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CFTC Compliance Divisions Publish Examination Priorities

The CFTC's Division of Market Oversight, Division of Swap Dealer & Intermediary Oversight, and Division of Clearing & Risk published examination priorities.

The Division of Market Oversight ("DMO") will focus on "emerging areas of self-regulation, where regulatory requirements and best practices may still be developing." The DMO stated it will conduct examinations in the following areas:

  • cryptocurrency surveillance practices;
  • surveillance for disruptive trading;
  • trade surveillance practices;
  • block trade surveillance practices;
  • market surveillance practices;
  • real-time market monitoring practices;
  • practices around market maker and trading incentive programs; and
  • derivatives contract markets' relationships with, as well as services received from, regulatory providers.

Further, the DMO Compliance Branch's priorities include regulatory consultations with SEFs to provide effective oversight while the CFTC finalizes new SEF rules.

The Division of Swap Dealer and Intermediary Oversight stated that its priorities for examination in 2019 include:

  • withdrawal of "residual interest from customer accounts";
  • accepted forms of non-cash margin;
  • compliance with segregation requirements;
  • use by futures commission merchants ("FCMs") of customer depositories;
  • FCM customer account documentation; and
  • swap dealer / major swap participants' relationships with third-party vendors.

The Division of Clearing and Risk ("DCR") stated that its goal is to "identify areas of weakness or non-compliance in activities that are critical to a safe and efficient clearing process." The DCR stated that "the scope and methodology for each examination is risk-based and individually tailored to the unique characteristics" of the derivative clearing organization ("DCO") and the products it clears." In order to assess the maturity, capabilities, and overall resilience of the DCO, the DCR will examine:

  • financial resources;
  • risk management;
  • system safeguards; and
  • cyber-security policies, practices, and procedures.

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