Since May 13, the financial community has been bracing itself for the release of a detailed legislative proposal by the administration to regulate the OTC derivative markets.1 The wait is over. The Obama administration closed out the first stage of its regulatory reform agenda by delivering to Congress the final piece of legislative language implementing its proposals: the Over-the-Counter Derivatives Markets Act of 2009 (the "Proposed Legislation" or "Act").2 If enacted, this legislation will radically alter the regulatory landscape, affecting the economic fortunes of not only established dealers and hedge funds but possibly also countless many other users of derivatives, including industrial companies.
As discussed below, the Proposed Legislation is breathtaking in its potential scope and reach. A wide range of swaps–including equity, fixed income, and currency swaps–would be subject to regulation. Any market participant with a "substantial net position" in covered swaps–including a corporate issuer or a pension fund–would be required to register as a "major swap participant," unless that position qualifies as an "effective hedge under generally accepted accounting principles," a notoriously complex concept in the world of financial accounting. Moreover, the Proposed Legislation would mandate not only central clearing of standardized OTC derivatives but also that they be traded on a regulated exchange or regulated alternative swap execution facility. This latter requirement goes further than what was initially contemplated in the administration's May 13 outline or its June 17 White Paper.3 Jurisdiction over the OTC derivatives markets would be divided between the Commodities Futures Trading Commission and the Securities and Exchange Commission with the former having jurisdiction over swaps and the latter over security-based swaps. Federal bank regulators would be responsible for prudential oversight over market participants that are subject to U.S. banking regulation.
The Proposed Legislation is complex and in parts confusing, raising a number of serious questions that will need to be resolved as it moves through Congress.
- Swaps/security-based swaps would be defined broadly to include virtually all OTC derivatives.
- The SEC would have jurisdiction over security-based swaps, which would explicitly be defined as securities. The CFTC would have jurisdiction over swaps. Federal bank regulators would set prudential standards for entities under their jurisdiction.
- The SEC and the CFTC, in consultation with the federal bank regulators, would be required to adopt uniform joint rules. If they do not do so within the period established by the Proposed Legislation, Treasury would be required to promulgate the rules instead. If a joint rule is required, only jointly-adopted guidance or interpretations would be effective.
- The SEC would have primary enforcement authority over all provisions relating to security-based swaps; the CFTC would have primary enforcement authority over provisions relating to swaps. However, the federal bank regulators would have exclusive enforcement authority over prudential standards for those entities regulated by them.
- Dealers and major participants would be broadly defined to include virtually any significant market actor and would be subject to sweeping (and potentially identical) regulation.
- All standardized swaps/security-based swaps would have to be cleared through a registered central counterparty ("CCP") and traded on a registered exchange or alternative execution facility. Any derivative accepted for clearing would be presumed to be standardized.
- Customized derivatives or those not accepted for clearing would have to be reported by both counterparties to a registered swap repository and generally would be subject to higher margin and capital requirements.
- Higher margin and capital requirements might not apply where one of the counterparties is not a swap/security-based swap "dealer" or "major participant," the derivative is part of an "effective hedge" under GAAP, and that counterparty is predominantly engaged in activities that are not "financial in nature."
- CCPs, swap repositories, boards of trade, and alternative execution facilities would be subject to extensive registration, reporting, recordkeeping, and other requirements.
- Major participants would be defined in reference to a GAAP standard for derivatives and hedging transactions that is generally regarded as extremely technical and complex.
- The SEC and the CFTC would be authorized to impose position limits on market participants and to require large trader recordkeeping and reporting.
Summary of the Proposed Legislation and Some of the Questions it Raises
Swaps and Security-based Swaps
The Proposed Legislation would generally give the CFTC jurisdiction over swaps and the SEC jurisdiction over security-based swaps. The CFTC would have primary authority to enforce the provisions of Subtitle A of the Act (swaps); the SEC would have primary authority to enforce Subtitle B (security-based swaps). Federal bank regulators would have exclusive authority to enforce the prudential requirements of the Proposed Legislation with respect to banks as well as branches or agencies of foreign banks that are swap/security-based swap dealers or major swap/security-based swap participants. The federal bank regulators could refer suspected violations of non-prudential provisions or rules to the SEC or CFTC, as appropriate and would have backstop authority if the SEC/CFTC did not initiate an enforcement proceeding within 90 days of the referral.
The Proposed Legislation defines the term "swap" broadly to capture any product today known as a swap and virtually any other derivative instrument. A swap generally would include any agreement that (1) includes a put, call, cap, floor, collar, or similar option for the purchase or sale of, or based on the value of, one or more interest or other rates, currencies, commodities, securities, debt instruments, indices, quantitative measures, or other financial or economic interest or property of any kind, (2) provides for any purchase, sale, payment, or delivery that depends on the occurrence, non-occurrence, or extent of the occurrence of an event associated with a potential financial, economic, or commercial consequence, (3) provides for the exchange of payments based on the value or level of one or more interest or other rates, currencies, commodities, securities, debt instruments, indices, quantitative measures, or other financial or economic interests, including any transaction commonly known as an interest rate swap, a rate floor, rate cap, rate collar, price-currency rate swap, basis swap, currency swap, total return swap, equity index swap, equity swap, debt indexed swap, debt swap, credit spread, credit default swap, credit swap, weather swap, energy swap, metal swap, agricultural swap, emission swap, or commodity swap, (4) is commonly known to the trade as a swap, or (5) is any combination or permutation of the foregoing.4
The definition of swap would exclude (1) any contract of sale of a commodity traded on or subject to the rules of any commodities board of trade designated as a contract market under the Commodity Exchange Act, (2) any sale of a non-financial commodity for deferred shipment or delivery, if physically settled, (3) any put, call, straddle, option, or privilege on a security or index or group of securities that is subject to the Securities Act of 1933 and the Securities Exchange Act of 1934, (4) options on foreign currencies entered into a national securities exchange, (5) any agreement providing for the purchase or sale of one or more securities on a fixed basis that is subject to the Securities Act and the Exchange Act, (6) any agreement providing for the purchase or sale of one or more securities on a contingent basis that is subject to the Securities Act and Exchange Act, unless the purchase or sale is predicated on the occurrence of a contingency that might turn on the creditworthiness of a third party, (7) any debt instrument that is a security under the Securities Act, (8) any agreement that is based on a security and entered into directly or through an underwriter by the issuer of such security for the purpose of raising capital, (9) any foreign exchange swap or forward, or (10) any agreement where the counterparty is a Federal Reserve Bank, U.S. Government, or agency thereof.
The definition of swap also would exclude most security-based swaps. A security-based swap would be defined as an instrument that would be a swap and be based on (1) an index that is a narrow-based security index, (2) is based on a single security or loan, or (3) is based on the occurrence, non-occurrence, or extent of the occurrence of an event relating to a single issuer of a security or the issuers of securities in a narrow-based security index, if the event directly affects the financial statements, financial condition, or financial obligations of the issuer.
The Proposed Legislation would repeal Section 206B of the Gramm-Leach-Bliley Act and would make explicit that security-based swaps are securities subject to the Securities Act and the Exchange Act. While the definition of "security" under the Securities Act would include a security-based swap, it is not clear which category of swap transactions would be subject to the registration requirements under Section 5 of the Securities Act. The Proposed Legislation appears to limit the applicability of Section 5 by providing that an offer or sale of a security-based swap by or on behalf of the issuer of the reference securities, an affiliate of the issuer, or an underwriter would constitute an offer or sale to sell such securities. This suggests that swap transactions between dealers and eligible contract participants that do not involve the issuer of any reference securities would not implicate any registration requirement under Section 5. Note, however, that swap transactions involving non-eligible contract participants might require a registration of such security-based swap under the proposed amendment to Section 5(d).
Under the Proposed Legislation, the SEC and the CFTC would be required to adopt a joint rule further defining "swap" and "security-based swap" within 180 days of the effective date of the legislation. That rulemaking would need to clarify a number of questions regarding whether an instrument should be characterized as a swap. For example, it is unclear how the Proposed Legislation would affect the so-called "status" issue as to whether a particular contract should be characterized as a swap or an extension of credit involving securities.5 It appears that instruments such as variable forwards or any kind of cash-settled forward are not intended to be included in the definition, but the definition is not entirely clear on this point.
The SEC and the CFTC would have no jurisdiction over an "identified banking product," as defined in Section 206 of the Gramm-Leach-Bliley Act, unless a federal bank regulator excepts the product from exclusion, which it may do if it determines (in consultation with the SEC and the CFTC) that the product would meet the definition of swap or security-based swap and that the product has either become known as a swap or security-based swap or has been structured as an identified banking product to evade the federal securities or commodities laws.
CCPs, Swap Repositories, and Alternative Swap Execution Facilities
All standardized derivatives would have to be cleared by a registered CCP whose rules prescribe that all swaps/security-based swaps with the same terms and conditions are fungible and may be offset against one another. Any derivative accepted for clearing by a registered CCP would be presumed to be standardized.6
The SEC and CFTC would be required to adopt joint rules to define, as broadly as possible, what "standardized" means. The rulemaking should take into account the extent to which the terms of the swap or security-based swap are disseminated to third parties or referenced in other contracts; the volume of transactions in the swap or security-based swap; the extent to which its terms are similar to those of other centrally-cleared contracts; whether any differences are economically significant, and any other factors the regulators deem appropriate. The regulators also would be permitted to designate as standardized any particular derivative over which they have jurisdiction.
If a derivative contract is not accepted for clearing by a registered CCP, both counterparties would have to report it to a registered repository or to the relevant regulator if the repository refuses to accept it. Any entity acting as a derivatives repository would have to register with the appropriate regulator and be subject to inspection and examination. The Proposed Legislation would define a swap repository as "an entity that collects and maintains the records of the terms and conditions of swaps or security-based swaps entered into by third parties."
Contracts entered into before the date of enactment of the legislation would have to be reported to a registered repository or to the SEC or CFTC within 180 days of the effective date of the Act. Contracts entered into on or after the date of enactment would have to be reported within the later of 90 days of the effective date or such time after entry into the contract as the SEC or CFTC determine.
All standardized swaps or security-based swaps would be required to be traded on a designated board of trade, an exchange, or a registered alternative swap execution facility unless (1) the swap or security-based swap is not accepted for clearing by a registered CCP; or (2) one of the counterparties is neither a swap/security-based swap dealer nor a major swap/security-based swap participant and does not meet the eligibility requirements of any registered CCP. A non-eligible contract participant would be allowed to effect a swap or a security-based swap transaction only on a registered board of trade or exchange. It is possible that an entity could meet the definition of eligible contract participant (meaning that it could trade OTC derivatives as a general matter), but not meet particular exchange or execution facility eligibility criteria.
Under certain circumstances, foreign boards of trade that provide U.S. participants with direct access to the electronic trading and order matching systems would be required to register with the CFTC. Certain existing foreign boards of trade would be grandfathered. The extent to which requiring registration in the U.S. of foreign exchanges could result in significant anti-competitive effects on U.S. companies doing business abroad will need to be explored by Congress.
Alternative swap execution facilities would need to demonstrate that they have trading and participation rules to deter abuse and that they have the resources in place to enforce such rules. They would also need to establish and enforce rules relating to trading procedures, information gathering, and the financial integrity of the derivatives in their system. To maintain their registration, they would have to comply with a set of "core principles," including that they would permit trading only in swaps/security-based swaps "not readily susceptible to manipulation," as well as with any rules established by the SEC or CFTC, as appropriate.
Alternative swap execution facilities also would be required to adopt position limits or position accountability for each contract "where necessary and appropriate," at a level no higher than that set by the relevant regulatory agency. They would need to adopt emergency rules that include the authority to limit or suspend trading. Alternative swap execution facilities and CCPs would be required to designate a compliance officer with attendant responsibilities. The Proposed Legislation also would impose conflict of interest rules and/or financial safeguard requirements on the clearing, reporting, and execution entities, including among other things, margin requirements and the ability for the entity to cover its operating costs.
Dual registration with the SEC and the CFTC would be required for all entities for which the Proposed Legislation would require registration, including clearing agencies, repositories, alternative swap execution facilities, banks, dealers, and major participants. The regulators would be allowed to exempt a CCP, a repository, or an alternative swap execution facility from registration if that entity is subject to comparable consolidated regulation by the SEC or CFTC, as appropriate, or by one of the federal bank regulators or an appropriate home country regulator.
Information and Disclosure
The SEC and CFTC would adopt reporting and recordkeeping standards for CCPs, repositories and alternative swap execution facilities. Standards for repositories would have to specify the data to be collected and maintained for each swap/security-based swap. On request, the SEC and CFTC would share the information collected with each other, with the federal banking regulators, the proposed Financial Services Oversight Council, the Justice Department, and, if the primary regulators deem it appropriate, with foreign authorities.
CCPs would be required to provide market participants with enough information to identify and evaluate risks and costs. They would need to disclose publicly their rules and operating procedures, their margin-setting methodology, information about their financial resources, the terms and conditions of cleared and settled contracts, fees charged, and aggregate daily settlement prices, volume, and open interest for all settled and cleared contracts.
Repositories would have to make available on a confidential basis all data, including individual counterparty trade and position data, to their regulator as well as to the federal banking agencies, the Oversight Council, the Justice Department, and, if the primary regulators deem it appropriate, with foreign authorities.
The SEC and CFTC would be required to make publicly available, in a way that protects individual information, aggregate data on swap/security-based swap trading volumes and positions. The agencies would be able to delegate this function to a CCP or repository.
Reporting and recordkeeping requirements for swaps/security-based swaps not cleared through a registered CCP and not reported to a repository would be required to be at least as onerous as for cleared/reported contracts.
The Proposed Legislation would amend Sections 13(d), (f), and (g) of the Exchange Act by providing that it is possible for a person to become or be deemed a beneficial owner "upon the purchase or sale of a security-based swap." It is not clear whether this means that a person may become a beneficial owner of a publicly traded security by virtue of entering any security-based swap referencing that security (e.g., a cash-settled total return swap), given the existing definition of beneficial ownership under Rule 13d-3.7 The Proposed Legislation seems to leave open the possibility for the SEC to define more narrowly the universe of swaps that would cause a person to become or be deemed to become a beneficial owner of a security by virtue of entering into a security-based swap.
Dealers and Major Participants
The Proposed Legislation does not appear to distinguish between dealers and major participants and would subject both to sweeping new regulation.8 Both dealers and major participants would be broadly defined to include virtually any significant market actor. Every swap/security-based swap dealer and major swap/security-based swap participant would have to register as such with the appropriate regulator within one year of the effective date of the legislation. Dual registration would be required for dealers and major participants engaging in swap and security-based swap transactions. Notably, the Proposed Legislation would authorize the SEC to exempt registered broker-dealers from duplicative SEC registration requirements. Moreover, although the Proposed Legislation treats dealers and major participants identically, it would allow the SEC and CFTC to adopt appropriate rules for such entities, as discussed further below. It is possible therefore that the regulators could impose different requirements on dealers and major participants, consistent with the requirements under the Proposed Legislation.
The Proposed Legislation would define a swap dealer as any person engaged in the business of buying and selling swaps for such person's own account, through a broker or otherwise. Persons who buy or sell for their own account, either individually or in a fiduciary capacity, but not as part of a regular business, would be exempt from the definition.
A major swap participant would be defined as "any person who is not a dealer and who maintains a substantial net position in outstanding swaps, other than to create and maintain an effective hedge under generally accepted accounting principles, as the [SEC and CFTC] may further jointly define by rule or regulation." The Proposed Legislation contains parallel definitions for security-based swap dealers and major security-based swap participants.
The SEC and CFTC would be required to adopt a joint rule to define further "swap dealer," "security-based swap dealer," "major swap participant," and "major security-based swap participant." Presumably the rules would lay out what constitutes a "substantial" position and might further define what is an effective hedge under GAAP. The rules would also need to address, for example, the application of these provisions to investment advisers. It is not clear whether individual funds would be required to register as major swap participants or whether registration would be required of their investment advisers.
The incorporation of accounting standards into a key definition in the Proposed Legislation is notable. The current GAAP standard for accounting for derivatives and hedging transactions is generally regarded as extremely technical and complex and it is not uncommon for companies to fail to satisfy the standards for an effective hedge.9 Accordingly, an industrial company that engages in limited hedging activities could find itself subject to regulation as a major swap participant, despite the apparent intent of the Proposed Legislation to exclude them.
Moreover, GAAP is established by the Financial Accounting Standards Board, an independent standard-setting body. The FASB is not a regulatory organization, but tying the determination of major swap participant to GAAP could turn the FASB into an arbiter of whether an entity is or is not a major swap participant, and therefore subject to the Act. To complicate matters even further, if the U.S. ultimately converts to International Financial Reporting Standards, the question would arise whether the reference to GAAP precludes determining whether a hedge is effective under IFRS.
The SEC and CFTC also would be required to adopt other joint uniform rules relating to dealers and major participants, such as business conduct, reporting, and recordkeeping rules. While these agencies would be authorized to impose these rules on dealers and major participants that are subject to regulation by one of the federal bank regulators, they would not be authorized to adopt prudential requirements (which would include activity restrictions) for these entities.
Bank dealers and major participants would be subject to capital and margin requirements set by their federal bank regulator. Non-bank dealers and major participants would have to meet capital and margin requirements prescribed jointly by the SEC and the CFTC. The regulators would all be required to consult on the appropriate capital and margin standards. The standards set for non-bank dealers and major participants would have to be at least as stringent as those established for banks and bank holding companies.
The federal bank regulators would be required to impose both initial and variation margin requirements on all swaps/security-based swaps not cleared by a registered CCP, i.e., not standardized, except that the regulators would not be required to impose such margin where one of the counterparties is not a dealer or major participant, the derivative is being used by that counterparty as part of an effective hedge under GAAP, and the counterparty is predominantly engaged in activities that are not financial in nature, as defined in the Bank Holding Company Act. To the extent that industrial companies employ customized derivatives to create hedges, a substantial migration of these derivatives to standardization – an express goal of the Proposed Legislation – might have unintended effects on the ability of these entities to satisfy the carve-out from the definition of major participant if the standardized product would not be deemed an effective hedge under GAAP.
Dealers and major participants would be subject to strict reporting and recordkeeping requirements pursuant to rules to be promulgated jointly by the SEC and CFTC within a year of the effective date of the Act. Information required to be kept would include daily trading records, customer records, a complete audit trail, and all recorded communications, including but not limited to email, instant messages and recordings of phone calls. Because major participants generally deal with dealers as counterparties, the new regime appears to require duplicative reporting and recordkeeping efforts, many of which may not in fact be necessary to achieve the goal of greater market transparency.
The SEC and CFTC also would promulgate business conduct rules, including without limitation rules addressing fraud, manipulation and abuse, supervision, and adherence to position limits. In addition, the SEC and CFTC would establish the "standard of care" a dealer or major participant must meet in verifying that each counterparty is an eligible contract participant and would require specific disclosures by the dealer or major participant to any non-dealer/major participant counterparty about risks, fees, incentives and conflicts. Fee disclosure would have to include "the source and amount of any fees or other material remuneration that the swap dealer or major swap participant would directly or indirectly expect to receive in connection with the swap." It is not clear what indirectly might mean in this context. Although "eligible contract participant" is a term defined in Section 1a(12) of the Commodity Exchange Act, the Proposed Legislation would call for joint rulemaking by the SEC and CFTC on further definition of this term.
With some exceptions, associated persons subject to statutory disqualification would be prohibited from engaging in derivative activities on behalf of the dealer or major participant. The SEC also could reject the application or limit the activities of a swap dealer or major swap participant if (among other things) "any person associated with" such swap dealer or swap participant has certain disciplinary history. "Person associated with" a securities swap dealer or major participant would be defined very broadly to include "any person directly or indirectly controlling, controlled by or under common control with" such dealer or participant.
The SEC and CFTC would have a year to adopt rules regarding back office policies and procedures, including with respect to timely and accurate confirmation, processing, netting, documentation, and valuation of all swaps/security-based swaps. Dealers and major participants would have to implement internal controls to monitor trading to prevent violations of position limits and to ensure they can obtain the information required by their relevant regulators. They also would have to establish information barriers between research and analysis on the one hand and trading or clearing on the other.10 Interestingly, the Proposed Legislation appears to impose a research-investment banking type separation and safeguards for "any person within the firm relating to research or analysis of the price or market" without any assumption or requirement that the research or analysis be published or otherwise made available to the public.
The SEC would be authorized under the Proposed Legislation to establish aggregate position limits (including related hedge exemption provisions) across listed securities and security-based swaps that "perform or affect a significant price discovery function with respect to regulated markets." The SEC would be permitted to exempt any person, security-based swap or transaction from the position limits. It also would be permitted to direct any self-regulatory organization to adopt rules regarding position size, not only for member firms, but for "any person for whom a member of such SRO effects transactions in such security-based swap or other security." We expect that if this provision were to be adopted and limits were imposed on broker-dealer customers, it could result in a substantial competitive disadvantage for U.S. broker-dealers.
The CFTC also would be authorized to adopt aggregate position limits based on the same underlying commodity for each month across contracts listed by designated contract markets; contracts traded by a foreign board of trade that provides U.S. participants with direct access to electronic trading and order matching; and swap contracts that perform or affect a significant price discovery function, as described in the Proposed Legislation.
In determining whether a derivative "performs or affects a significant price discovery function," the regulators would be required to consider a number of factors, including price linkage to an instrument/security traded on a regulated exchange or market, the extent of arbitrage between markets, the extent of a material price reference, and impact on liquidity, among other factors.
The SEC and the CFTC would be authorized to impose large trader reporting and recordkeeping requirements on any person directly or indirectly entering into or obtaining a position in swaps/security-based swaps equal to or more than the limits set by the regulators.
Notably, the Proposed Legislation provides that in determining whether a position exceeds the position limits set by the regulators, the positions and trading activity of "any persons directly or indirectly controlled by such person" must be included. There appears to be no room for Regulation 13D-type disaggregation procedures for calculating these limits, although those procedures would continue to apply in other contexts/markets.
The SEC and the CFTC would be required to consult with federal banking agencies and to adopt uniform rules governing OTC derivatives contracts. If the derivatives regulators do not adopt any joint rules as required by the Act, Treasury would be required, in consultation with these regulators, to adopt such rules within 180 days of the initial deadline.
Any rules required to be adopted jointly by the SEC and the CFTC must be uniform and must treat functionally or economically similar products similarly. Moreover, the agencies would be required to issue joint interpretations or guidance regarding any provisions requiring joint regulation. Neither agency would be permitted to grant an exemption from the swap or security-based swap-related provisions except as expressly authorized by the legislation.
The SEC and the CFTC would have authority to issue joint rules and interpretations to prevent "evasions of this Act."
Assuming passage of the Proposed Legislation, a real question remains as to whether the division of regulatory authority between the SEC and CFTC, with coordination required among the SEC, the CFTC, and federal banking regulators, would create an unduly cumbersome regulatory approach, especially where joint rulemaking is required.
The ambitious and complex Proposed Legislation, if enacted as drafted, will have a significant impact on all aspects of the derivatives markets and on the regulatory landscape for financial products and businesses. As discussed above, it raises many serious questions that will need to be resolved before it becomes law.
1See WilmerHale's earlier alert on the administration's plans to pursue regulatory overhaul in this area: "Regulating OTC Derivatives: How Hard Would It Be To Undo the CFMA?" (May 22, 2009), available here.
2 The Proposed Legislation is available here.
3 Both documents contemplated "greater use" of exchange trading in the future but fell short of mandating it. The White Paper is available here.
4 The definition of swap is somewhat different from the definition of "swap agreement" in the Gramm-Leach-Bliley Act.
5 In 2005, the SEC asserted that certain total return swaps constituted "sham loans" that violated federal margin requirements. Canadian Imperial Holdings Inc. and CIBC World Markets Corp., Exchange Act Release No. 52063 (July 20, 2005), available here. For an analysis of this decision, see WilmerHale Alert, "SEC Recharacterizes Swap Transactions As "Sham Loans": A Potential Regulatory Fall-Out from the Market Timing Investigations, (Aug. 12, 2005), available here.
6 CCPs that clear swaps or security-based swaps that are not required to be cleared by a registered CCP may voluntarily register with the relevant agency.
7 It is not clear how the proposed amendments to Sections 13(d), (f), and (g) would affect the existing reporting requirements under Schedules 13D and 13G and Form 13F.
8 Assistant Treasury Secretary Michael Barr confirmed in a conference call following release of the Proposed Legislation that dealers and major participants would be subject to the same regulatory treatment under the Act.
9 The principal standard applicable to hedge accounting is Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities, a 176 page standard that has been supplemented and amended by numerous other FASB documents. These standards were recently codified and restated in the FASB's Accounting Standards Codification, Topic 815, Derivatives and Hedging.
10 The Proposed Legislation also would amend the Commodity Exchange Act to require the CFTC to establish rules for futures commission merchants and introducing brokers to implement similar information barrier systems and procedures.