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- Practices and Industries
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- Futures and Derivatives; Commodity Futures Trading Commission (CFTC)
Covington offers cross-border regulatory and market expertise on the full range of issues implicated by the worldwide futures and derivatives markets. Covington’s Commodity Futures Trading Commission (CFTC) lawyers have been at the forefront of the regulatory evolution underway while serving at the CFTC in the U.S. and the Financial Conduct Authority (FCA) in the UK, working in the industry, and representing financial institutions acting as dealers and a wide spectrum of end-users, including energy companies, asset management firms, corporates, and private equity/hedge funds.
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.
Comment letters related to the Basel III leverage ratio
Prepare multiple comment letters on behalf of several trade associations related to the treatment of segregated margin for cleared derivatives under the Basel III leverage ratio.
Comment letter on behalf of SIFMA AMG
Prepare comment letter on behalf of SIFMA AMG related to a Joint Audit Committee policy on margining of accounts held by the same beneficial owner.
Advice on the application of the CFTC's core principles for trading platforms
Advise a derivatives trading platform on the application of the CFTC’s core principles for swap execution facilities and designated contract markets.
Regulatory requirements for domestic and international derivatives activities
Advise multiple derivatives market participants, including energy company end-users, regarding the regulatory requirements for domestic and international derivatives activities, specifically the analysis of whether financial products are “swaps” under Dodd-Frank, the analysis of whether a market participant satisfies the CFTC’s swap dealer registration requirements and the application of the CFTC’s guidance on the cross-border application of Dodd-Frank on the market participant’s derivatives activities.
CFTC regulations compliance
Advise multiple derivatives market participants on compliance with CFTC regulations, including the development of policies and procedures related to futures and swaps trading to demonstrate compliance with CFTC rules and regulations.
Advise a custody bank on customer collateral requirements
Provide advice to a major custody bank related to the CFTC requirements for customer collateral, including rules related to the interactions with futures commission merchants and clearinghouses.
Advise a coalition of foreign currency intermediaries
Advise a coalition of foreign currency intermediaries regarding the CFTC’s external business conduct regulations in the context of foreign currency prime brokerage arrangements, including a successful request for no-action relief to the CFTC.
Advise U.S. investment bank with international offices on the regulatory treatment of derivatives
Advise a U.S. investment bank with international offices on the regulatory treatment of derivatives, including the CFTC’s guidance on the cross-border application of Dodd-Frank and the related structure of the investment bank’s operations.
Review of futures and swaps trading activity
Conduct real-time reviews of futures and swaps trading activity to verify compliance with internal hedging policies and CFTC regulations; prepare related response to the CFTC’s Division of Market Oversight special call request.
Special reports related to the European Securities and Markets Authority consultation process
Prepare special reports for FIA and FIA Europe related to the European Securities and Markets Authority consultation process for the implementation of Markets in Financial Instruments Directive and Markets in Financial Instruments Regulation.
Climate Regs Expected To Lead CFTC Policy Agenda In 2021
January 3, 2021, Law360
Anne Termine spoke with Law360 about the U.S. Commodity Futures Trading Commission’s expected focus on mitigating climate risks in 2021. Ms. Termine says, “A lot of it requires action outside of the CFTC, but I think the agency is ready to join in on discussion and provide regulations for their registered entities as necessary.”
December 22, 2020, The Wall Street Journal
Anne Termine spoke with The Wall Street Journal about the CFTC’s enforcement actions against Vitol, a Swiss energy firm for bribery misconduct. The Vitol settlement lays the legal foundation for future foreign corruption cases by the CFTC. While the CFTC doesn't have statutory authority to enforce antibribery laws directly, the case introduces a theory for how ...
December 8, 2020, Bloomberg Law
Anne Termine is quoted in Bloomberg Law regarding the CFTC’s foreign bribery enforcement action against oil trader Vitol Inc. Ms. Termine says commodities traders “will likely sit up and take notice” of the Vitol settlement because of the expansive use of the CFTC’s powers to get at conduct that normally falls under anti-bribery laws. That “kitchen sink” ...
December 8, 2020, Law360
Anne Termine is quoted in Law360 regarding the CFTC’s vote to approve electronic trading rules. Ms. Termine says, “The electronic trading rule has been a long controversial one and one the industry is waiting for finality on. The bankruptcy rule is noteworthy because it is the first overhaul in an extremely long time.”
October 16, 2020, Covington Alert
On September 17 and October 6, 2020, the Commodity Futures Trading Commission (“CFTC” or “Commission”) held open meetings (the “September Meeting” and the “October Meeting,” respectively) to consider a number of final rules, each of which the Commission approved unanimously. The September Meeting considered rules impacting market participants, such as swap ...
October 15, 2020, Global Investigations Review
Anne Termine is quoted in Global Investigations Review regarding this year’s aggressive spoofing enforcement from the CFTC. Ms. Termine says the marked increase in the agency’s spoofing-related enforcement actions in recent years is due to the software generating more leads. She adds that the marked increase in the agency’s spoofing-related enforcement actions ...
CFTC Issues Guidance on Corporate Compliance Program
September 10, 2020, The Wall Street Journal
Anne Termine is quoted in The Wall Street Journal regarding a memo from the U.S. Commodity Futures Trading Commission detailing how it will evaluate corporate compliance programs. Ms. Termine says, “It’s making clear the expectation that industry and market participants should operate in a certain way and have clear and robust systems and controls.” The guidance ...
June 30, 2020, Bloomberg Law
Anne Termine is quoted in Bloomberg Law regarding the increased credit risks within the global financial system due to the slow progress in replacing Libor. Ms. Termine says, “Libor was beautiful in its simplicity because you had one type of rate structured one way to be applied across multiple currencies. There are no easy answers.”
June 18, 2020, Covington Alert
Lawyers encouraged by CFTC vow to avoid piling on
May 27, 2020, Global Investigations Review
Anne Termine spoke with Global Investigations Review about the U.S. Commodities and Futures Trading Commission’s vow to recognize punishments issued by other agencies when calculating its own civil penalties. Ms. Termine says the new guidance lacked information about the technical aspect of penalty calculations, such as how investigators decide how many separate ...
April 6, 2020, Covington Alert
On March 24, 2020, the CFTC unanimously voted to adopt final interpretive guidance on when “actual delivery” of retail commodity transactions in virtual currencies occurs within the meaning of Section 2(c)(2)(D) of the Commodities Exchange Act, making them eligible to meet the exception from regulation as a futures contract. The CFTC previously published ...
March 18, 2020, Covington Alert
On March 17, 2020, the Commodity Futures Trading Commission’s (CFTC) Division of Swap Dealer and Intermediary Oversight (DSIO) and Division of Market Oversight (DMO) each released an announcement regarding a series of no-action letters in response to the ongoing global COVID-19 pandemic (see here for the DSIO announcement and here for the DMO announcement). The ...
CFTC's Plan To End Position Limits Saga Faces Big Test
February 5, 2020, Law360
Anne Termine is quoted in Law360 regarding the U.S. Commodity Futures Trading Commission’s effort to impose position limits meant to curb speculators’ ability to distort prices. The new plan allows users to seek exemptions not set forth in the rule proposal by applying directly to their relevant exchanges. The CFTC would have 10 days to review that decision or ...
February 3, 2020, Covington Alert
At an open meeting on January 30, 2020, the Commodity Futures Trading Commission (“CFTC”) voted 3–2 to approve a proposed rule that would impose federal position limits on derivatives. The proposed rule, if finalized, would prevent excessive speculation while allowing bona fide hedgers in agricultural, energy, metals, and other commodities markets to hedge risk ...
SEC And CFTC Regulatory Priorities To Watch In 2020
January 1, 2020, Law360
Anne Termine is quoted in Law360 regarding CFTC’s proposal to regulate cross-border swaps and govern when cross-border swaps should be registered with the agency. Ms. Termine says, “The commission is trying to thread the needle of registration that is not over-reaching beyond our borders, yet sufficiently protects the interests of the U.S. and U.S. markets. This ...
October 31, 2019, Bloomberg Law
Laura Brookover is quoted in Bloomberg Law regarding a House bill to reauthorize the Commodity Futures Trading Commission for the first time in more than a decade. The bill would give the agency stronger legal footing to pursue fraudulent overseas trading activities. Ms. Brookover says that language would potentially give the agency broader authority over ...
Exchange Rules Spark Conflict
August 14, 2019, The Information
Anne Termine spoke with The Information about the issues cryptocurrency exchange companies face with U.S. regulation. Some exchange companies have resulted to forbidding U.S. customers from using their services. Ms. Termine said that to avoid regulatory scrutiny and possible fines, crypto exchanges should make a “reasonable effort” to prevent U.S. residents from ...
June 7, 2019, Reuters
Laura Brookover is quoted in Reuters regarding recent developments of the Commodity Futures Trading Commission. Ms. Brookover says, “When you have a small agency and a small enforcement staff, you need to rely on deterrent effect and incentives.”
CFTC on lookout for foreign bribery whistleblowers
June 4, 2019, Global Investigations Review
Laura Brookover is quoted in Global Investigations Review regarding the U.S. Commodity Futures Trading Commission’s recently published notice advertising its whistleblower program for “foreign corrupt practices.” Ms. Brookover says the announcement serves as a “marketing tool”. The commission’s whistleblower provisions already extended to this type of conduct ...
FCPA Professor: Laura Brookover
May 31, 2019, FCPA Professor
Laura Brookover appeared on FCPA Professor to discuss the CFTC's recent enforcement advisory concerning violations of the Commodity Exchange Act (CEA) involving foreign corrupt practices including the background of the CFTC and the CEA; why the CFTC may have issued the advisory; what type of conduct involving foreign corrupt practices could fall under the CEA; ...
May 6, 2019, CoinDesk
Anne Termine is quoted in CoinDesk regarding the U.S. Commodity Futures Trading Commission’s willingness to let an ether futures contract go to market. Ms. Termine says, “As such, the CFTC has limited regulatory oversight over cryptocurrency spot markets, namely the ability to take enforcement action whenever there is fraud or manipulation in these spot ...
Software Execs Acquittal Could Rein In Spoofing Cases
April 5, 2019, Law360
Laura Brookover spoke with Law360 regarding a recent a spoofing case involving software executive, Jitesh Thakkar, on a charge of creating a program to manipulate the commodities market. Mr. Thakkar was acquitted midtrial, but prosecutors are still moving forward with charges of aiding and abetted a U.K.-based trader’s “flash crash” spoofing scheme. Because ...
CFTC paves way for no-deal Brexit swaps transfers
March 26, 2019, Risk
Anne Termine is quoted in Risk regarding U.S. margin rules in the event of Brexit. To ensure continued access to the full range of services, EU-based swaps counterparties may wish to move their contracts to affiliates outside of the UK, says Ms. Termine. Swaps dealers may need to move their swaps, for example, to the EU from a UK platform because there is no ...
CFTC Targets Foreign Corrupt Practices
March 12, 2019, Law.com
Laura Brookover spoke with Law.com regarding Commodity Futures Trading Commission’s announcement that it will be on the lookout for bribery intended to secure business related to trading, advising, or dealing in swaps or derivatives. Ms. Brookover says, “We’ve already seen that this director is keen to work with other agencies and coordinate with other agencies ...
March 11, 2019, Bloomberg Law
Laura Brookover is quoted in Bloomberg Law regarding the CFTC’s promise of no-penalty enforcement action on foreign bribery violations. Ms. Brookover says, “I think that may be the central challenge for the CFTC in rolling out this program: making sure the advisory reaches its intended audience.” Foreign companies who learn about the guidance will then have to ...
CFTC's Foray Into Corruption Hints At Imminent Action
March 8, 2019, Law360
Laura Brookover is quoted in Law360 regarding Commodity Futures Trading Commission’s announcement that it will begin prosecuting corruption. She says, “This is sort of an unpredictable development, but also unsurprising because I think under his leadership we’ve seen a renewed focus on policing the integrity of the markets under CFTC jurisdiction.”
January 28, 2019, Covington Alert
The past few weeks have been chaotic for both Brexit negotiations and UK politics overall. On January 15, 2019, British Prime Minister Theresa May’s Brexit plan succumbed to historic defeat in Parliament.
Crypto Exchanges Left Hanging as Shutdown Sidelines CFTC
January 15, 2019, Bloomberg Law
Anne Termine is quoted in Bloomberg Law regarding the Commodity Futures Trading Commission’s enforcement of cryptocurrency coming to a halt with the government shutdown. Ms. Termine says, “It’s an agency working at 10,000 feet right now.” She adds that an extended shutdown could impact the agency’s preparation for oral arguments. “In litigation, March is around ...
March 2018, Futures and Derivatives Law Report, Volume 38, Issue 3
February 15, 2018, Bloomberg Law
Anne Termine is quoted in a Bloomberg Law article regarding the settlement reached with AMP Global Clearing LLC following charges from the CFTC stating that AMP's failure to diligently supervise a cybersecurity vendor resulted in a data breach. According to Termine, cybersecurity is “an area of increasing concern and scrutiny for the CFTC as it goes directly to ...
October 5, 2017, Risk
Anne Termine is quoted in a Risk article examining recent cases that have restricted the extraterritorial application of the Commodity Exchange Act. “I don’t think the Brent case ruling will deter any enforcement programme by the CFTC on an extraterritoriality basis,” says Termine. “However, it does give pause because some parts of the language are incorrect ...
September 27, 2017, Bloomberg BNA
Anne Termine is quoted in a Bloomberg BNA article regarding the CFTC's new enforcement policy following Director James McDonald's September 25 speech. Termine asks, "Will every report to the CFTC result in an enforcement investigation?’’ McDonald indicated that’s not where he wants to go and seems to recognize that the CFTC has to establish a dialogue with the ...
September 25, 2017, Bloomberg BNA
Anne Termine is quoted in a Bloomberg BNA article ahead of CFTC Director James McDonald's expected announcement of a new policy to incentivize self-reporting and cooperation. According to Termine, the CFTC "wants to encourage cooperation, but then people are asking, `what is cooperation going to get me?' That's the number one complaint I always get." She adds, ...
August 28, 2017, Covington Alert
The U.S. Commodity Futures Trading Commission (the “CFTC” or the “Commission”) has been very active since the beginning of this year, despite the change in Presidential Administration, the lack (until recently) of appointed Commissioners, and the turnover of leadership at both the Commission and Division level. Notably, the Commission has announced over 20 ...
June 12, 2017, Law360
Anne Termine is quoted in a Law360 article regarding the Commodity Futures Trading Commission's reaction to a recent internal watchdog review of the agency's oversight of the National Futures Association. According to Termine, it appeared the CFTC's Division of Swap Dealer and Intermediary Oversight was saying that it has a core mission and a core duty and that ...
CFTC Announces Innovation Lab for Fintechs
May 17, 2017, The National Law Journal
Anne Termine is quoted by The National Law Journal in an article regarding the U.S. Commodity Futures Trading Commission's new initiative, LabCFTC, designed to engage innovators in the financial technology industry. “As progressive as this effort might be for the CFTC, it is not the same as a regulatory sandbox, as other regulators around the world have ...
April 24, 2017, Covington Alert
On April 19, 2017, the House Financial Services Committee (the “Committee”) released a new “discussion draft” of the Financial CHOICE Act, its comprehensive regulatory reform bill (“CHOICE Act 2.0”). The Committee released the first version of the bill (“CHOICE Act 1.0”) in June 2016.
January 19, 2017, Covington Alert
One of the most sweeping changes brought about by the Dodd-Frank Act was the introduction of a new regulatory framework for swaps trading. In 2013, the Commodity Futures Trading Commission (“CFTC”) finalized its rules on swap execution facilities (“SEFs”) and swaps trading on SEFs. Less than four years after these rules were finalized, the change in Presidential ...
November 30, 2016, Covington Alert
The Commodity Futures Trading Commission is set to begin its trial of Donald R. Wilson and his proprietary trading firm, DRW Investments, LLC (“DRW”) on December 1, 2016. In advance of this trial, this alert provides the legal theory that will be tested during this trial and other observations related to the CFTC’s pursuit of attempted manipulation.
November 14, 2016, Covington Alert
On November 8, 2016, American voters elected Republican Donald J. Trump as President. In addition, Republicans maintained control of the House of Representatives and the Senate. As the campaign rhetoric fades into the background over the coming weeks and months, the business of transitioning to a new administration will begin in earnest. The results of the ...
October 12, 2016, Covington Alert
Insider trading is a familiar term to participants in the equities markets; however, this term now has application in the swaps, futures, and commodities markets regulated by the U.S. Commodity Futures Trading Commission (CFTC). In a time of aggressive enforcement, financial market participants should be aware that insider trading is a high priority for the CFTC ...
August 30, 2016, Covington Alert
As election season enters full swing, with political candidates at all levels actively soliciting campaign donations from individuals and companies, it is an ideal time for all companies to review the policies and procedures in place for political donations. While the SEC’s pay-to-play rules governing registered investment advisers and their “covered associates” ...
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