October 23, 2014
End-users that trade derivatives on designated contract markets (DCMs) or swap execution facilities (SEFs) should expect to receive requests for additional trader and account information from their futures commission merchants (FCMs) to address the Commodity Futures Trading Commission (CFTC) Ownership and Control Reporting (OCR) rules. The CFTC’s OCR rules require FCMs, clearing members, foreign brokers and swap dealers (collectively, Reporting Entities) to obtain additional identification and market participant data on new and updated forms. Swap end-users and other market participants that fail to provide the CFTC with the appropriate forms and information may have their trading privileges suspended or be assessed a fine.
Background
On Nov. 18, 2013, the CFTC published new OCR rules and related forms to enhance its identification of futures and swap market participants (the OCR Final Rule). The OCR Final Rule expands upon the CFTC’s pre-existing position and transaction reporting requirements and is intended to improve the CFTC’s market surveillance and large trader reporting program. The CFTC currently requires Reporting Entities to obtain Forms 102 and 40 from market participants. The old Form 102 provides the CFTC with information regarding special accounts, volume threshold accounts and consolidated accounts, and the old Form 40 collects reporting trader information. The OCR Final Rule creates an updated Form 102 (New Form 102) and an updated Form 40 (New Form 40), as well as an entirely new Form 71 (New Form 71). New Form 102 is now expanded and divided into three sections (New Form 102A, New Form 102B and New Form 102S). A summary of the new and updated forms is provided below:
What End-Users Need to Do
An end-user may provide the trader and account information required under the OCR Final Rule by sending a spreadsheet with the data directly to each Reporting Entity that it trades with. Alternatively, many end-users prefer to submit the information electronically through the Futures Industry Association (FIA) Tech Portal. The FIA Tech Portal is a web-based application that may simplify the data entry and information submission process. The FIA Tech Portal, which includes the OCR Data Service, can file an end-user’s New Form 40(40S) and New Form 71 electronically with the CFTC, enable an end-user’s Reporting Entities to comply with the OCR Final Rule and automatically re-file a New Form 40(40S) and a New Form 102 whenever the end-user updates its information. There is no fee for clients to use the FIA Tech Portal or OCR Data Service. However, the deadline for clients to register for the FIA Tech’s OCR Data Service is Oct. 31, 2014. End-users that don’t register for FIA Tech’s OCR Data Service before Oct. 31, 2014, may still send their information in spreadsheet form to their Reporting Entities before the applicable compliance deadline for the OCR Final Rule. Pursuant to the CFTC’s July 23, 2014 No-Action Letter, the compliance deadlines for end-users and Reporting Entities under the OCR Final Rule are as follows:
Additional Recordkeeping Obligations
End-users should also be aware that the OCR Final Rule imposes additional recordkeeping obligations on certain large traders. The OCR Final Rule applies additional recordkeeping obligations on four new categories of market participants, including:
CFTC regulations require that every volume threshold account controller, person who owns a volume threshold account, reportable sub-account controller, person who owns a reportable sub-account, and trader who owns, holds or controls a reportable futures or option position shall:
The OCR Final Rule recordkeeping obligations are in addition to other recordkeeping requirements that may be applicable to end-users that trade listed derivatives on DCMs or SEFs or over-the-counter swaps under Dodd-Frank Act swap data recordkeeping requirements.
Given the complexity of the OCR Final Rule and related recordkeeping requirements applicable to end-users, please contact one of the authors or your regular McGuireWoods lawyer for further guidance.
Click here for the full text of the OCR Final Rule.
Click here for a link to the FIA Tech’s OCR Data Service Portal.
Click here for our Swaps End-User Update regarding recordkeeping requirements.