DCO

CFTC Unanimously Approves Final Rule for Granting Exemptions from Derivatives Clearing Organization Registration

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On November 18, the Commodity Futures Trading Commission (CFTC) unanimously approved a final rule establishing a framework for the Commission to grant an exemption from registration as a derivatives clearing organization (DCO) to a clearing organization organized outside of the United States for the purpose of clearing proprietary swap transactions for U.S. persons. Section 5b(h) of the Commodity Exchange Act permits the CFTC to exempt a non-U.S. clearing organization from registration for clearing swaps if the CFTC determines that the clearing organization is subject to comparable, comprehensive supervision and regulation by its home country authorities. Therefore, financial institutions may have more options for central clearing counterparties to clear swaps that they enter into that are subject to a clearing mandate by the CFTC – namely, derivatives clearing organizations organized outside of the U.S., so long as the CFTC determines that they are subject to comparable, comprehensive supervision and regulation by the relevant local authorities in the jurisdiction of their organization. Final Rule.

CFTC Amendments to Regulations Governing Investment of Customer Funds by DCOs and FCMs

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On December 5, the CFTC adopted amendments to Regulation 1.25 and Regulation 30.7, which govern the investment of customer and secured amount funds by derivatives clearing organizations (DCOs) and futures commission merchants (FCMs). The amendments address: (i) changes to the list of permitted investments, including the elimination of foreign sovereign debt and in-house transactions; (ii) a clarification of the liquidity requirement; (iii) the removal of rating requirements; and (iv) an expansion of concentration limits including asset-based, issuer-based, and counterparty concentration restrictions. The rule will be effective 60 days after the date of publication in the Federal Register. CFTC Q&A. CFTC Final Rules.

CFTC Rule on Derivatives Clearing Organization General Provisions

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On October 18, pursuant to Section 725(c) of the Dodd-Frank Act, the CFTC adopted final rules establishing standards for compliance with certain core principals applicable to derivatives clearing organizations (DCOs). The CFTC also adopted rules requiring DCOs to designate a Chief Compliance Officer, and rules revising the DCO registration application. CFTC Fact Sheet.

CFTC Final Rule on Review of Swaps for Mandatory Clearing

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On July 19, pursuant to Sections 723(a)(3) and 745(b) of the Dodd-Frank Act, the CFTC adopted Regulation 39.5 establishing procedures for: (i) determining the eligibility of a derivatives clearing organization (DCO) to clear swaps; (ii) the submission of swaps by a DCO to the CFTC for a mandatory clearing determination; (iii) CFTC-initiated review of swaps; and (iv) staying a clearing requirement while the clearing of a swap is reviewed. The final rule will be effective 60 days after publication in the Federal Register. CFTC Fact Sheet. CFTC Final Rule.