WFE Response to the CFTC’s Request for Comment on the Impact of Affiliations of Certain CFTC-Regulated Entities
The WFE welcomes the opportunity to respond to the Request for Comment on the Impact of Affiliations of Certain CFTC-Regulated Entities issued by the Commodity Futures Trading Commission (CFTC). The WFE and its members actively promote efforts that are designed to ensure the safety and soundness of the global financial system, and appreciates the CFTC’s work to enhance investor and consumer confidence, particularly in regards to addressing conflicts-of-interest (COI) amongst groups that own multiple regulated entities.
The WFE’s response to the RFC recommends that the CFTC review its COI oversight and management practices around groups that own a futures commission merchant (FCM) in addition to a DCM, DCO and/or a SEF, while not deviating from its successful principles-based approach. The paper outlines that an FCM is a risk-taking entity which creates inherently different COIs than in historically observed ownership models where the COIs and their management are well understood and well managed. The WFE put forth that the two structures should be treated distinctly from a regulatory perspective, and that the CFTC should consider whether additional guidance is necessary to address COI where a group owns an FCM and a DCO, DCM, and/or SEF (for example, whether an FCM needs to be a separate legal entity, and what information sharing barriers and shared personnel restrictions are necessary between an FCM and an integrated DCO/DCM/SEF model if owned by the same group).