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.
More than $45 million in recent awards should remind businesses to proactively look within and implement effective whistleblower programs to protect themselves from potential enforcement actions.
This past week has seen two novel developments in the spoofing theories of the U.S. Commodity Futures Trading Commission. The first involves alleging that orders placed on a foreign market that were immediately canceled after the fill of an order on a U.S. exchange (and vice versa) constitute violations of the Commodity Exchange Act and CFTC regulations. The second involves allegations that a trader’s mere flashing of large orders — posting and then quickly canceling orders — without placing a genuine order on the opposite side of the market violates the CEA’s anti-disruptive trading provisions.
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