The National Futures Association proposed a new NFA Compliance Rule 2-49 (“Swap Dealers and Major Swap Participants Regulations”) regarding the conduct of swaps dealers and major swap participants. If approved, the amendment would specially provide that any violation by an SD or MSP of CFTC Rule 3.3 (“Chief Compliance Officer Requirements”) would be deemed a violation of an NFA requirement.
Lofchie Comment: The explanation of the proposed amendment indicates that the CFTC expected the NFA to adopt compliance rules applicable to swap dealers and major swap participants that “were at least as stringent as the Commission’s [rules].” The clear implication of the NFA’s statement is that it intended to do so.
This raises at least three interesting questions. First, what does it say about the nature of “self”-regulation if the government instructs a “self”-regulatory organization to adopt even tougher rules than the government? Doesn’t that make the SRO a mere branch of the government? Second, if the SRO is just a branch of the government, shouldn’t the same rules (cost/benefit requirements) apply to NFA rulemaking? Lastly, given that the CFTC’s own rules are just coming into force, many of them are unclear as to their requirements, and many of them have impossible deadlines that required delays, why is it necessary for the CFTC to mandate that the NFA adopt even tougher rules? How could the CFTC have sufficient evidence to know that the current rules are not tough enough?
See: Text of Proposed Amendment.
See also: YouTube Video.