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Government Shutdown
“Boom, Boom, out go the lights” was the headline of former CFTC Commissioner Bart Chilton’s statement in anticipation of the 2013 government shutdown, which also began on October 1. Usually we lead in each month with our famed Enforcement Round-Up, but today is the first day of a government shutdown in which a number of the U.S. agencies (including the CFTC) will be operating at an extremely reduced capacity. This is the first time the CFTC has operated under a shutdown since the government shutdown in December 2018, which lasted for 35 days. During prior shutdowns the CFTC was delayed in getting out reports on positions in futures and options markets and naturally slow to respond to inquiries.
Also on September 29th, the CFTC issued their plan for a lapse in appropriations. Of the 543 employees, only 31 will be excepted from the furlough which means 5.7% of the CFTC’s staff will be working during the shutdown. Another 18 employees in the Whistleblower Office, Office of Customer Education and Outreach, and Division of Administration will be working because they are funded through different sources. Plus, Acting Chairman Caroline Pham and Commissioners (of which all have resigned) are also excepted from the furlough. If you want to know which CFTC employees will be in the office and what functions they will be performing, the CFTC’s plan (linked above) has a very helpful excepted staff list to provide that detail.
Two days before the shutdown, on September 29th, Forecastex LLC submitted a notification regarding their prediction contract/initial listing of “Government Shutdown End Forecast Contract”.
Barrett Morris | Email
Enforcement Round-Up
Sprint Initiative Concludes with 6 Orders Involving 10 Firms that Provide Mixed Insight into Application of Self-Reporting & Cooperation Matrix
The results of the “Enforcement Sprint Initiative” are in—10 firms received a combined $8.325 million in civil monetary penalties.
As we previously covered in March 2025, Acting Chair Pham announced an Enforcement Sprint Initiative that permitted eligible firms with potential compliance violations—such as recordkeeping, reporting, or other violations that did not involve fraud, customer harm, or market abuse—to submit to the Division of Enforcement (DOE) remediation plans and reasonable settlement offers based on comparable cases over the last decade and the DOE Enforcement Advisory on Self-Reporting, Cooperation, and Remediation issued in February 2025 (the “DOE Advisory”). The purpose of the initiative was to efficiently resolve technical, compliance-related matters so the staff could refocus their resources on fighting fraud and helping victims.
The orders resulting from the sprint initiative covered (1) supervision and other violations related to system errors; (2) recordkeeping and supervision violations related to offline communications; and (3) swap data reporting violations. For example, one firm agreed to pay a $5 million civil monetary penalty for failing to diligently supervise trade surveillance systems from at least 2015 until 2024. In three orders, firms agreed to pay a $500,000 civil monetary penalty because their employees used unapproved communication channels, including messaging apps and personal text messages.
These orders also provide some initial insight into how the current DOE interprets and applies the mitigation credit matrix set forth in the DOE Advisory in practice. Most firms in the Enforcement Sprint received the maximum mitigation credit based on their respective tiers for self-reporting and cooperation, with one firm (Citi) receiving the highest mitigation credit of 55% based on both “exemplary self-reporting” and “exemplary cooperation.” An “Exemplary Self-Report” is where the respondent not only notified the Commission of a potential violation, but provided all material information reasonably related to the
potential violation that was known to the respondent at the time of the self-report as well as additional information that assisted the Division with conserving resources, with an emphasis on quality over quantity. “Exemplary Cooperation” is where a respondent consistently provided material assistance to the Division's investigation by generally taking most or all the steps described under “Satisfactory Cooperation” and “Excellent Cooperation” at a consistently high level throughout an investigation, including, e.g., proactive engagement and use of significant resources as well as significant completion of remediation and use of accountability measures.
Another firm, however, did not receive any mitigation credit under the DOE Advisory even though the order acknowledged that the firm self-disclosed gaps in trade surveillance to the Commission. The order does not explain why the firm did not receive any self-reporting credit despite these self-disclosures, nor does it explain precisely how the firm’s actions during the investigation appear to have fallen short of “Satisfactory Cooperation.” Thus, we will have to wait for future actions and staff guidance to hopefully flesh out the answers to these questions and provide other details on the DOE’s application of its
Advisory.
A matrix containing September 2025’s full slate of Enforcement Actions, including the Enforcement Sprint matters, can be found here.
Drew Newman and Tiffany Payne | Email
Revisions to Business Conduct and Swap Documentation Requirements
On September 30th, the CFTC released a notice of proposed rulemaking (“NPRM”) to amend certain CFTC business conduct and documentation requirements applicable to swap dealers and major swap participants. The NPRM is open for comments until October 24, 2025.
The NPRM focuses on rules contained in subpart H of part 23 and to the swap trading relationship documentation rule for swap entities under 23.504. The NPRM states that it intends to address “long-standing issues” with the CFTC’s external business conduct standards and swap trading relationship documentation rule.
PTMMM
First up, the NPRM addresses the pre-trade mid-market mark (“PTMMM”) requirements at 23.431(a)(3)(i). The CFTC highlights the relief provided under CFTC Staff Letter 13-12, CFTC Staff Letter 12-58 and CFTC Staff Letter 25-09 and stated that they “believe[] that the PTMMM requirement provides no utility to counterparties and may delay execution to the disadvantage of counterparties.” Further PTMMM is not required under the Commodity Exchange Act (“CEA”), so its elimination would not frustrate the Dodd-Frank Act. As such, the CFTC proposes to eliminate the PTMMM requirement altogether.
Scenario Analysis
The CFTC notes too that the scenario analysis requirement under 23.431(b) both provides no utility to counterparties and is not mandated by the CEA. Further, the Securities and Exchange Commission does not require scenario analysis from security-based swap dealers, so eliminating this requirement would harmonize CFTC and SEC regulations.
Daily Mark Disclosure Requirement
Not a complete elimination here like PTMMM and scenario analysis, but instead the CFTC proposes to amend the daily mark disclosure requirement at 23.431(d)(2) to harmonize with the CFTC’s uncleared swap margin rules and swap data reporting rules. The CFTC notes that under the current rules swap entities may be required on any business day to calculate the valuation of a swap for “three different purposes using three similar, but not identical calculations” – specifically under 23.431 (daily mark), 45.4 (end of day reporting) and 23.155 (variation margin). The revised definition in the NPRM of daily mark for an uncleared swap (which
will be used across all three instances) is “the estimated price that would be received by the counterparty to sell (expressed as a positive number), or be paid by the counterparty to transfer (expressed as a negative number), the uncleared swap in the market in an orderly transaction.”
Other Proposed Amendments
Because believe it or not, we do try to keep this short, some other highlights from the NRPM include:
- Create a definition for an intended to be cleared swap (i.e. “ITBC Swap”) and spell out the different applicable requirements and exceptions;
- Prime Broker related updates including definitions for “covered transaction”, “Prime Broker Arrangement” and “Qualified Prime Broker Arrangement” to 23.401;
- Provide certain exclusions to the rules around transacting with Special Entities through a SEF or DCM (and ITBC Swaps); and
- Swap trading relationship documentation would not be required for swaps entered into prior to the date the swap dealer/major swap participant is required to be in compliance, swaps entered into with a DCO or cleared on a clearing organization that is currently exempted from registration pursuant to section 5b(h) of the CEA and ITBC Swaps.
Barrett Morris | Email
CFTC Reiterates Policy for Criminal Referrals and Sets Deadline to Identify Criminal Regulatory Offenses for OMB
The Commission announced that by May 9, 2026, it will provide the Director of the Office of Management and Budget a report with (1) all criminal regulatory offenses enforceable by the Commission or the Department of Justice (DOJ); and (2) the range of potential criminal penalties and the applicable mens rea for each such criminal regulatory offense.
In this same announcement, the Commission reiterated the general policy previously issued in July 2025 that the Commission will use in deciding whether to refer alleged violations of criminal regulatory offenses to the DOJ. The factors considered include:
- Harm or risk of harm;
- Potential gain to the putative defendant that could result from the offense;
- Whether the putative defendant held specialized knowledge, expertise, or was licensed in an industry related to the rule or regulation at issue;
- Evidence, if any is available, of the putative defendant’s general awareness of the unlawfulness of his conduct as well as his knowledge or lack thereof of the regulation at issue;
- Whether the putative defendant is a recidivist or has otherwise engaged in a pattern of misconduct; and
- Whether the involvement of the DOJ will provide additional meaningful protection to participants in the derivatives markets.
Drew Newman and Tiffany Payne | Email
Spring 2025 Unified Agenda of Regulatory and Deregulatory Actions
On September 4th, the Trump Administration released a lengthy agenda of both new regulatory initiatives and deregulatory actions. The list of CFTC items in the agenda can be found here. Of particular importance for folks to keep on their radar includes:
- Consideration to recommend that the CFTC sunset Part 20 reporting obligations for large trader reporting for physical commodity swaps pursuant to the sunset provision in 17 CFR 20.9;
- A rebirth of the July 2023 advance notice of proposed rulemaking on certain risk management regulations for FCMs, SDs, and MSPs;
- Amending cross-border application of SD and SBSD registration requirements;
- Changes to the enumerated data fields under Part 43 and Part 45’s reporting requirements to facilitate the implementation of the Unique Product Identifier standard and add additional fields; and
- Finalizing the August 2023 notice of proposed rulemaking concerning margin requirements for uncleared swaps for SDs and MSPs for which there is not a prudential regulator.
These are just a handful of the items on the CFTC’s agenda. I expect we will begin to see these start to roll out once the government shutdown is over and CFTC staff are back in the office – especially those that there is an NPRM and the comment period closed years ago.
Barrett Morris | Email
CFTC Withdraws “Guidance Regarding the Listing of Voluntary Carbon Credit Derivative Contracts”
On September 10th, the CFTC withdrew its October 2024 guidance regarding DCMs listing voluntary carbon credit (“VCC”) futures contracts, noting that “the guidance resulted in placing a disproportionate focus on VCC derivative contracts, which could lead to confusion and inconsistencies in implementing the CFTC’s existing, well-established product listing regulatory framework.” As mentioned in the press release, the CEA and CFTC regulations, already establish the regulatory framework for listing derivative contracts. At the end of the day, the guidance was not binding on staff or the Commission, but it remains to be seen whether this withdrawal signals a more flexible or iterative approach for DCM’s listing new VCC futures than what was provided for in the guidance.
Stuart Armstrong | Email
Acting Chair Pham Seeks to Reassure as the Sole Remaining Commissioner Following Another Vacancy at the Top of the CFTC and Quintenez’s Nomination Stagnant
As previewed in last month’s The Desk, former Commissioner Kristin Johnson departed on September 3—the day before the Commission announced the results of the Enforcement Sprint Initiative—leaving Acting Chair Pham as the only Commissioner remaining. The CFTC leadership situation became more complicated this past month as Brian Quintenz started digitally sparring with Tyler Winklevoss, alleging that he and his twin brother Cameron (owners of Gemini, a crypto company) reached out to President Trump directly to urge him to reconsider Mr. Quintenz’s nomination as Commission Chair. President Trump nominated Mr. Quintenz back in
February, but the nomination has stalled, with reports that the White House may be considering other candidates for the Chair position, including potentially Josh Sterling, a former CFTC Commissioner and Partner at Jones Day.
In the interim, questions remain on how effective the Commission will be in pursuing its regulatory and enforcement agenda with a single Commissioner at the helm. Legally, under the Commodity Exchange Act there is no impediment for Acting Chair Pham to move forward with business as usual because there is no regulatory minimum quorum at the CFTC, so a single Commissioner retains the full authority with respect to rulemaking and approval of enforcement orders. That said, the current situation is unprecedented so it remains to be seen how Acting Chair Pham will proceed, particularly as she has announced that she plans to step down as soon
as a permanent Chair is confirmed.
On September 29 at the SEC-CFTC Joint Roundtable on Regulatory Harmonization Efforts, however, Acting Chair Pham made public remarks seemingly aimed at quelling any suggestion that the CFTC would remain stagnant amid the leadership vacancies. Acting Chair Pham highlighted that since September 4 (the day after Commissioner Johnson departed), there has been 11 Commission actions and 14 enforcement actions, which is higher than the 13 enforcement actions that the CFTC had in the eight months prior. Firms and practitioners will closely monitor enforcement activity and regulatory action as the Commission attempts to forge ahead in this unchartered territory. But Acting Chair Pham has signaled that business will continue to run as usual at the CFTC until the leadership vacancy is addressed.
Drew Newman and Tiffany Payne | Email
Interesting Links
Places We’ll Be
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