CFTC Divisions Issue Staff Advisory on Affiliations Among CFTC-Regulated Entities

Following the launch of a request for comment (RFC) to gather insights into and inform possible future regulation as regards potential issues arising from affiliations between CFTC-registered entities and market participants by the staff of the divisions of Market Oversight, Clearing and Risk, and Market Participants of the CFTC in June 2023 (EventID 21982), the divisions have now published a Staff advisory (23-16) in this context.
In the advisory, the divisions briefly remind derivatives clearing organizations (DCOs), designated contract markets (DCMs), or swap execution facilities (SEFs) with affiliations to intermediaries like futures commission merchants (FCMs) or other market participants of their „obligations to ensure compliance with existing statutory and regulatory requirements“, including obligations pertaining to conflicts of interest, contagion, or IT-system risks management. Furthermore, the divisions inform that they will thoroughly scrutinize any applications of prospective DCOs, DCMs, and SEFs with respect to their handling of such risks. In the meantime, the divisions will closely review the numerous comments received (165) by respondents, before deciding on the way forward in this matter.