Following some missed deadlines, the CFTC today finalized a new batch of regulations governing the $600 trillion derivatives market.  The rules, most notably, would allow the Commission to collect a battery of data on derivatives deals and operate a whistle-blower program to reward tipsters who exposed fraud in the marketplace.  Chairman Gary Gensler said the CFTC has turned the corner toward final rules and will build on this momentum. 

Last month, Gensler's Agency adopted the first in a series of derivatives regulations under the Dodd-Frank Act, but has finalized only 11 new rules so far this summer.  Some 40 rules remain on hold, including some very contentious proposals that would spell out which companies are exempt from the overhaul.

Mr. Gensler express satisfaction in signing off on the data rules and whistle-blower program.  He said his Agency is "likely" to take up some thornier rules in the fall, but cautioned that the entire process remained in flux.  “I say ‘likely’ because there’s a lot of work to be done and this could easily change,” he said.

CFTC-Approved Requirements for Swap Data Repositories.   The Commission, in a 4-1 vote, adopted an array of requirements for so-called swap data repositories.  The new entities will collect once-private data about swap trades, a type of derivative contract that is tied to the value of a commodity, mortgage or other asset.  As written, the rules would require repositories to authenticate and aggregate pricing information and other data electronically, enabling regulators to keep an eye on the market. 

“Leading up to the 2008 financial crisis, swaps operated in the shadows.  With this rule, regulators - for the first time - will have specific information on the market’s scale and risk.”

That opinion was not shared by all - Commissioner Michael Dunn, a Democrat like Mr. Gensler, questioned whether the rule was too soft and expressed “grave concerns” that the regulation did not require data collectors to feature independent directors.  questioned whether the rule was too soft.

CFTC-Approved Whistle-Blower Rule.   This rule also was adopted by a vote of 4-1 vote.  It too generated its own controversy.  The program would provide a bounty to whistle-blowers who exposed Ponzi schemes or other wrongdoings.  To qualify for the reward, tipsters must turn over new information that spawns a “successful enforcement action” worth more than $1 million.

Republican commissioners, including the one who voted against the program, complained it would allow insiders to bypass internal compliance departments and take their tips straight to the government.  [C-I Note:  Similar concerns were voiced in May, when the SEC adopted its version of the whistle-blower rule.]    

C-I Note:  At the time this blog was published, the CFTC had not yet issued anything about the new rules on its Web site.   [DealBook, 8/4/11]