CFTC Issues Guidance on DCO Regulations

The CFTC Division of Clearing and Risk ("DCR") issued an interpretation harmonizing regulations applicable to derivatives clearing organizations ("DCOs") under CFTC Part 39, with risk management standards under the CPMI-IOSCO Principles for Financial Market Infrastructures ("PFMIs"). The PFMI risk management standards address, among other things, risks associated with: (i) exchange-of-value settlement services; (ii) DCOs' link arrangements; (iii) the requirement to use central bank services (where available and practicable); and (iv) requirements regarding the conduct of due diligence on custodian banks.

The CFTC's interpretation aims to assist DCOs that have been designated systemically important ("SIDCOs") or that have opted into the enhanced SIDCO regulatory framework (known as Subpart C DCOs) in their understanding of how certain CFTC regulations apply, consistent with the risk management standards in the PFMIs.

Tags