I support today’s final rule that would simplify and streamline the reporting obligations of commodity pool operators (CPOs) on Form CPO-PQR.  The Commission first adopted Form CPO-PQR in 2012 and closely modeled the form on Form PF.  The Commission adopted the Form of its own volition; unlike Form PF, which is specifically mandated by the Dodd-Frank Act, there is no similar statutory directive requiring the adoption of Form CPO-PQR.[1]  In my opinion, since its adoption, the detailed information requested on Form CPO-PQR has not significantly enhanced the Commission’s oversight over CPOs and has never been fully utilized by staff.  I have long questioned the Commission’s need to know the litany of data requested on the Form.

In my view, many of the questions on the existing form are more academic than pragmatic in nature – information that may be nice for the Commission to have, but data that is certainly not necessary for the Commission to effectively oversee commodity pools and the derivatives markets.  This is why I am very pleased that the final rule eliminates the most burdensome sections on the current form—Schedules B and C, which together contain roughly 72 distinct questions, if one includes all the separately identifiable subparts.  Many of these questions are challenging for CPOs to calculate precisely and require numerous underlying assumptions that vary from firm to firm, making it difficult, if not impossible, for the Commission to perform an apples-to-apples comparison across the commodity pool industry.

While today’s final rule represents a marked improvement over the current CPO reporting regime, more work remains to be done.  Importantly, the proposal requested comment about reverting back to the former Schedule of Investments originally adopted by the National Futures Association (NFA) in 2010 for its NFA Form PQR (2010 Schedule of Investments).  In 2012, the Schedule of Investments adopted by the Commission went further than the 2010 Schedule of Investments, by lowering the itemized reporting thresholds and adding significantly more granular subcategories of investments.  For example, the Commission sought information regarding the tranches of various types of securitizations and the types of bonds held by the pool.  Historically, the information on the Schedule of Investments has mostly been used by the NFA for their CPO examination program.  However, in its comment letter to the Commission, the NFA noted that it “does not have a need for the more granular information currently in the Schedule” and that it “fully supports [aligning the current schedule with the 2010 Schedule of Investments] because [NFA] believe[s] a more streamlined schedule will significantly alleviate filing burdens on CPOs without negatively impacting the usefulness of the information that is collected.”[2]

I am disappointed that this final rule does not amend the form to adopt the 2010 Schedule of Investments, but I am encouraged that the preamble instructs DSIO staff to evaluate the ongoing utility of the current Schedule of Investments, including comparing it to the 2010 Schedule of Investments, within 18-24 months following the compliance date.  As part of this review, staff is instructed to consider whether or not, in light of its utility, the Commission should revert back to the 2010 Schedule of Investments.  After completing this review, in whole or in stages, staff will develop recommendations, provide relief, or propose a rulemaking for the Commission’s further consideration to effectuate staff’s findings.  This review will allow staff to carefully consider which questions on the Schedule of Investments are necessary to effectively oversee CPOs and to propose eliminating any fields which are being received through other data channels or have no regulatory use case to the Commission’s oversight function.  I think this review is long overdue and is especially timely given the developments in other data streams, like part 45 swap data, that DSIO is actively working to combine with clearinghouse data to provide a complete picture of a CPO’s derivatives activity.  I believe that DSIO’s ability to monitor, in real time, a fund’s derivatives positions will be absolutely vital to the oversight and regulation of commodity pools in the future.

In closing, I deeply appreciate DSIO staff’s efforts to address my concerns on this point in the weeks leading up to today’s vote.  Thank you all very much for your engagement and dedication.

[1] See section 404 of the Dodd-Frank Act.

[2] NFA Comment Letter (June 20, 2020), https://comments.cftc.gov/Handlers/PdfHandler.ashx?id=29369.