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CFTC ‘should demand’ clearing house mins

Friday 19 November 2010 – by Andrew Hickley

The Managed Funds Association has appealed to the Commodity Futures Trading Commission to address issues of transparency surrounding the regulation of derivatives clearing houses.

Responding to a CFTC consultation on removing mitigation of conflicts of interest, the MFA says that clearing houses should supply detailed minutes from any board, committee or subcommittee meetings.

The MFA deems this information “essential” for the commission to oversee these organisations, stating that this will help achieve a primary aim in the Dodd-Frank act of increasing transparency.

But it acknowledges that the CFTC must preserve the confidentiality of “sensitive” commercial information raised during these meetings.

The MFA also believes that the CFTC should force clearing houses to make all board and committee charters, procedural rules and similar documents publicly available, as well as revealing the identity of board and committee members, to allow the monitoring of potential conflicts of interest.

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Among other recommendations, the MFA calls for the removal of a provision that states employees or officers of a clearing house cannot be members of its own risk management committee.

The MFA says that the interests of these groups are aligned, with employees motivated to ensure that clearing organisations maintain their risk management boundaries to prevent losses to both the clearing house and its members.

It also says that allowing competition between designated contract markets and swap execution facilities is “critical” for developing a sound market.

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