CFTC Proposes New Governance Requirements for DCOs

The CFTC proposed amendments to CFTC Rule 39.24 ("Governance") that would impose additional governance requirements on derivatives clearing organizations ("DCOs").

The proposal, which is based in significant part on recommendations of the CFTC Market Risk Advisory Committee, would require DCOs to:

• establish one or multiple risk management committees ("RMCs") to review matters that could materially affect the DCO's risk profile;
• require the DCO to consult with the RMC for material changes to the DCO margin model, default procedures, participation requirements, risk monitoring practices and new products;
• appoint clearing members and customers of clearing members to the RMCs, and for the RMC membership to be rotated on a consistent basis;
• create one or more market participant risk advisory working groups and require that the groups meet at least each quarter; and
• adopt written policies regarding the RMC consultation process as well as the formation and role of the working groups.

Additionally, the proposed amendments would (i) require DCOs to screen RMC members to determine their ability to advise on risk and (ii) maintain policies that enable its RMC members to provide independent opinions on all matters presented.

Comments must be submitted within 60 days of publication of the proposal in the Federal Register.