Commodity-Corner.com is a Murphy & McGonigle resource for those interested in legal developments in the commodities, futures, and derivatives area. The information provided by this site is intended to provide insightful analysis and perspectives, as well as regulatory and enforcement updates and trends, in this increasingly varied and complex industry.
Although distributed ledger technology offers significant potential to streamline financial transactions, it does not come without potential challenges to its use to record electronic warehouse receipts – a fundamental part of the financial plumbing supporting cash commodity and commodity derivatives transactions.
The Bible’s Book of Genesis tells the story of how Jacob persuaded his older, first-born, brother, Esau, to exchange his first-born birthright for a bowl of stew. Needless to say, the famished Esau made a bad deal. Last fall, the SEC hinted that it may be on the verge of making a similar bad deal with its younger sister agency, the CFTC. To rid Bitcoin-related securities from trading in the U.S. securities markets, the SEC has implied that it was willing to cede jurisdiction over commodity-linked exchange-traded notes to the CFTC on the basis that such instruments are “commodity swaps” rather than securities.
On November 5, 2018, the Commodity Futures Trading Commission (“Commission” or “CFTC”) voted 4-1 to propose sweeping changes to its regulations relating to swap execution facilities (“SEFs”) and the trade execution requirement under the Commodity Exchange Act (“Act”). This article summarizes the proposed modifications to the SEF regulatory framework and trade execution requirement.
On November 15, 2018, the CFTC’s Division of Enforcement released its Annual Report for Fiscal Year 2018. This article provides an in-depth and comprehensive analysis of the Division’s FY 2018 enforcement campaign, with predictions of trends and developments for the coming year.
Over the past week, regulators in both the United Kingdom and Hong Kong have voiced words of caution regarding varying virtual assets. Both regulators were concerned in particular about the integrity of the cash markets for virtual assets and products giving retail investors both direct and indirect exposure to virtual assets.
On May 8, 2019, the Division of Enforcement made public its first-ever Enforcement Manual. The Enforcement Manual addresses the various stages of the Division’s investigations and litigations. While much of the Enforcement Manual is rooted from the Commission’s Regulations and still leaves much discretion to Division Staff, its deputies and director, it does shed some light into the Division’s processes and policies. Although the Enforcement Manual does not create any private rights, is not enforceable in court, and is not binding law, it will likely be a useful reference tool for engaging in dialogue with Division Staff during various points of the Division’s investigations and litigations.
On April 18, 2019, Eric Powers of Kern County, California, entered into a consent order with the Financial Crimes Enforcement Network for acting as an unregistered money transmitter. FinCEN determined that Powers’ purchase and sale of Bitcoin for U.S. Dollars in over 1,700 “peer-to-peer” transactions from 2012 through 2014 made him an “exchanger” of convertible virtual currency.
On March 13, 2019, the Senate Agriculture Committee held its hearing on the nomination of Dr. Heath Tarbert to replace current CFTC Chairman J. Christopher Giancarlo, whose term is set to expire in mid-April. Tarbert currently serves as the Assistant Secretary for Institutional Markets at the Treasury Department. With indications of bipartisan support for his nomination, Tarbert is widely expected to be confirmed and to arrive at the CFTC this summer. The hearing provided insights into what is in store for the CFTC’s regulatory and enforcement regimes under Tarbert’s watch.
UPDATE: On July 5,2019, the Senate voted overwhelmingly to confirm Dr. Tarbert to be the CFTC's next chairman. Dr. Tarbert is expected to be sworn in as the CFTC's chairman in mid-July.
CFTC Director of Enforcement James McDonald offered remarks detailing the agency’s intention to investigate “violations of the CEA carried out through foreign corrupt practices.” On the same day, the CFTC issued an Enforcement Advisory related to “Self Reporting and Cooperation for CEA Violations Involving Foreign Corrupt Practices.”
The European Union (“EU”) on Monday, February 25, 2019, agreed to give providers of “critical benchmarks” (e.g., Euribor or EONIA) an additional two years (to December 31, 2021) to comply with the EU’s new benchmark regulation requirements.
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