We hope everyone has a relaxing, safe, and enjoyable Fourth of July. Despite some personnel changes at the CFTC, the current administration seems to be hitting its stride in terms of enforcement actions and regulatory updates. As with nearly all things though, change may be just around the corner as Brian Quintenz had his hearing in June to be the next Chair of the CFTC. In July’s edition of The Desk, we cover: the Enforcement Round-Up (there continue to be changes in the Division of Enforcement), the still pending response from the U.S. Attorney General’s office on carbon/emission credit transactions, ISDA Notices Hub, extension of CFTC No-Action relief for non-U.S. swap dealers, and ISDA and SIFMA’s response to the Federal Reserve’s proposal to amend the stress capital buffer rules.
Enforcement Round-Up
The CFTC’s organizational chart may best be written in pencil because shortly after we published June’s edition of The Desk, Acting Chair Pham announced that Director of the Division of Enforcement (DOE) Brian Young is out, and Paul Hayeck, is in—at least as Acting Director, for now. While Acting Chair Pham’s announcement did not elaborate on Young’s status with the CFTC, at least one external report indicated that Young was departing the agency having taken a federal employee buyout offer for an early retirement. While new to this particular leadership role, Acting Director Hayeck is no stranger to the CFTC, having served as a DOE deputy director since 2013. Moreover, Acting Director Hayeck was already Chief of DOE’s Complex Fraud Task Force, a role that he will continue. It’s unclear whether Acting Director Hayeck will be elevated to Director, assuming President Trump’s nomination for CFTC Chair, Brian Quintenz, is confirmed, but it’s not unreasonable to expect Quintenz may appreciate the continuity for some period of time given the numerous Staff departures that have been reported and the fact that he’ll be leading what is expected to be a one-Commissioner CFTC, with Acting Chair Pham and Commissioner Johnson expected to join former Commissioners Mersinger and Goldsmith Romero as CFTC alumni once Quintenz is confirmed.
We expect Acting Director Hayeck to continue Acting Chair Pham’s back-to-basics approach to enforcement, by continuing to refocus the Staff’s resources on those cases that involve fraud or market manipulation resulting in customer harm. Indeed, while the enforcement actions in June (click here for last month’s enforcement actions) were developments in previously filed actions, they are still consistent with this refocused enforcement mandate.
In our June update, we discussed the sanctions against the CFTC that the Special Master recommended and the District Court ordered in CFTC v. Traders Global Group Inc., et al., No. 23-11808 (D.N.J.). In her statement following the District Court order, Acting Chair Pham said “[t]his case clearly shows that the Division has for far too long maintained a culture that the CFTC is above the law and that breaking the rules is justified because the CFTC is a government agency.” Building on this record of questioning the previous enforcement approach, it has been reported that Gemini Trust Company, LLC has filed a complaint with the CFTC’s Inspector General that alleges the Staff involved in Gemini’s case misused their authority to get a win against a high-profile company to advance their careers and further urges the Inspector General to ensure that the CFTC follows through on the enforcement reforms directed by Acting Chair Pham. In January of this year, Gemini had agreed to a consent order and paid a $5 million CMP, without admitting guilt, to settle charges related to alleged false statements.
Tiffany Payne
U.S. Attorney General Carbon Credit Update Still MIA
Remember when last month we said we would find out how the U.S. Attorney General Pam Bondi would decide on President Trump’s Executive Order to (1) take all action to stop the enforcement of State laws and continuation of civil actions regarding carbon/emissions contracts that the AG determines to be illegal; and (2) recommend next steps to stop the enforcement of these carbon/emissions contracts? Well, we are about 21 days past the deadline. It is entirely possible that a response was delivered outside the public realm, but we have not seen nor heard any indication of such.
We remained glued to our inboxes and news feeds for an update.
Barrett Morris
ISDA Notices Hub
On June 12, ISDA launched the pre-adherence period for its Notices Hub. Adherence to the ISDA 2025 Notices Hub Protocol will amend the terms of your ISDA Master Agreement to allow the party to use ISDA’s Notices Hub, which acts as a secure central platform for firms to deliver notices (including waivers), with automatic alerts sent to the receiving entity. The protocol is free and ISDA gives a helpful step-by-step guide about how to adhere. FAQs regarding the protocol are expected by close of business on July 13 at ISDA’s website. We think this is an exciting way for market participants to securely and quickly exchange notices and should prove to be an efficient development for the market.
Barrett Morris
CFTC No-Action Regarding non-U.S. Swap Dealers [Extension]
On June 23, 2025, the CFTC extended No-Action relief for certain requirements of Part 45 and Part 46 of the CFTC’s regulations for Swap Dealers and Major Swap Participants (there still aren’t any MSPs) established under the laws of Australia, Canada, the European Union, Japan, Switzerland, or the United Kingdom.
The letter continues long standing relief originally issued on December 20, 2013 in CFTC Letter No. 13-75 and originally drafted by none other than, me. Any entity to receive relief must meet the definition of a non-U.S. Person under the CFTC’s 2013 Cross-Border Guidance and not be affiliated with a group whereby the ultimate parent is a U.S. financial institution. Foreign entities do not get the benefit of the CFTC’s recent Staff Interpretation regarding cross-border definitions.
The letter states that the CFTC’s Division of Market Oversight will not recommend that the CFTC take an enforcement action against a non-U.S. SD or a non-U.S. MSP established in Australia, Canada, the European Union, Japan, Switzerland, or the United Kingdom and is not part of an affiliated group in which the ultimate parent entity is a U.S. SD, U.S. MSP, U.S. bank, U.S. financial holding company, or U.S. bank holding company with the requirements of the Amended SDR Reporting Rules under the earlier of (1) 30 days following the issuance of a comparability determination by the CFTC in which the non-U.S. SD or non-U.S. MSP is established, and (2) the CFTC’s compliance date to address such obligations. The relief does not apply to CFTC Regulations 45.2, 45.6, 46.2 and 46.4.
Stuart Armstrong
Stress Capital Buffer
On June 23, 2025, ISDA and SIFMA submitted a comment letter regarding the Federal Reserve Board’s proposal to revise its capital plan rule and stress capital buffer requitement (SCB). The associations commended the Board’s efforts to address longstanding and unwarranted volatility of the SCB (by averaging SCB results over a two-year period), but took issue with the proposals failure to address more fundamental drivers of SCB volatility (including the implausibility of supervisory stress scenarios and overlap with the risk-based capital framework). The associations note that these core issues lead to SCBs that are excessively volatile and miscalibrated (not reflective of underlying risks), which constrains large banks’ ability to intermediate markets and support economic growth.
The letter highlights key recommendations that are designed to make the U.S. capital framework more risk sensitive:
- Employ a phased-in approach: apply the current SCB rules through September 30, 2026 regardless of whether the proposal is finalized with an earlier effective date;
- Adopt an asymmetric averaging approach to determine the SCB requirement;
- Remove the dividend add-on component from supervisory stress tests; and
- Reform the supervisory stress testing framework because: (1) it includes assumptions that are not consistent with post-crisis reforms or market practice; and (2) it is conceptually inconsistent with the risk-weighted asset (RWA) framework.
Stuart Armstrong
Interesting Links
