Concurring Statement, Second Extension of Temporary Exemptive Relief
Commissioner Scott D. O’Malia
October 18, 2011
As Yogi Berra famously proclaimed: “It is déjà vu all over again.” Yogi perfectly encapsulates my feelings today. We find ourselves again voting on a proposed order aimed at providing legal certainty in the form “temporary exemptive relief” for swap market participants that extends the soon to expire relief found in the Commission’s July 14, 2011 exemptive order (“July 14 Order”). This temporary relief is necessary because: (1) the Commission has not yet put forth final rules defining such key terms such as “swap” and “swap dealer”; and (2) certain exemptions and exclusions for transactions in exempt and excluded commodities currently relied upon by market participants will be repealed effective December 31, 2011. The proposal states: “[t]he Commission proposes that this further amendment to the July 14 Order is necessary to ensure that the same scope of the exemptive relief available before December 31, 2011 is available to all swaps and extends through July 16, 2012, at the latest.”
Unfortunately, we are once again facing an exemptive order that suffers the same faults that the July 14 Order suffered, namely: (1) it again includes an arbitrary sunset provision that will cut the transition period short and so will likely not provide necessary “relief” to market participants, and (2) it demonstrates the lack of ordering of rulemakings combined with the failure to put forth an implementation schedule. We now need to broaden the scope of the July 14 Order because the exemptive rules contained in part 35 will no longer be available to market participants after December 31, 2011 even though the replacement regulatory regime is not in place yet.1 Part 35 is more commonly known as the swap exemption and is relied upon primarily by entities engaging in agricultural swaps. The Commission repealed part 35 in order to ensure that it is not used by individuals and entities who had relied on Sections 2(d), (g) and (h) of the Commodity Exchange Act (“CEA”) as an end run around the new statutory and regulatory requirements.
I support the proposal, as I did last time, because it is important for the Commission to provide market participants and the public with the form of relief the exemptive order is contemplating, but I would have preferred that this rule, like its predecessor, would not select an arbitrary end date.
Mr. Chairman, I again renew my call for a comprehensive rulemaking schedule and implementation plan, that provides greater insight on reporting requirements to swap data repositories as well as separate rulemaking on real time and block rules. The Commission must also provide some certainty on the clearing and trading mandate including clarification of “made available for trading” and guidance on swap clearing.
1 The Commission recently promulgated a rule pursuant to section 723(c)(3) of the Dodd-Frank Act that, effective December 31, 2011, will repeal the existing part 35 relief and replace it with new § 35.1 of the Commission’s regulations. See Agricultural Swaps, 76 FR 49291 (Aug. 10, 2011).
Last Updated: October 18, 2011