August 17, 2012
On August 17, ASF submitted a letter to the Commodity Futures Trading Commission (“CFTC”) requesting an exclusion for securitization trusts from potential regulation as commodity pools. This issue arose when Dodd-Frank enacted changes to the Commodity Exchange Act (“CEA”) that modified the definition of commodity pool. Generally, Dodd-Frank changed the definition from (x) a pool that is operated for trading in commodity futures on an exchange to (y) a pool that is operated “for the purpose of trading in commodity interests, including any . . . swap.”
With the release of the final swap definitions this past Monday, August 14, the CFTC could interpret the statutory language to include securitization trusts with plain vanilla interest rate or currency swaps as commodity pools. If that determination was made, and without any additional relief, certain transaction parties may be forced to register as commodity pool operators under the CEA, ultimately subjecting them to reporting and other requirements that may not be practicable for securitization trusts. Additionally, a determination that a securitization trust is a commodity pool would cause it to be considered a “covered fund” under the proposed Volcker Rule, which would prevent banks from sponsoring such vehicles or even owning a portion of outstanding bonds linked to such vehicles. The implementation date for this new rule appears to be December 31, 2012, based on a reading of CFTC FAQs.
ASF staff has been engaged in dialogue with senior staff at the CFTC over the last few weeks in an attempt to address this issue and is planning significant additional advocacy over the coming weeks with the CFTC and their Congressional oversight committees. The letter was produced over the past two months with extensive input from the broad ASF membership. Ellen Marks of Latham and Watkins LLP is serving as ASF’s outside counsel on this initiative.
ASF Comment Letter: Request for Exclusion from Commodity Pool Regulation for Securitization Vehicles - August 17, 2012
CFTC Final Rule: Commodity Pool Operators & Commodity Trading Advisors: Compliance Obligations - February 24, 2012
CFTC Correction: Commodity Pool Operators & Commodity Trading Advisors: Compliance Obligations - March 26, 2012
CFTC FAQ: Compliance Obligations for Commodity Pool Operators - August 14, 2012
CFTC No-Action Letter: Relief from Rescission of Regulation 4.13(a)(4) & Amendments to Regulation 4.5 - July 13, 2012
Dodd-Frank Wall Street Reform and Consumer Protection Act (see Section 721 for commodity pool definition) - July 21, 2010
Congressional Record Legislative History: Commodity Pool Operators - July 15, 2010