The Managed Funds Association ("MFA") outlined a set of regulatory priorities for the CFTC including several recommendations to ease burdens on market participants in the private fund industry.

In a letter to Acting Chair J. Christopher Giancarlo, the MFA recommended that the CFTC consider taking the following actions, among others:

  • harmonize CPO and CTA regulations with the SEC's fund regulations to reduce redundancy;

  • abandon the CFTC proposed position limits rule;

  • focus on protecting interests and assets of customers in regulations related to central clearing counterparty recovery and resolution;

  • make improvements to the existing swaps trading framework; and

  • abandon the Regulation AT proposal and create a simpler automated trading framework.

Highlights of the letter include:

Position Limits Rule Proposal: MFA argued that position limits are "a crude and inefficient tool for deterring market manipulation because it is difficult to set limits at a level that inhibits market manipulation without unduly affecting the ability of markets to efficiently transfer risk." MFA stated that "the Commission has failed to justify the economic need or basis for the Reproposal."

Registered Investment Company Regulation: MFA asserted that "[s]ubjecting investment managers to two similar but slightly different regulatory frameworks have made regulation inefficient, ineffective, and extremely burdensome." The MFA also suggested that the CFTC reduce redundancy in oversight of investment managers by reinstating CFTC Rule 4.13(a)(4), which previously provided an exemption from registration for CPOs of private commodity pools that were registered as an investment adviser with the SEC.

Commodity Pool Regulation (In General): MFA requested that the CFTC modernize and update its Part 4 commodity pool rules, noting that "[c]urrently it is extremely difficult for a CPO or CTA to ensure compliance with the CFTC Part 4 rules without retaining outside counsel with CPO/CTA expertise because a significant amount of rulemaking is found in CFTC staff letters from the past 10 or more years."

Swaps Trading Framework: MFA urged the CFTC to assume responsibility for determining when particular swap contracts have to be SEF-traded, and to adopt regulatory refinements to its swap trading framework so as to "[a]llow investors more flexbility in how they trade swaps."

Insolvency: MFA advocated for amending the Bankruptcy Code—including facilitating "full physical segregation of customer collateral"—so that customer assets posted as collateral on cleared derivatives transactions would not be subject to pro rata distribution upon an FCM's insolvency.

The MFA also praised the CFTC's Project KISS (Keep It Simple, Stupid) initiative and expressed support for measures aimed at streamlining processes and modernizing regulations.

Previously, the MFA had outlined its regulatory priorities for the SEC.

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