CFTC approves updated DCO governance rules

Commission also advances proposals on DCO resolution plans

7 June 2023


The US Commodity Futures Trading Commission held a public meeting on 7 June where it unanimously approved a final rule on governance requirements for Derivatives Clearing Organizations (DCOs), which updates information requirements associated with customer funds and futures and swaps positions in the same account. The CFTC also advanced an item related to DCO recovery and resolution planning.

In his opening statement, CFTC Chairman Rostin Behnam noted that the majority of the meeting was related to issues around central clearing – something he called "a fundamental pillar of global financial reform."

"Policymakers, both bank and market regulators, must take the necessary steps to ensure that clearinghouses are not simply commercially viable, but can continue to operate and provide critical services as expected, even in times of extreme market stress," Behnam said.

Behnam also previewed that he anticipates the Commission considering roughly 15 additional proposals by the end of the September, including considering the finalization of last year's proposal to amend certain reporting and information regulations applicable to DCOs, as well as hosting "events aimed at further engaging stakeholders and the general public on issues facing every sector of our jurisdictional markets and beyond."

DCO governance

The final rule on DCO governance requirements passed unanimously. Behnam said the rulemaking will support "further cooperation and collaboration through risk management committees including representation from clearing members and customers and through risk advisory working groups, which will give all clearing members and customers—not just those on the risk management committee—an opportunity to have their voices heard on risk management issues which impact them, not just the DCO."

FIA offered comprehensive feedback to the CFTC in October, highlighting the importance of DCOs providing risk committees with all matters, including launching new products, that could materially affect the risk profile of the DCO. The CFTC agreed with FIA's comment, and the final rule will require each DCO to define in its policies and procedures what it means to materially affect the risk profile of the DCO.

DCO recovery and resolution

In addition to the DCO governance rulemaking, the CFTC also advanced a proposed rule on DCO wind-down plans and information for resolution planning, codifying a requirement that systemically important entities share recovery and resolution plans with the CFTC.

The proposal advanced with three votes in favor, one concurrence, from Commissioner Caroline Pham, and one vote opposing.

Commissioner Summer Mersinger opposed the proposal, taking issue with potential frictions that would be caused by the implementation and recordkeeping brought about by the rule, as well as what she considered overly prescriptive requirements. Pham called for a tailoring of wind down proposals to size and risk of the DCO and raised questions with staff both in writing before the meeting and during the event itself. Ultimately, the measure did advance with Chairman Behnam acknowledging the final rule would reflect some of the concerns raised by commissioners during the rulemaking process.

Other matters before the CFTC

  • Proposed amendments to Part 17 large trader reporting requirements for futures and options, which are intended to modernize collection, data elements and reporting. The proposal advanced unanimously.
  • A request for comments regarding a capital comparability determination related to nonbank swap dealers in France and Germany. The notice of a proposed order and request for comment was unanimously advanced.
  • In advance the open meeting, the CFTC approved an amended order of registration for Cboe Clear Digital, allowing it to provide clearing services for digital asset futures on a margined basis for futures commission merchants, in addition to the fully collateralized futures and fully collateralized swaps previously authorized.

Official statements and documents


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