CFTC Rule Establishing New Governance Requirements for DCOs Becomes Effective; Compliance Deadline Set
"Together, clearinghouses, their members, and market participants, can benefit from a 360 degree view of risk, and make a powerful force in developing a workable game plan to keep markets functioning well during times of stress."
CFTC Commissioner Christy Goldsmith Romero
"Together, clearinghouses, their members, and market participants, can benefit from a 360 degree view of risk, and make a powerful force in developing a workable game plan to keep markets functioning well during times of stress."
CFTC Commissioner Christy Goldsmith Romero
CFTC rule amendments requiring derivatives clearing organizations ("DCOs") to involve key stakeholders in their governance went into effect on July 13, 2023. The compliance deadline is July 12, 2024. The final rule was published in the Federal Register.
As previously covered, the amendments to CFTC Rule 39.24 ("Governance") mandate that DCOs establish and engage with risk management committees ("RMCs") consisting of clearing members and customers of clearing members. The CFTC said that the purpose of these committees is to address issues that could significantly impact the risk profile of the DCO.
The following requirements would apply to the RMCs:
- RMC Composition. An RMC must include clearing members and customers of clearing members. Additionally, the CFTC emphasized the importance of periodically rotating committee members to ensure fresh perspectives and expertise.
- Fitness Standards for RMC Members. DCOs must establish and enforce fitness standards for RMC members, ensuring that they possess the necessary qualifications and expertise to contribute effectively to risk management decisions.
- Written Policies and Procedures. DCOs are obligated to develop and maintain written policies and procedures governing the RMC consultation process and the role of RMC members.