Futures and Derivatives - Commodity Futures Trading Commission (CFTC)

Regulatory Advocacy and Advice

In the U.S., market participants must implement and apply new Dodd-Frank Act regulations to everyday business functions. Implementation requires specialized knowledge of the new swaps regulations and the existing futures regulations combined with expertise on how the CFTC has traditionally regulated market participants. Our experience can assist clients with CFTC registrations (including swap dealer, intermediary, clearing or trading facility registrations), regulatory analysis of swaps and futures products (including cross-border application), filings related to the end-user exception, requests to CFTC Commissioners and CFTC Staff for relief from specific CFTC regulations.

Compliance Policies and Programs

Covington can assist clients in the review of existing policies and procedures and the development of new policies and procedures in order to demonstrate compliance with CFTC regulations in the U.S. and FCA rules and regulations in the UK and consistency with industry best practices. The zero-tolerance regulatory environment worldwide means that a robust compliance program must be instituted, practiced and continually updated. Covington can provide ongoing compliance advice, including on real-time issues, and training programs tailored to a client’s needs.

Enforcement Actions and Internal Investigations

The CFTC’s new enforcement authority combined with an aggressive enforcement program means clients must be prepared when conduct is discovered internally or when an investigative request is received from the CFTC. Due to our experience working at the CFTC, we can provide a focused and rapid review of conduct, as well as perform internal investigations and represent companies and employees in CFTC investigations and litigation. Because derivatives investigations often cross multiple jurisdictional boundaries, Covington has the cross-agency capabilities to assemble a collaborative team to advise clients in related enforcement actions before the Federal Energy Regulatory Commission, the U.S. Securities and Exchange Commission, the FCA in the UK, and criminal matters before the U.S. Department of Justice.

European Legislation

In the European Union, the futures and derivatives markets are highly regulated and are set to become even more so. EMIR—the regulation on OTC derivative transactions, central counterparties and trade repositories—imposes a number of requirements on counterparties to derivatives contracts. In addition, the Markets in Financial Instruments Directive (MiFID), which already regulates derivatives, is set for an extensive overhaul, taking account of new trading venues and technological developments which will affect the futures and derivatives markets. Similarly, the Market Abuse Directive is being substantially updated to take new trading systems and new technology into account.

Covington can advise clients on the requirements under the Directives and Regulations, both at national and European level and internationally. With our offices in London and Brussels, we work with EU institutions and agencies and with national governments, on our clients’ behalf, to navigate political processes and to influence policy. We can advise on reviews and amendments to systems and controls to meet the new requirements. Where problems occur with the regulators, we have an experienced team who can assist.

Transactional Advice

Covington advises clients on products and transactions involving the futures, commodities, and derivatives markets. We advise clients, both domestic and offshore, on the optimal structuring of their business operations in light of the regulatory changes to these markets. In addition to advice related to International Swaps and Derivatives Association documentation, we regularly advise clients on collateral arrangements, prime brokerage agreements, derivative structuring for corporate treasury functions, insolvency issues and transactional due diligence.