CFTC votes to make firms give data on over-the-counter derivatives units.

WASHINGTON -- The Commodity Futures Trading Commission voted yesterday to require futures firms to provide information about their affiliated over-the-counter derivatives businesses.

The measures will make futures commission merchants submit to the agency organizational charts, written risk management policies, and consolidated financial statements.

The new rules will apply to about 200 firms and will become effective on Dec. 31. Firms will begin filing the newly required information starting next April.

"Development of these rules has become a lightning rod for discussions of appropriate regulatory reporting of firms doing substantial over-the-counter derivatives business in derivative product companies that are neither regulated as securities broker-dealers or futures commission merchants," said agency chairwoman Mary Schapiro.

Schapiro said that the agency, along with the Securities and Exchange Commission, is taking a very active role in encouraging improved regulatory reporting by the most active domestic derivatives trading firms, as well as with international regulators.

"I believe the implementation of these rules will enhance the commission's ability to assess the risks that are posed to FCMs [futures firms] by activities of affiliated entities and will improve our ability to manage a financial crisis if one should arise," Schapiro said.

Andrea Corcoran, head of the futures commission's division of trading and markets, said the newly approved rules will help the agency draft further requirements with respect to position reporting.

"It is important contextual information about the structure of firms that can be used as background when you have financial disruptions within a particular entity," Corcoran said.

Corcoran said firms that haven't drafted risk management policies will have a reason to do so once they must submit written statements on the subject.

"It will make clear ... that if these procedures have not been produced to writing quality, now is the time to do that," Corcoran said. "We suspect that the information will provide some comfort."

The new rules are only part of the commission's efforts to handle systemic risk in over-the-counter derivatives trading. The agency said yesterday it will continue to work with other regulators, in large part the SEC, to draft final rules that would require futures firms to report declines in net capital and give notice of margin calls.

Schapiro said it was not clear when these proposals, which were opened for comment at yesterday's meeting, would be complete.

Among those proposals are a requirement that a firm give notice when a margin call that is greater than its a margin call that is greater than its excess adjusted net capital remains unanswered by the close of business on the day following issuance of the call.

In addition, the proposals call for firms to report when excess adjusted net capital is less than 6% of the maintenance margin required to support proprietary and non-customer positions carried.

Meanwhile, both Schapiro and the agency's commissioner, Sheila Bair, expressed interest in the agency's continued efforts to devise an emergency sharing system with other regulators.

"I think there is a lot of congressional interest, and, to the extent regulators can get ahead of the game and have something in place, I think it will help a lot," Bair said.

In the last Congress, Rep. Jim Leach, R-Iowa, and Rep. Henry Gonzalez, D-Tex, jointly introduced legislation that in part called for the sharing of information between regulators in times of financial emergency.

"I think [information sharing] is particularly important for an agency like the CFTC. The exchange-traded futures markets are highly interconnected with the off-exchange derivatives market," Bair said.

The futures trading agency first put its risk assessment proposals on the table in March. Since then, the agency twice extended its comment period and then resolved to approve the rules in different phases.

Agency commissioner Joseph Dial applauded the new rules and proposals. He said agency staff members are to be "commended for crafting rules which will be effective, useful, and not unduly burdensome to market participants."

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