Opinion ID: 931605
Heading Depth: 2
Heading Rank: 1

Heading: Change in Agency Position

Text: The appellants first contend that CFTC failed to explain why it changed from its more generous exemption requirements that had existed since 2003 to the more stringent requirements 10 contained in the Final Rule. Though it is true that the Final Rule stated that investment companies are increasing their participation in derivatives markets, the 2003 rule was explicitly designed to promote liquidity in the commodities markets by making it easier for registered investment companies to participate in derivatives markets. CFTC, according to the appellants, completely failed to address the liquidity issue, and therefore its change in position was arbitrary and capricious. We disagree. An agency changing course “need not demonstrate to a court’s satisfaction that the reasons for the new policy are better than the reasons for the old one; it suffices that the new policy is permissible under the statute, that there are good reasons for it, and that the agency believes it to be better.” FCC v. Fox Television Stations, Inc., 556 U.S. 502, 515 (2009). Appellants do not argue that the new rule is impermissible under CFTC’s statutory framework. Instead, appellants argue that CFTC had an obligation to address the rule’s impact on liquidity. But the APA imposes no heightened obligation on agencies to explain “why the original reasons for adopting the displaced rule or policy are no longer dispositive.” Id. at 514 (internal quotation marks and citation omitted). So long as CFTC provided a reasoned explanation for its regulation, and the reviewing court can “reasonably . . . discern[]” the agency’s path, we must uphold the regulation, even if the agency’s decision has “less than ideal clarity.” Bowman Transp., Inc. v. Arkansas-Best Freight Sys., Inc., 419 U.S. 281, 286 (1974). CFTC’s regulation clears this low bar. CFTC explicitly acknowledged that it was changing its position from its 2003 rulemaking. The Final Rule detailed the changed circumstances that prompted CFTC to amend the rule, including increased derivatives trading by investment companies (an issue inherently tied to liquidity) and a perceived lack of market transparency that could lead to a buildup of systemic risk. See 77 Fed. Reg. 11 at 11,275, 11,277. It is clear that the Commission, in adopting the changes and the rule, was attempting to respond to those changed circumstances by adding registration and reporting requirements. As is clear from our discussion of the regulatory and statutory history above, the Commission’s requirements followed a congressional shift evidenced in the Dodd-Frank Act—legislation expressly relied upon by the Commission. See id. at 11,252. Such reasoned decisionmaking is an acceptable way to change CFTC’s past rules, cf. Fox, 556 U.S. at 517, the appellants’ policy disagreements with CFTC notwithstanding. The law requires no more.