Understanding NFTs as commodities calls for a more nuanced analysis than what their “non-fungible” label might suggest at first glance.

By Yvette D. Valdez

The appropriate regulatory characterization of cryptocurrencies and digital assets for US legal purposes has spawned many pages of analysis and occupied many hours of industry, law firm, and regulatory consideration. Significant amounts of commentary, and later government and judicial attention, have been devoted to determining whether fungible cryptocurrencies and digital assets constitute securities for purposes of

A new rule removes the requirement to clear IBOR-based swaps and extends mandatory clearing to swaps on IBOR alternatives.

By Yvette D. Valdez and Adam Bruce Fovent

On August 12, 2022, the US Commodity Futures Trading Commission (CFTC) voted to amend its mandatory clearing requirements for interest rate swaps (the Rule). The vote furthers the CFTC’s  efforts in the global transition away from inter-bank offered rates (IBORs) towards alternative reference rates.

The agency will use the information to take further steps to address climate risks in the commodity derivatives markets.

By Jean-Philippe Brisson, Yvette Valdez, Douglas Yatter, Joshua Bledsoe, Michael Dreibelbis, Qingyi Pan, and Deric Behar

On June 2, 2022, the Commodity Futures Trading Commission (CFTC) issued a Request for Information (RFI) to inform its understanding and oversight of climate-related financial risk relevant to the derivatives markets and underlying commodities market. The CFTC is seeking public feedback on all aspects of climate-related financial risk that “may pertain to the derivatives markets, underlying commodities markets, registered entities, registrants, and other related market participants.”

According to the RFI, public response may be used to inform new or amended guidance, interpretations, policy statements, regulations, or other potential CFTC action. The information will also inform CFTC’s response to the recommendations of the Financial Stability Oversight Council 2021 Report on Climate Related Financial Risk (see Latham’s blog post on the FSOC Report) and inform the work of the CFTC’s Climate Risk Unit (CRU) (see Latham’s blog post on the CRU). Comments on the RFI were originally due by August 8, 2022. On July 18, 2022, the CFTC extended the deadline by an additional 60 days; comments are therefore due by October 7, 2022. 

As the countdown to the LIBOR sunset enters its final six months, the CFTC staff is trying to help the market transition.

By Yvette D. Valdez and Deric Behar

With less than six months to go before the London Interbank Offered Rate (LIBOR) expires on December 31, 2021, regulators around the world have been amplifying already loud calls for market participants to switch to alternative reference rates. In many cases, those calls have been accompanied by significant regulatory efforts and policy shifts to ween the market off reliance on LIBOR. In particular, the US Commodity Futures Trading Commission (CFTC) has been focused on helping the trillion-dollar USD LIBOR interest rate swap market navigate the transition.

Along with other regulatory authorities such as the Federal Reserve Board, the Financial Stability Board, the International Organization of Securities Commissions, the Alternative Reference Rates Committee (ARRC), and the International Swaps and Derivatives Association, the CFTC has been working to steer the derivatives market to safety before the LIBOR clock runs down. On July 13, 2021, the CFTC’s Market Risk Advisory Committee (MRAC) adopted SOFR First, a market best practice recommendation developed by MRAC’s Interest Rate Benchmark Reform Subcommittee. The Subcommittee previously recommended SOFR First on June 8, 2021, and provided an informative set of frequently asked questions.

A comprehensive guide to the new rule, which largely supersedes prior CFTC guidance that had informed market practice for over seven years.

By Yvette D. Valdez, Adam Bruce Fovent, and J. Ashley Weeks

On November 13, 2020, the US Commodity Futures Trading Commission’s (CFTC’s) final rule on the cross-border application of aspects of the swaps regulatory regime under the Commodity Exchange Act (CEA) (the Cross-Border Rule) became effective.

The Cross-Border Rule addresses (i) the cross-border application of the registration thresholds for swap dealers (SDs) and major swap participants (MSPs) and (ii) the categorization and cross-border application of certain regulatory requirements applicable to those entities and previously addressed in CFTC guidance. The Cross-Border Rule also addresses key definitions, such as the terms “US person” and “guarantee,” and replaces the previous “conduit affiliate” category with a new “significant risk subsidiary” concept. Additionally, the Cross-Border Rule formalizes a process and standard of review for the CFTC’s grant of comparability determinations regarding a foreign jurisdiction’s regulation of SDs/MSPs for substituted compliance purposes.

The CFTC continues to demonstrate a commitment to using its regulatory mandate to combat climate change risks to the US financial system.

By Yvette D. Valdez, Douglas K. Yatter, Jean-Philippe Brisson, Paul Davies, Nicola Higgs, and Deric Behar

On March 17, 2021, the Commodity Futures Trading Commission (CFTC) announced the establishment of an interdivisional Climate Risk Unit (CRU) to assess the risks to US financial stability posed by climate change. The CRU aims to be a catalyst for change by highlighting the derivatives markets’ role in understanding, pricing, and addressing climate-related risks, as well as its role in the transition to a low-carbon economy.

The announcement was made by Acting Chairman Rostin Behnam, whose efforts to steer the CFTC’s focus toward climate-related impacts on the financial system led to the publication of a landmark report by the CFTC’s Climate-Related Market Risk Subcommittee of the Market Risk Advisory Committee in September 2020. The report, titled “Managing Climate Risk in the U.S. Financial System” (the Report), makes 53 recommendations to help mitigate climate risk to financial markets. See Latham’s discussion of the report here.

The CFTC and the DOJ both now pursue enforcement actions against trading in commodities based on misappropriation of confidential information.

By Douglas K. Yatter, Sohom Datta, and Cameron J. Sinsheimer

Among the many changes resulting from the Dodd-Frank Act, one that has been slow to develop, but broad in its significance, is the assertion of authority by the CFTC to police insider trading in commodities markets. Starting in 2015, the agency began bringing enforcement actions against individuals and

A watershed CFTC report highlights the dangers of climate change to the US economy, and provides a broad risk-mitigation roadmap.

By Jean-Philippe Brisson, Paul A. Davies, Nicola Higgs, Yvette D. Valdez, R. Andrew Westgate, Kristina S. Wyatt, and Deric Behar

On September 9, 2020, the US Commodity Futures Trading Commission’s (CFTC’s) Climate-Related Market Risk Subcommittee of the Market Risk Advisory Committee (MRAC) published Managing Climate Risk in the U.S. Financial System (the Report) — a first-of-its-kind publication from a US regulator focusing on the systemic threat that climate change poses to the stability of the US financial system.

The Report is the product of the collaborative effort of the CFTC and a diverse advisory panel of 34 market participants across industries and sectors, including investors; non-governmental organizations; investment banks; academic organizations; and insurance, agriculture, and oil and gas companies.

The Report calls on legislators and market regulators to overcome what it describes as “political inertia” and to take urgent and decisive action commensurate with the risks. To that end, the Report presents a broad range of concrete recommendations, designed to either directly or indirectly mitigate the risks that climate change poses to the US financial markets and long-term economic growth.

The relief removes regulatory obstacles and provides additional flexibility for market participants.

By Yvette D. Valdez, Adam Bruce Fovent, and J. Ashley Weeks

On August 31, 2020, three divisions of the US Commodity Futures Trading Commission (CFTC) issued revised no-action letters providing additional relief to swap dealers, end users, and other market participants from registration requirements; business conduct standards; uncleared swap margin requirements; and mandatory clearing and trade execution requirements as a result of the looming discontinuation of the London Interbank Offered Rate (LIBOR) and other interbank offered rates (IBORs) and the transition to risk-free rates (RFRs).

The self-regulatory organization responds to the US derivatives market’s shift to remote working arrangements.

By Yvette D. Valdez, Carlos Alvarez, Brett M. Ackerman, J. Ashley Weeks, and Deric Behar

As the novel coronavirus outbreak (COVID-19) continues to spread across the globe, causing various disruptions, derivatives regulators are addressing the resulting legal and regulatory uncertainty. This post provides an overview of recent relief and guidance from the National Futures Association (NFA), the self-regulatory organization for the US derivatives industry. Latham & Watkins will discuss recent US Commodity Futures Trading Commission (CFTC) relief in a separate alert and continue to provide updates to the derivatives community.