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The PWG Report recommended: ( 1 ) the codification into the CEA, as an “ exclusion ”, of existing regulatory exemptions for OTC financial derivatives, revised to permit electronic trading between “ eligible swaps participants ” ( acting as “ principals ”) and to even allow standardized ( i. e. “ fungible ”) contracts subject to “ regulated ” clearing ; ( 2 ) continuation of the existing CFTC authority to exempt other non-agricultural commodities ( such as energy products ) from provisions of the CEA ; ( 3 ) continuation of existing exemptions for “ hybrid instruments ” expanded to cover the Shad-Johnson Accord ( thereby exempting from the CEA any hybrid that could be viewed as a future on a “ non-exempt security ”), and a prohibition on the CFTC changing the exemption without the agreement of the other members of the PWG ; ( 4 ) continuation of the preemption of state laws that might otherwise make any “ excluded ” or “ exempted ” transactions illegal as gambling or otherwise ; ( 5 ) as previously recommended by the PWG in its report on hedge funds, the expansion of SEC and CFTC “ risk assessment ” oversight of affiliates of securities firms and commodity firms engaged in OTC derivatives activities to ensure they did not endanger affiliated broker-dealers or futures commission merchants ; ( 6 ) encouraging the CFTC to grant broad “ deregulation ” of existing exchange trading to reflect differences in ( A ) the susceptibility of commodities to price manipulation and ( B ) the “ sophistication ” and financial strength of the parties permitted to trade on the exchange ; and ( 7 ) permission for single stock and narrow index stock futures on terms to be agreed between the CFTC and SEC.
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PWG and Report
The CFMA, as enacted by President Clinton, went beyond the recommendations of a Presidential Working Group on Financial Markets ( PWG ) Report titled “ Over-the Counter Derivatives and the Commodity Exchange Act .” ( the “ PWG Report ”).
The PWG Report was directed at ending controversy over how swaps and other OTC derivatives related to the CEA.
Her successor, William Rainer, was CFTC Chair when the PWG Report was issued in November 1999.
The PWG Report ended that disagreement by analyzing only four issues in deciding not to apply the CEA to OTC derivatives.
Rather than treat the “ convergence ’ of OTC derivatives and futures markets as a basis for CFTC regulation of OTC derivatives, the PWG Report acknowledged and encouraged the growth in similarities between the OTC derivatives market and the regulated exchange traded futures market.
The PWG Report also emphasized the desire to “ maintain U. S. leadership in these rapidly developing markets ” by discouraging the movement of such transactions “ offshore .” In the 1998 Congressional hearings concerning the CFTC “ concept release ” Representative James A. Leach ( R-IA ) had tied the controversy to “ systemic risk ” by arguing the movement of transactions to jurisdictions outside the United States would replace U. S. regulation with laxer foreign supervision.
It can be argued that the PWG Report recommendations and the CFMA as enacted did not change the “ regulation ” of OTC derivatives because there was no existing regulation under the CEA or securities laws.
Title I of the CFMA adopted recommendations of the PWG Report by broadly excluding from the CEA transactions in financial derivatives ( i. e. “ excluded commodities ”) between “ eligible contract participants .” The definition of “ eligible contract participant ” covered the same types of “ sophisticated ” parties as the existing “ swaps exemption ” in its definition of “ eligible swap participants ”, but was broader, particularly by adding permission for individuals with assets of $ 5 million rather than $ 10 million, if the transaction related to managing asset or liability “ risk .” The PWG had recommended “ considering ” an increase in this threshold to $ 25 million, not a reduction for actual hedging.
The PWG Report had recommended permitting “ standardized ” contracts, so long as they were subject to regulated clearing.
Title I ’ s biggest departure from the PWG Report recommendations was in extending most of the same exclusions to non-financial commodities that were not agricultural.
The PWG Report had recommended that exemptions for such transactions remain in the control of the CFTC, although it had recommended the continuation of those regulatory exemptions.
Title III established a framework for SEC regulation of “ security-based swaps .” The PWG Report had not addressed this issue.
The PWG Report had not dealt with these issues beyond how Title IV overlapped with Title I.
The CFMA did not provide the CFTC or SEC the broader “ risk assessment ” authority over affiliates of futures commission merchants or broker-dealers that the PWG Report had recommended.
Sponsors had delayed introduction of the bills as they vainly awaited agreement between the CFTC and SEC on how to regulate the single stock futures contemplated by the PWG Report.
Instead, it was widely hailed for bringing “ legal certainty ” to this “ important market ” permitting “ the United States to retain its leadership in the financial markets ”, as recommended by the PWG Report.
As described in Section 1. 2. 1 above, legal uncertainty for security-based swaps was an important issue in the events that led to the PWG Report.
The PWG Report recommended eliminating that uncertainty by excluding credit default swaps and all security-based swaps from the CEA and by adding to the “ hybrid instrument ” exemption an exclusion from the Shad-Johnson Accord.
PWG and 1
Work on IPP continues in the PWG with the publication of 12 candidate standards providing extensions to IPP and definition of IPP / 2. 0, IPP / 2. 1, and now IPP / 2. 2 representing different categories or classes of printers.
Although Chairperson Born had explained at the October 1, 1998, House Banking Committee hearing that the CFTC ’ s supervisory authority over the LTCM fund as a “ commodity pool operator ” was limited to monitoring its exchange trading activities, the CFTC ’ s possession of financial statements for the fund received negative news coverage in November 1998 based on the fact the CFTC was the only federal regulator to receive such reports directly from LTCM and had not shared the information with other members of the PWG.
When the LTCM matter was investigated at a December 16, 1998, Senate Agriculture Committee hearing, the three CFTC Commissioners that had supported the Congressional moratorium, as described in Section 1. 2. 1 above, reiterated their support and their position that the entire PWG should study the OTC derivatives market and the issues raised in the CFTC ’ s “ concept release .”
Whereas the CFTC saw broad purposes in protecting “ fair access ” to markets, “ financial integrity ”, “ price discovery and transparency ”, “ fitness standards ,” and protection of “ market participants from fraud and other abuses ,” other members of the PWG ( particularly the Federal Reserve through Alan Greenspan ) found the more limited purposes of ( 1 ) preventing price manipulation and ( 2 ) protecting retail investors.
By finding ( 1 ) the sophisticated parties participating in the OTC derivatives markets did not require CEA protections, ( 2 ) the activities of most OTC derivatives dealers were already subject to direct or indirect federal oversight, ( 3 ) manipulation of financial markets through financial OTC derivatives had not occurred and was highly unlikely, and ( 4 ) the OTC derivatives market performed no significant “ price discovery ” function, the PWG concluded “ there is no compelling evidence of problems involving bilateral swap agreements that would warrant regulation under the CEA .” By essentially adopting the views of the other members of the PWG concerning the scope and application of the CEA, the CFTC permitted a “ remarkable ” agreement “ on a redrawing of the regulatory lines .”
Price information could be broadly disseminated through “ electronic trading facilities .” The PWG hoped these features would ( 1 ) increase “ transparency ” and liquidity in the OTC derivatives market by increasing the circulation of information about market pricing and ( 2 ) reduce “ systemic risk ” by reducing credit exposures between parties to OTC derivatives transactions.
On November 1 and 2 in Burbank, California, Low Ki defeated Roderick Strong, Masato Yoshino, Nigel McGuinness and the PWG World Champion Chris Hero to win the 2008 Battle of Los Angeles.
** PWG World Tag Team Championship ( 1 time ) – with Roderick Strong
After taking two months off Super Dragon returned to PWG on March 21, 2008, at 1. 21 Gigawatts by attacking Jade Chung and giving her a Psycho Driver during a tag team match between the Dynasty ( Joey Ryan and Scott Lost ) and Kevin Steen and El Generico.
** PWG Championship ( 1 time )
** PWG World Tag Team Championship ( 6 times ) – B-Boy ( 2 ), Excalibur ( 1 ), Davey Richards ( 2 ) and Kevin Steen ( 1 )
Later in June, The AXP defeated Los Luchas ( Zokre and Phoenix Star ), thus becoming # 1 contenders for the PWG tag team title.
:* PWG Tag Team Championship ( 1 time )-with Quicksilver
On August 30, 2008 Kingston returned to PWG for All Star Weekend VII where he competed in a four-way match for the PWG World Title on Night 1, but he was pinned by the defending champion Chris Hero.
** PWG World Tag Team Championship ( 1 time ) – with Tyler Black
** PWG World Tag Team Championship ( 3 times ) – with Davey Richards ( 1 ), PAC ( 1 ), and Jack Evans ( 1 )
PWG and into
The CFTC expressed dismay over the Broker-Dealer Lite proposal and the manner in which it was issued, but also noted it was 18 months into a “ comprehensive regulatory reform effort .” The same day the CFTC issued its “ concept release ” Treasury Secretary Robert Rubin, Federal Reserve Board Chair Alan Greenspan, and SEC Chair Arthur Levitt ( who, along with CFTC Chair Brooksley Born, were the members of the PWG ) issued a letter asking Congress to prevent the CFTC from changing its existing treatment of OTC derivatives.
In July 2006, PWG announced that they would be leaving the JCC due to the gym being turned into a gymnastics training center for young children.
In the summer of 2007, Sky and Joey Ryan feuded, ending with Sky defeating Joey Ryan and thus winning his reinstatement back into PWG.
PWG and CEA
In the ensuing Congressional hearings, the three members of the PWG dissenting from the CFTC ’ s “ unilateral ” actions argued the CFTC was not the proper body, and the CEA was not the proper statute, to regulate OTC derivatives activities.
The dissenting PWG members explained that any effort to regulate those activities through the CEA would only lead to the activities moving outside the United States.
CFTC Chair Brooksley Born replied that the CFTC had exclusive authority over “ futures ” under the CEA and could not allow the other PWG members to dictate the CFTC ’ s authority under that statute.
In 1998 the CFTC had disagreed with the other members of the PWG about the scope and purposes of the CEA.
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