Reporting and Information Requirements for Derivatives Clearing Organizations

Following the announcement of finalized regulation including revisions to various rules under Statutory Instrument 17 CFR Part 39 concerning business operation requirements of DCOs and revisions to rule § 140.94 under Statutory Instrument 17 CFR Part 140 pertaining to various registration, filing, or publication requirements of derivatives clearing organizations (DCOs) (please see EventID #22513 in this context), the Commodity Futures Trading Commission (CFTF) has now published this final rule in the Federal Register.
Amendments to § 39.13(h)(5)
The new rule § 39.13(h)(5)(iii) says that a „DCO that clears fully collateralized positions may exclude from the requirements of paragraphs (h)(5)(i) and (ii) those clearing members that clear only fully collateralized positions“. This means that these DCOs will be exempt from:
– requiring its clearing members to maintain current risk management policies and ensuring that these clearing members can provide such documentation and policies upon request
– reviewing these risk management policies in a periodical matter
The reasoning behind this exemption is that DCOs that clear only fully collateralized positions are not exposed to credit or default risks.
Amendments to § 39.15(b)(2)
If a clearing organization wants to commingle customers‘ derivatives and/or securities, it is necessary to obtain CFTF’s approval. This approval must contain at least the information listed in this paragraph. The amendment to the rule aims to provide CFTF with relevant information to ease the procedure of evaluation whether such commingling combination should be allowed. The new information requested by CFTF is „any characteristics that are unusual in relation to the other products cleared by the DCO“.
Amendments to § 39.18
Under the current rule, the DCOs are required to inform the Division of Clearing and Risk (Division) of any hardware or software malfunction, which would result in a „material impairment, of automated system operation, reliability, security, or capacity“, and in case a business continuity management plan is launched. After the consultation and the responses the CFTF has decided to not amend § 39.18, speficically § 39.18(g).
Amendments to § 39.19(c)
The amendment will change the daily reporting requirements and implement new coding instructions for those reportings.
Amendments to § 39.21(c)
Currently the DCOs are required to post information on their margin-calculation methodology and other information on their website for customers to have a clear view on the DCO’s approach. The amendment to § 39.21(c) would exempt DCOs that clear only fully collateralized positions from this requirement. The reasoning behind it is that these is no margin-caltulation methodology behind these operations if all positions are fully collateralized.
Amendments to § 39.37(c) and (d)
The current disclosure of „transaction data, and information regarding the segregation and portability of customers‘ positions and funds“ is required both to the public as well as to CFTF. The rule amendment would eliminate the latter, meaning that if the public disclosure is available, it is not necessary to disclose the same information to the CFTF separately.
Amendments to § 140.94(c)(10)
Delegation of powers from the „Commission to the Director of the Division of Clearing and Risk to perform certain specific functions.“ Under the amendment, the Director will have the power to ask the DCOs to provide necessary documents and to propose a format in which information will be submitted to the CFTF.