeful that it is an indicator of future action by the CFTC that more readily takes to heart those common concerns in all of our regulatory actions.”
More work needed
Senate Agriculture Committee chairman Pat Roberts, R., Kan., also welcomed the rule and says there is more work CFTC needs to do to improve rules for those managing risk in the commodities markets.
“End-users did not cause the 2008 financial crisis, nor were they ever blamed for contributing it. Because of this, Congress did not intend for them to be subject to Title VII of Dodd-Frank. However, these end-users are captured by many rules and regulations stemming from the regulatory implementation of Dodd-Frank. We need the CFTC to continue adequately addressing the concerns of the end-user community, as they have done today,” Roberts says.
Roberts says he intends to keep working in a bipartisan manner on a bill that eases the burdens on end-user companies that provide the crucial services our farmers and ranchers need to effectively operate in our economy, as well as accomplish the committee’s responsibility of reauthorizing the Commission.
Roberts, an outspoken opponent of overregulation through the implementation of Dodd-Frank, oversees the U.S. Senate Agriculture Committee, which has jurisdiction over the CFTC. Roberts is continuing to work on a CFTC reauthorization bill and is looking forward to finding middle ground on the issue early next year, he says in a statement.