A CFTC Agriculture Advisory Subcommittee (the "Subcommittee") offered recommendations to the Agriculture Advisory Committee ("AAC") on the "Efficient and Effective Oversight of Changes to Agricultural Futures Contracts with Open Interest."
In its report, the Subcommittee considered improvements to current procedures for oversight of amendments to contracts with open interest. The Subcommittee found that effective oversight cannot avoid the tradeoff between the need to make necessary changes to contracts and the fact that such changes will result in value transfers. The Subcommittee found, however, that it is possible for the CFTC to play a critical role in the contract amendment process by "facilitating information flows and maintaining channels for public engagement and open dialogue [which would] fulfill the stated desire of market participants to inform and be informed about the contract amendment process."
The Subcommittee recommended that the CFTC:
- provide the public with improved information as to (i) markets that are subject to the CFTC's approval processes and (ii) the outcomes of past rule changes;
- create a bolstered system, for public comment on submitted amendments, which allows all market participants to comment;
- improve risk disclosures to clarify the possibility of changes to contracts with open interest;
- focus on contract changes that are more likely to materially impact the contract's value; and
- amend staff policy and guidance so that it is reflective of current market conditions and contract specifications.
The Subcommittee vote to adopt the recommendations was unanimous.
In remarks at the CFTC's AAC meeting on June 9, 2021, Commissioner Dawn Stump praised the Subcommittee's efforts in coming up with "a consensus-based approach to managing open interest when making changes to ag commodity contracts."
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