CFTC Approves Final Governance Rule, Two Proposals and Other Business at the Commission Open Meeting

The US Commodity Futures Trading Commission (CFTC) has published the outcome of its most recent open meeting on June 7, 2023. Specifically, the Commission approved one final rule, two proposed rules, and a notice of proposed comparability determination as briefly described below:
#### Final rule as regards governance requirements of derivatives clearing organizations (DCOs)
Following a corresponding consultation in July 2022, the CFTC has now published the final revisions to its rule 17 CFR, Part 39, § 39.24 regarding such governance requirements. The final rule outlines and takes into account the feedback the Commission has received to its consultation and defines the final requirements as they will apply one year after the rule’s effective date. Specifically, the new rule
(1) mandates the creation of a „risk management committee (RMC) and one or more risk advisory working groups (RWGs)“ by a DCO;
(2) sets out rules for the composition of the RMC and RWG;
(3) requires rotation of the members of the committee;
(4) requires the DCO to consult with the risk management committee on all matters that „could materially affect the risk profile of the DCO“; and
(5) requires the DCO to set out policies and procedures for such consultation process and the exact functions of the committee and the working group(s).
#### Upcoming consultation on proposed rule amendments to Part 17 Large Trader Reporting Requirements
This Commission agreed to propose amendments to the „Large Trader Reporting Requirements“ in an effort to modernize the reports and the submission standards. Specifically, the Commission seeks to
– set out in new Appendix C to Statutory Instrument 17 CFR 17 all the reportable data fields in one table and
– grant authority to the „Director of the Office of Data and Technology to determine the form, manner, coding structure, and electronic data transmission procedures for reporting the data elements in appendix C to this part and to determine whether to permit or require one or more particular data standards“.
#### Upcoming consultation on proposed rule amendments to Part 39 as regards recovery and orderly wind-down plans of DCOs and information for resolution planning
In 2013, the Commission introduced rules for the recovery and wind-down plans of Systemically Important Derivatives Clearing Organizations (SIDCOs) and Subpart C DCOs. These rules required each SIDCO and Subpart C DCO to have procedures for providing the Commission and the Federal Deposit Insurance Corporation (FDIC) with necessary information for resolution planning. However, at that time, recovery and wind-down planning was still developing, and international standards for addressing these issues were not yet finalized.
To align with international standards and guidance established since 2013, the Commission is now proposing amendments to the rules under § 39.39. The proposed changes include specifying the required elements of a SIDCO’s or Subpart C DCO’s recovery and orderly wind-down plans, modifying the information provision procedures for resolution planning, and defining the types of information to be provided to the Commission.
Furthermore, the Commission is proposing that all other DCOs maintain and submit orderly wind-down plans similar to those required for SIDCOs and Subpart C DCOs. These plans should facilitate efficient decision-making, continuation of critical operations, and timely wind-down when a DCO is unable to meet its obligations or provide its services.
The proposed revisions aim to enhance risk management, ensure financial integrity, and avoid systemic risk in the derivatives markets. They respond to feedback from SIDCOs and Subpart C DCOs and promote effective compliance and risk management for all DCOs.
#### Upcoming request for comments on an „Application for a Capital Comparability Determination Submitted on behalf of Nonbank Swap Dealers domiciled in the French Republic and Federal Republic of Germany and subject to Capital and Financial Reporting Requirements of the European Union“
This request for comment is based on the application of the EU for recognizing EU rules as regards the capital adequacy standards and corresponding notification requirements of non-bank swap dealers and major swap participants to be equivalent for those of the CFTC under the Commodity Exchange Act. As not all provisions would be identical to those of the CFTC, the equivalence decision would be subject to certain conditions as outlined in the proposal.