NFA Urges CFTC to Drop Proposal on "Operational Resilience"

NFA urged the CFTC to drop a CFTC proposal that would impose a new "operational resilience framework" ("ORF") on futures commission merchants ("FCMs") and swap dealers ("SDs"). (See related coverage.)

In a Comment Letter in response to the proposal, NFA argued the CFTC’s proposed requirements would impose unnecessary burdens on regulated firms. Further, NFA argued that the proposed rule is too prescriptive and may cause conflicts with FCM and SD existing frameworks. NFA said that the proposal is "incompatible with a principles-based approach and does not produce significant regulatory benefits."

NFA argued that the CFTC "can achieve its objective to have appropriate oversight in this area by utilizing the existing framework." NFA described its current operational resilience framework, which includes requirements for information systems security programs, third-party service provider oversight and business continuity and disaster recovery plans. NFA recommended that the CFTC adopt a "principles-based rule" for FCMs and SDs that incorporates NFA's current framework, including the specific requirements in each of these areas. According to the NFA, doing so would (i) prevent duplication of efforts, (ii) reduce the compliance burden on FCMs and SDs and (iii) ensure that existing programs need not be unnecessarily overhauled to meet the CFTC’s proposed requirements.