CFTC Adopts Systemically Important Designated Clearing Organization Rules
The US Commodity Futures Trading Commission has adopted its final rules regarding systemically important designated clearing organizations. The new SIDCO rules line up CFTC regulations to with the Principles for Financial Market Infrastructures set up by the International Organization of Securities Commissions and the Bank for International Settlements.
Per the rules, SIDCOs can remain Qualifying Central Counterparties (QCCPs) for international bank capital standard purposes. The rules come with substantive requirements having to do with financial resources, governance, system safeguards, special default rules and procedures for shortfalls or losses that are not covered, disclosure requirements, risk management, efficiency, and recovery and wind-down procedures. The rules also tackle the procedures through which derivatives clearing organizations besides SIDCOs can choose to become subject to additional standards so they can also be considered QCCPs.
Relief on Contemporaneous Swaps Documentation Requirements is Reissued
In other CFTC news, the agency’s Division of Swap Dealer and Intermediary Oversight says that it is extending the no-action relief that it issued earlier this year to swap dealers (SDs) and major swap participants (MSPs). The earlier relief gave certain exemptions to CFTC rules that were put into place in February 2012 and established business conduct standards for MSPs and SDs in their counterparty dealings.
Now, with this latest no-action letter, relief has been issued again along with modifications, including obligatory CFTC registration of swap execution facilities and additional staff guidance regarding CFTC straight-through-processing requirements. Also included are modifications that acknowledge the required immediate and efficient processing of swaps all the way through to clearing. Meantime, conditions that require an agreement between and MSP or SD and its counterparty before swaps can be executed have been removed.
CFTC Chair Speaks at Swaps Execution Facility Conference
At the recent Swaps Execution Facility Conference, CFTC Chair Gary Gensler said that now, for the first time, all swaps market participants are able to compete on a level playing field. He noted that prior to 2012 there was no transparency in the swaps market and that this played a role in the 2008 financial crisis. Gensler credits the Dodd-Frank Act and the significant compliance dates that are now in effect.
He spoke about how real-time clearing now exists and that there are 18 temporarily registered swaps execution facilities that offer impartial market access. Gensler also talked about how his agency’s staff just put out guidance reminding SEFs about their duty to make sure that all market participants can fully engage on order books or request-for-quote systems while addressing questions that market participants had wanted the CFTC to answer.
Additionally, the CFTC chief talked about how he believed that by February a trade execution requirement for a significant chunk of the interest rate and credit index swaps markets would be in place. Gensler also spoke about how in addition to a finalized block rule for swaps there should also be one for futures.
SIDCO Final Rule (PDF)
Gensler’s Remarks (PDF)
More Blog Posts:
CFTC Votes to Restrict Commodities Trader’ Position Sizes in the Market, Institutional Investor Securities Blog, November 18, 2013
CFTC Securities Headlines: Goldman Sachs Fined For Inadequate Broker Supervision in $118M Fraud, Firms Named in Precious Metal Scam, & Defendants to Pay $1.8M Over Off-Exchange Foreign Currency Scheme, Stockbroker Fraud Blog, December 14, 2012
SEC Proposes New Rule to Verify Swap Transactions, Institutional Investor Securities Blog, January 27, 2011