CFTC Staff Interpretations Regarding Derivatives Clearing Organizations

6 October 2015
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Key takeaways

  • The CFTC's Division of Clearing and Risk has issued a memorandum interpreting Part 39 of the CFTC’s regulations applicable to derivatives clearing organizations ("DCOs") to be consistent with CPSS-IOSCO's Principles of Financial Market Infrastructures.
  • Ensuring that the CFTC regulations fully implement the PFMI provides U.S. DCOs an opportunity to become qualifying central counterparties ("QCCPs") under the Basel III capital rules, thereby avoiding a potential competitive disadvantage relative to foreign CCPs that are QCCPs.
  • The CFTC's Division of Clearing and Risk and the Division of Market Oversight have also issued an interpretive letter regarding the applicability of certain regulatory requirements to the “firm or forced trades” process used by some DCOs to determine the price of swaps for which public market prices are not available.