cfr_sections
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44 rows where part_number = 39 and title_number = 17 sorted by section_id
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| section_id ▼ | title_number | title_name | chapter | subchapter | part_number | part_name | subpart | subpart_name | section_number | section_heading | agency | authority | source_citation | amendment_citations | full_text |
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| 17:17:1.0.1.1.32.1.7.1 | 17 | Commodity and Securities Exchanges | I | 39 | PART 39—DERIVATIVES CLEARING ORGANIZATIONS | A | Subpart A—General Provisions Applicable to Derivatives Clearing Organizations | § 39.1 Scope. | CFTC | [86 FR 965, Jan. 7, 2021] | The provisions of this subpart A apply to any derivatives clearing organization, as defined under section 1a(15) of the Act and § 1.3 of this chapter, that is registered or is required to register with the Commission as a derivatives clearing organization pursuant to section 5b(a) of the Act, or that is applying for an exemption from registration pursuant to section 5b(h) of the Act. | ||||
| 17:17:1.0.1.1.32.1.7.2 | 17 | Commodity and Securities Exchanges | I | 39 | PART 39—DERIVATIVES CLEARING ORGANIZATIONS | A | Subpart A—General Provisions Applicable to Derivatives Clearing Organizations | § 39.2 Definitions. | CFTC | [85 FR 4850, Jan. 27, 2020, as amended at 85 FR 67186, Oct. 21, 2020; 86 FR 965, Jan. 7, 2021; 88 FR 53682, Aug. 8, 2023] | For the purposes of this part: Activity with a more complex risk profile includes: (1) Clearing credit default swaps, credit default futures, or derivatives that reference either credit default swaps or credit default futures and (2) Any other activity designated as such by the Commission pursuant to § 39.33(a)(3). Backtest means a test that compares a derivatives clearing organization's initial margin requirements with historical price changes to determine the extent of actual margin coverage. Business day means the intraday period of time starting at the business hour of 8:15 a.m. and ending at the business hour of 4:45 p.m., on all days except Saturdays, Sundays, and any holiday on which a derivatives clearing organization and its domestic financial markets are closed, including a Federal holiday in the United States, as established under 5 U.S.C. 6103. Customer account or customer origin means “customer account” as defined in § 1.3 of this chapter. Depository institution has the meaning set forth in section 19(b)(1)(A) of the Federal Reserve Act (12 U.S.C. 461(b)(1)(A)). Enterprise risk management means an enterprise-wide strategic business process intended to identify potential events that may affect the enterprise and to manage the probability or impact of those events on the enterprise as a whole, such that the overall risk remains within the enterprise's risk appetite and provides reasonable assurance that the derivatives clearing organization can continue to achieve its objectives. Exempt derivatives clearing organization means a derivatives clearing organization that the Commission has exempted from registration under section 5b(a) of the Act, pursuant to section 5b(h) of the Act and § 39.6. Fully collateralized position means a contract cleared by a derivatives clearing organization that requires the derivatives clearing organization to hold, at all times, funds in the form of the required payment sufficient to cover the maximum possible loss that a party or counterparty could incur u… | ||||
| 17:17:1.0.1.1.32.1.7.3 | 17 | Commodity and Securities Exchanges | I | 39 | PART 39—DERIVATIVES CLEARING ORGANIZATIONS | A | Subpart A—General Provisions Applicable to Derivatives Clearing Organizations | § 39.3 Procedures for registration. | CFTC | [76 FR 69430, Nov. 8, 2011, as amended at 85 FR 4851, Jan. 27, 2020; 85 FR 67186, Oct. 21, 2020] | (a) Application for registration —(1) General procedure. An entity seeking to register as a derivatives clearing organization shall file an application for registration with the Secretary of the Commission in the format and manner specified by the Commission. The Commission will review the application for registration as a derivatives clearing organization pursuant to the 180-day timeframe and procedures specified in section 6(a) of the Act, and may approve or deny the application. If the Commission approves the application, the Commission will register the applicant as a derivatives clearing organization subject to conditions as appropriate. (2) Application. Any entity seeking to register as a derivatives clearing organization shall submit to the Commission a completed Form DCO, which shall include a cover sheet, all applicable exhibits, and any supplemental materials, as provided in appendix A to this part (application). The Commission will not commence processing an application unless the applicant has filed the application as required by this section. Failure to file a completed application will preclude the Commission from determining that an application is materially complete, as provided in section 6(a) of the Act. Upon its own initiative, an applicant may file with its completed application additional information that may be necessary or helpful to the Commission in processing the application. (3) Alternative application procedures. An entity that is organized outside of the United States, is seeking to register as a derivatives clearing organization for the clearing of swaps, and does not pose substantial risk to the U.S. financial system may apply for registration in accordance with the terms of this paragraph in lieu of filing the application described in paragraph (a)(2) of this section. If the application is approved by the Commission, the derivatives clearing organization's compliance with its home country regulatory regime would satisfy the core principles set forth in section 5b(c)(2) of … | ||||
| 17:17:1.0.1.1.32.1.7.4 | 17 | Commodity and Securities Exchanges | I | 39 | PART 39—DERIVATIVES CLEARING ORGANIZATIONS | A | Subpart A—General Provisions Applicable to Derivatives Clearing Organizations | § 39.4 Procedures for implementing derivatives clearing organization rules and clearing new products. | CFTC | [76 FR 69430, Nov. 8, 2011, as amended at 83 FR 7996, Feb. 23, 2018; 85 FR 4852, Jan. 27, 2020; 85 FR 67187, Oct. 21, 2020] | (a) Request for approval of rules. A registered derivatives clearing organization may request, pursuant to the procedures of § 40.5 of this chapter, that the Commission approve any or all of its rules and subsequent amendments thereto, including operational rules, prior to their implementation or, notwithstanding the provisions of section 5c(c)(2) of the Act, at any time thereafter, under the procedures of § 40.5 of this chapter. A derivatives clearing organization may label as “approved by the Commission” only those rules that have been so approved. (b) Self-certification of rules. Proposed new or amended rules of a derivatives clearing organization not voluntarily submitted for prior Commission approval pursuant to paragraph (a) of this section must be submitted to the Commission with a certification that the proposed new rule or rule amendment complies with the Act and rules thereunder pursuant to the procedures of § 40.6 of this chapter. (c) Exemption from self-certification of rules. Notwithstanding the rule certification requirements of section 5c(c)(1) of the Act and § 40.6 of this chapter, a derivatives clearing organization that is subject to subpart D of this part is not required to certify a rule unless the rule relates to the requirements under section 4d(f) of the Act, parts 1, 22, or 45 of this chapter, or § 39.15. (d) Acceptance of new products for clearing. (1) A dormant derivatives clearing organization within the meaning of § 40.1 of this chapter may not accept for clearing a new product until its registration as a derivatives clearing organization is reinstated under the procedures of § 39.3 of this part; provided however, that an application for reinstatement may rely upon previously submitted materials that still pertain to, and accurately describe, current conditions. (2) A derivatives clearing organization that accepts for clearing a new product that is a swap shall comply with the requirements of § 39.5 of this part. (e) Orders regarding competition. An applicant for registr… | ||||
| 17:17:1.0.1.1.32.1.7.5 | 17 | Commodity and Securities Exchanges | I | 39 | PART 39—DERIVATIVES CLEARING ORGANIZATIONS | A | Subpart A—General Provisions Applicable to Derivatives Clearing Organizations | § 39.5 Review of swaps for Commission determination on clearing requirement. | CFTC | [76 FR 69430, Nov. 8, 2011, as amended at 88 FR 53682, Aug. 8, 2023] | (a) Eligibility to clear swaps. (1) A derivatives clearing organization shall be presumed eligible to accept for clearing any swap that is within a group, category, type, or class of swaps that the derivatives clearing organization already clears. Such presumption of eligibility, however, is subject to review by the Commission. (2) A derivatives clearing organization that wishes to accept for clearing any swap that is not within a group, category, type, or class of swaps that the derivatives clearing organization already clears shall request a determination by the Commission of the derivatives clearing organization's eligibility to clear such a swap before accepting the swap for clearing. The request, which shall be filed electronically with the Secretary of the Commission, shall address the derivatives clearing organization's ability, if it accepts the swap for clearing, to maintain compliance with section 5b(c)(2) of the Act, specifically: (i) The sufficiency of the derivatives clearing organization's financial resources; and (ii) The derivative clearing organization's ability to manage the risks associated with clearing the swap, especially if the Commission determines that the swap is required to be cleared. (b) Swap submissions. (1) A derivatives clearing organization shall submit to the Commission each swap, or any group, category, type, or class of swaps that it plans to accept for clearing. The derivatives clearing organization making the submission must be eligible under paragraph (a) of this section to accept for clearing the submitted swap, or group, category, type, or class of swaps. (2) A derivatives clearing organization shall submit swaps to the Commission, to the extent reasonable and practicable to do so, by group, category, type, or class of swaps. The Commission may in its reasonable discretion consolidate multiple submissions from one derivatives clearing organization or subdivide a derivatives clearing organization's submission as appropriate for review. (3) The submission shall be … | ||||
| 17:17:1.0.1.1.32.1.7.6 | 17 | Commodity and Securities Exchanges | I | 39 | PART 39—DERIVATIVES CLEARING ORGANIZATIONS | A | Subpart A—General Provisions Applicable to Derivatives Clearing Organizations | § 39.6 Exemption from derivatives clearing organization registration. | CFTC | [86 FR 965, Jan. 7, 2021] | (a) Eligibility for exemption. A derivatives clearing organization that is organized outside of the United States shall be eligible for an exemption from registration as a derivatives clearing organization for the clearing of swaps for U.S. persons, and thereby exempt from compliance with provisions of the Act and Commission regulations applicable to derivatives clearing organizations, if: (1) The derivatives clearing organization is subject to comparable, comprehensive supervision and regulation by a home country regulator as demonstrated by the following: (i) The derivatives clearing organization is organized in a jurisdiction in which a home country regulator applies to the derivatives clearing organization, on an ongoing basis, statutes, rules, regulations, policies, or a combination thereof that, taken together, are consistent with the Principles for Financial Market Infrastructures; (ii) The derivatives clearing organization observes the Principles for Financial Market Infrastructures in all material respects; and (iii) The derivatives clearing organization is in good regulatory standing in its home country; and (2) A memorandum of understanding or similar arrangement satisfactory to the Commission is in effect between the Commission and the derivatives clearing organization's home country regulator, pursuant to which, among other things, the home country regulator agrees to provide to the Commission any information that the Commission deems necessary to evaluate the initial and continued eligibility of the derivatives clearing organization for exemption from registration or to review its compliance with any conditions of such exemption. (b) Conditions of exemption. An exemption from registration as a derivatives clearing organization shall be subject to any conditions the Commission may prescribe including, but not limited to: (1) Clearing by or for U.S. persons and futures commission merchants. The exempt derivatives clearing organization shall have rules that limit swaps clearing services fo… | ||||
| 17:17:1.0.1.1.32.1.7.7 | 17 | Commodity and Securities Exchanges | I | 39 | PART 39—DERIVATIVES CLEARING ORGANIZATIONS | A | Subpart A—General Provisions Applicable to Derivatives Clearing Organizations | § 39.7 Enforceability. | CFTC | An agreement, contract or transaction submitted to a derivatives clearing organization for clearing shall not be void, voidable, subject to rescission, or otherwise invalidated or rendered unenforceable as a result of: (a) A violation by the derivatives clearing organization of the provisions of the Act or of Commission regulations; or (b) Any Commission proceeding to alter or supplement a rule under section 8a(7) of the Act, to declare an emergency under section 8a(9) of the Act, or any other proceeding the effect of which is to alter, supplement, or require a derivatives clearing organization to adopt a specific rule or procedure, or to take or refrain from taking a specific action. | |||||
| 17:17:1.0.1.1.32.1.7.8 | 17 | Commodity and Securities Exchanges | I | 39 | PART 39—DERIVATIVES CLEARING ORGANIZATIONS | A | Subpart A—General Provisions Applicable to Derivatives Clearing Organizations | § 39.8 Fraud in connection with the clearing of transactions on a derivatives clearing organization. | CFTC | It shall be unlawful for any person, directly or indirectly, in or in connection with the clearing of transactions by a derivatives clearing organization: (a) To cheat or defraud or attempt to cheat or defraud any person; (b) Willfully to make or cause to be made to any person any false report or statement or cause to be entered for any person any false record; or (c) Willfully to deceive or attempt to deceive any person by any means whatsoever. | |||||
| 17:17:1.0.1.1.32.2.7.1 | 17 | Commodity and Securities Exchanges | I | 39 | PART 39—DERIVATIVES CLEARING ORGANIZATIONS | B | Subpart B—Compliance with Core Principles | § 39.9 Scope. | CFTC | [86 FR 968, Jan. 7, 2021] | Except as otherwise provided by Commission order, the provisions of this subpart B apply to any derivatives clearing organization, as defined under section 1a(15) of the Act and § 1.3 of this chapter, that is registered with the Commission as a derivatives clearing organization pursuant to section 5b of the Act. The provisions of this subpart B do not apply to any exempt derivatives clearing organization, as defined under § 39.2. | ||||
| 17:17:1.0.1.1.32.2.7.10 | 17 | Commodity and Securities Exchanges | I | 39 | PART 39—DERIVATIVES CLEARING ORGANIZATIONS | B | Subpart B—Compliance with Core Principles | § 39.18 System safeguards. | CFTC | [81 FR 64336, Sept. 19, 2016] | (a) Definitions. For purposes of this section and § 39.34: Controls mean the safeguards or countermeasures employed by the derivatives clearing organization in order to protect the reliability, security, or capacity of its automated systems or the confidentiality, integrity, or availability of its data and information, and in order to enable the derivatives clearing organization to fulfill its statutory and regulatory responsibilities. Controls testing means assessment of the derivatives clearing organization's controls to determine whether such controls are implemented correctly, are operating as intended, and are enabling the derivatives clearing organization to meet the requirements established by this section. Enterprise technology risk assessment means a written assessment that includes, but is not limited to, an analysis of threats and vulnerabilities in the context of mitigating controls. An enterprise technology risk assessment identifies, estimates, and prioritizes risks to a derivatives clearing organization's operations or assets, or to market participants, individuals, or other entities, resulting from impairment of the confidentiality, integrity, or availability of data and information or the reliability, security, or capacity of automated systems. External penetration testing means attempts to penetrate a derivatives clearing organization's automated systems from outside the systems' boundaries to identify and exploit vulnerabilities. Methods of conducting external penetration testing include, but are not limited to, methods for circumventing the security features of an automated system. Internal penetration testing means attempts to penetrate a derivatives clearing organization's automated systems from inside the systems' boundaries to identify and exploit vulnerabilities. Methods of conducting internal penetration testing include, but are not limited to, methods for circumventing the security features of an automated system. Key controls means those controls that an appropriate risk … | ||||
| 17:17:1.0.1.1.32.2.7.11 | 17 | Commodity and Securities Exchanges | I | 39 | PART 39—DERIVATIVES CLEARING ORGANIZATIONS | B | Subpart B—Compliance with Core Principles | § 39.19 Reporting. | CFTC | [76 FR 69430, Nov. 8, 2011, as amended at 85 FR 4858, Jan. 27, 2020; 88 FR 53683, Aug. 8, 2023] | (a) General. A derivatives clearing organization shall provide to the Commission the information specified in this section and any other information that the Commission determines to be necessary to conduct oversight of the derivatives clearing organization. (b) Submission of reports —(1) General requirement. A derivatives clearing organization shall submit the information required by this section to the Commission in a format and manner specified by the Commission. (2) Certification. When making a submission pursuant to this section, an employee of the derivatives clearing organization must certify that he or she is duly authorized to make such a submission on behalf of the derivatives clearing organization. (3) Time zones. Unless otherwise specified by the Commission or its designee, any stated time in this section is Central time for information concerning derivatives clearing organizations located in that time zone, and Eastern time for information concerning all other derivatives clearing organizations. (c) Reporting requirements. Each registered derivatives clearing organization shall provide to the Commission or other person as may be required or permitted by this paragraph (c) the information specified as follows: (1) Daily reporting. (i) A derivatives clearing organization shall compile as of the end of each trading day, and submit to the Commission by 10 a.m. on the next business day, a report containing the results of the backtesting required under § 39.13(g)(7)(i), and the following information related to all positions, other than fully collateralized positions, in accordance with the data fields set forth in appendix C to this part: (A) Initial margin requirements and initial margin on deposit for each clearing member, by house origin and by each customer origin, and by each individual customer account. The derivatives clearing organization shall identify each individual customer account, using both a legal entity identifier, where available, and any internally-generated identifier… | ||||
| 17:17:1.0.1.1.32.2.7.12 | 17 | Commodity and Securities Exchanges | I | 39 | PART 39—DERIVATIVES CLEARING ORGANIZATIONS | B | Subpart B—Compliance with Core Principles | § 39.20 Recordkeeping. | CFTC | [76 FR 69430, Nov. 8, 2011, as amended at 85 FR 4860, Jan. 27, 2020] | (a) Requirement to maintain information. A derivatives clearing organization shall maintain records of all activities related to its business as a derivatives clearing organization. Such records shall include, but are not limited to, records of: (1) All cleared transactions, including swaps; (2) All information necessary to record allocation of bunched orders for cleared swaps; (3) All information required to be created, generated, or reported under this part 39, including but not limited to the results of and methodology used for all tests, reviews, and calculations in connection with setting and evaluating margin levels, determining the value and adequacy of financial resources, and establishing settlement prices; (4) All rules and procedures required to be submitted pursuant to this part 39 and part 40 of this chapter, including all proposed changes in rules, procedures or operations subject to § 40.10 of this chapter; and (5) Any data or documentation required by the Commission or by the derivatives clearing organization to be submitted to the derivatives clearing organization by its clearing members, or by any other person in connection with the derivatives clearing organization's clearing and settlement activities. (b) Form and manner of maintaining information —(1) General. The records required to be maintained by this chapter shall be maintained in accordance with the provisions of § 1.31 of this chapter, for a period of not less than 5 years, except as provided in paragraph (b)(2) of this section. (2) Exception for swap data. A derivatives clearing organization that clears swaps must maintain swap data in accordance with the requirements of part 45 of this chapter. | ||||
| 17:17:1.0.1.1.32.2.7.13 | 17 | Commodity and Securities Exchanges | I | 39 | PART 39—DERIVATIVES CLEARING ORGANIZATIONS | B | Subpart B—Compliance with Core Principles | § 39.21 Public information. | CFTC | [76 FR 69430, Nov. 8, 2011, as amended at 85 FR 4861, Jan. 27, 2020; 88 FR 53684, Aug. 8, 2023] | (a) General. A derivatives clearing organization shall provide to market participants sufficient information to enable the market participants to identify and evaluate accurately the risks and costs associated with using the services of the derivatives clearing organization. In furtherance of the objective in this paragraph (a), a derivatives clearing organization shall have clear and comprehensive rules and procedures. (b) Availability of information. A derivatives clearing organization shall make information concerning the rules and the operating and default procedures governing the clearing and settlement systems of the derivatives clearing organization available to market participants. (c) Public disclosure. A derivatives clearing organization shall make the following information readily available to the general public, in a timely manner, by posting such information on the derivatives clearing organization's website, unless otherwise permitted by the Commission: (1) The terms and conditions of each contract, agreement, and transaction cleared and settled by the derivatives clearing organization; (2) Each clearing and other fee that the derivatives clearing organization charges its clearing members; (3) Information concerning its margin-setting methodology, except that a derivatives clearing organization that clears only fully collateralized positions instead may disclose that it does not employ a margin-setting methodology because it clears only fully collateralized positions; (4) The size and composition of the financial resource package available in the event of a clearing member default, updated as of the end of the most recent fiscal quarter or upon Commission request and posted as promptly as practicable after submission of the report to the Commission under § 39.11(f)(1)(i)(A), except that a derivatives clearing organization that clears only fully collateralized positions instead may disclose that it does not maintain a financial resource package to be used in the event of a clearing member… | ||||
| 17:17:1.0.1.1.32.2.7.14 | 17 | Commodity and Securities Exchanges | I | 39 | PART 39—DERIVATIVES CLEARING ORGANIZATIONS | B | Subpart B—Compliance with Core Principles | § 39.22 Information sharing. | CFTC | [85 FR 4861, Jan. 27, 2020] | A derivatives clearing organization shall enter into, and abide by the terms of, each appropriate and applicable domestic and international information-sharing agreement, and shall use relevant information obtained from each such agreement in carrying out the risk management program of the derivatives clearing organization. | ||||
| 17:17:1.0.1.1.32.2.7.15 | 17 | Commodity and Securities Exchanges | I | 39 | PART 39—DERIVATIVES CLEARING ORGANIZATIONS | B | Subpart B—Compliance with Core Principles | § 39.23 Antitrust considerations. | CFTC | Unless necessary or appropriate to achieve the purposes of the Act, a derivatives clearing organization shall not adopt any rule or take any action that results in any unreasonable restraint of trade, or impose any material anticompetitive burden. | |||||
| 17:17:1.0.1.1.32.2.7.16 | 17 | Commodity and Securities Exchanges | I | 39 | PART 39—DERIVATIVES CLEARING ORGANIZATIONS | B | Subpart B—Compliance with Core Principles | § 39.24 Governance. | CFTC | [85 FR 4861, Jan. 27, 2020, as amended at 88 FR 44690, July 13, 2023] | (a) General. (1) A derivatives clearing organization shall have governance arrangements that: (i) Are written; (ii) Are clear and transparent; (iii) Place a high priority on the safety and efficiency of the derivatives clearing organization; and (iv) Explicitly support the stability of the broader financial system and other relevant public interest considerations of clearing members, customers of clearing members, and other relevant stakeholders. (2) The board of directors shall make certain that the derivatives clearing organization's design, rules, overall strategy, and major decisions appropriately reflect the legitimate interests of clearing members, customers of clearing members, and other relevant stakeholders. (3) To the extent consistent with other statutory and regulatory requirements on confidentiality and disclosure: (i) Major decisions of the board of directors shall be clearly disclosed to clearing members, other relevant stakeholders, and to the Commission; and (ii) Major decisions of the board of directors having a broad market impact shall be clearly disclosed to the public. (b) Governance arrangement requirements. A derivatives clearing organization shall have governance arrangements that: (1) Are clear and documented; (2) To an extent consistent with other statutory and regulatory requirements on confidentiality and disclosure, are disclosed, as appropriate, to the Commission, other relevant authorities, clearing members, customers of clearing members, owners of the derivatives clearing organization, and to the public; (3) Describe the structure pursuant to which the board of directors, committees, and management operate; (4) Include clear and direct lines of responsibility and accountability; (5) Clearly specify the roles and responsibilities of the board of directors and its committees, including the establishment of a clear and documented risk management framework; (6) Clearly specify the roles and responsibilities of management; (7) Describe procedures pursuant to which t… | ||||
| 17:17:1.0.1.1.32.2.7.17 | 17 | Commodity and Securities Exchanges | I | 39 | PART 39—DERIVATIVES CLEARING ORGANIZATIONS | B | Subpart B—Compliance with Core Principles | § 39.25 Conflicts of interest. | CFTC | [85 FR 4862, Jan. 27, 2020, as amended at 88 FR 53684, Aug. 8, 2023] | A derivatives clearing organization shall: (a) Establish and enforce rules to minimize conflicts of interest in the decision-making process of the derivatives clearing organization; (b) Establish a process for resolving such conflicts of interest; and (c) Have procedures for identifying, addressing, and managing conflicts of interest involving members of the board of directors. | ||||
| 17:17:1.0.1.1.32.2.7.18 | 17 | Commodity and Securities Exchanges | I | 39 | PART 39—DERIVATIVES CLEARING ORGANIZATIONS | B | Subpart B—Compliance with Core Principles | § 39.26 Composition of governing boards. | CFTC | [85 FR 4862, Jan. 27, 2020] | A derivatives clearing organization shall ensure that the composition of the governing board or board-level committee of the derivatives clearing organization includes market participants and individuals who are not executives, officers, or employees of the derivatives clearing organization or an affiliate thereof. | ||||
| 17:17:1.0.1.1.32.2.7.19 | 17 | Commodity and Securities Exchanges | I | 39 | PART 39—DERIVATIVES CLEARING ORGANIZATIONS | B | Subpart B—Compliance with Core Principles | § 39.27 Legal risk considerations. | CFTC | [76 FR 69430, Nov. 8, 2011, as amended at 85 FR 4862, Jan. 27, 2020] | (a) Legal authorization. A derivatives clearing organization shall be duly organized, legally authorized to conduct business, and remain in good standing at all times in the relevant jurisdictions. If the derivatives clearing organization provides clearing services outside the United States, it shall be duly organized to conduct business and remain in good standing at all times in the relevant jurisdictions, and be authorized by the appropriate foreign licensing authority. (b) Legal framework. A derivatives clearing organization shall operate pursuant to a well-founded, transparent, and enforceable legal framework that addresses each aspect of the activities of the derivatives clearing organization. As applicable, the framework shall provide for: (1) The derivatives clearing organization to act as a counterparty, including novation; (2) Netting arrangements; (3) The derivatives clearing organization's interest in collateral; (4) The steps that a derivatives clearing organization would take to address a default of a clearing member, including but not limited to, the unimpeded ability to liquidate collateral and close out or transfer positions in a timely manner; (5) Finality of settlement and funds transfers that are irrevocable and unconditional when effected (no later than when a derivatives clearing organization's accounts are debited and credited); and (6) Other significant aspects of the derivatives clearing organization's operations, risk management procedures, and related requirements. (c) Conflict of laws. If a derivatives clearing organization provides clearing services outside the United States: (1) The derivatives clearing organization shall identify and address any material conflict of law issues. The derivatives clearing organization's contractual agreements shall specify a choice of law. (2) The derivatives clearing organization shall be able to demonstrate the enforceability of its choice of law in relevant jurisdictions and that its rules, procedures, and contracts are enforceable i… | ||||
| 17:17:1.0.1.1.32.2.7.2 | 17 | Commodity and Securities Exchanges | I | 39 | PART 39—DERIVATIVES CLEARING ORGANIZATIONS | B | Subpart B—Compliance with Core Principles | § 39.10 Compliance with core principles. | CFTC | [76 FR 69430, Nov. 8, 2011, as amended at 85 FR 4852, Jan. 27, 2020] | (a) To be registered and to maintain registration as a derivatives clearing organization, a derivatives clearing organization shall comply with each core principle set forth in section 5b(c)(2) of the Act and any requirement that the Commission may impose by rule or regulation pursuant to section 8a(5) of the Act; and (b) Subject to any rule or regulation prescribed by the Commission, a registered derivatives clearing organization shall have reasonable discretion in establishing the manner by which it complies with each core principle. (c) Chief compliance officer —(1) Designation. Each derivatives clearing organization shall establish the position of chief compliance officer, designate an individual to serve as the chief compliance officer, and provide the chief compliance officer with the full responsibility and authority to develop and enforce, in consultation with the board of directors or the senior officer, appropriate compliance policies and procedures, to fulfill the duties set forth in the Act and Commission regulations. (i) The individual designated to serve as chief compliance officer shall have the background and skills appropriate for fulfilling the responsibilities of the position. No individual who would be disqualified from registration under sections 8a(2) or 8a(3) of the Act may serve as a chief compliance officer. (ii) The chief compliance officer shall report to the board of directors or the senior officer of the derivatives clearing organization or, if the derivatives clearing organization engages in substantial activities not related to clearing, the senior officer responsible for the derivatives clearing organization's clearing activities. The board of directors or the senior officer shall approve the compensation of the chief compliance officer. (iii) The chief compliance officer shall meet with the board of directors or the senior officer at least once a year. (iv) A change in the designation of the individual serving as the chief compliance officer of the derivatives clearing or… | ||||
| 17:17:1.0.1.1.32.2.7.20 | 17 | Commodity and Securities Exchanges | I | 39 | PART 39—DERIVATIVES CLEARING ORGANIZATIONS | B | Subpart B—Compliance with Core Principles | §§ 39.28-39.29 [Reserved] | CFTC | ||||||
| 17:17:1.0.1.1.32.2.7.3 | 17 | Commodity and Securities Exchanges | I | 39 | PART 39—DERIVATIVES CLEARING ORGANIZATIONS | B | Subpart B—Compliance with Core Principles | § 39.11 Financial resources. | CFTC | [76 FR 69430, Nov. 8, 2011, as amended at 85 FR 4852, Jan. 27, 2020; 85 FR 35805, June 12, 2020] | (a) General. A derivatives clearing organization shall have adequate financial, operational, and managerial resources, as determined by the Commission, to discharge each responsibility of the derivatives clearing organization. A derivatives clearing organization shall maintain sufficient financial resources to cover its exposures with a high degree of confidence. At a minimum, each derivatives clearing organization shall possess financial resources that exceed the total amount that would: (1) Enable the derivatives clearing organization to meet its financial obligations to its clearing members notwithstanding a default by the clearing member creating the largest financial exposure for the derivatives clearing organization in extreme but plausible market conditions; Provided that if a clearing member controls another clearing member or is under common control with another clearing member, the affiliated clearing members shall be deemed to be a single clearing member for purposes of this provision; and (2) Enable the derivatives clearing organization to cover its operating costs for a period of at least one year, calculated on a rolling basis. A derivatives clearing organization shall identify and adequately manage its general business risks and hold sufficient liquid resources to cover potential business losses that are not related to clearing members' defaults, so that the derivatives clearing organization can continue to provide services as a going concern. (b) Types of financial resources. (1) Financial resources available to satisfy the requirements of paragraph (a)(1) of this section may include: (i) The derivatives clearing organization's own capital; (ii) Guaranty fund deposits; (iii) Default insurance; (iv) Potential assessments for additional guaranty fund contributions, if permitted by the derivatives clearing organization's rules; and (v) Any other financial resource deemed acceptable by the Commission. (2) Financial resources available to satisfy the requirements of paragraph (a)(2) of thi… | ||||
| 17:17:1.0.1.1.32.2.7.4 | 17 | Commodity and Securities Exchanges | I | 39 | PART 39—DERIVATIVES CLEARING ORGANIZATIONS | B | Subpart B—Compliance with Core Principles | § 39.12 Participant and product eligibility. | CFTC | [76 FR 69430, Nov. 8, 2011, as amended at 77 FR 21309, Apr. 9, 2012; 85 FR 4855, Jan. 27, 2020] | (a) Participant eligibility. A derivatives clearing organization shall have appropriate admission and continuing participation requirements for clearing members of the derivatives clearing organization that are objective, publicly disclosed, and risk-based. (1) Fair and open access for participation. The participation requirements shall permit fair and open access; (i) A derivatives clearing organization shall not have restrictive clearing member standards if less restrictive requirements that achieve the same objective and that would not materially increase risk to the derivatives clearing organization or clearing members could be adopted; (ii) A derivatives clearing organization shall allow all market participants who satisfy participation requirements to become clearing members; (iii) A derivatives clearing organization shall not exclude or limit clearing membership of certain types of market participants unless the derivatives clearing organization can demonstrate that the restriction is necessary to address credit risk or deficiencies in the participants' operational capabilities that would prevent them from fulfilling their obligations as clearing members. (iv) A derivatives clearing organization shall not require that clearing members be swap dealers. (v) A derivatives clearing organization shall not require that clearing members maintain a swap portfolio of any particular size, or that clearing members meet a swap transaction volume threshold. (vi) No derivatives clearing organization shall require as a condition of accepting a swap for clearing that a futures commission merchant enter into an arrangement with a customer that: (A) Discloses to the futures commission merchant or any swap dealer or major swap participant the identity of a customer's original executing counterparty; (B) Limits the number of counterparties with whom a customer may enter into trades; (C) Restricts the size of the position a customer may take with any individual counterparty, apart from an overall limit for all posi… | ||||
| 17:17:1.0.1.1.32.2.7.5 | 17 | Commodity and Securities Exchanges | I | 39 | PART 39—DERIVATIVES CLEARING ORGANIZATIONS | B | Subpart B—Compliance with Core Principles | § 39.13 Risk management. | CFTC | [76 FR 69430, Nov. 8, 2011, as amended at 85 FR 4855, Jan. 27, 2020; 85 FR 35805, June 12, 2020; 88 FR 53682, Aug. 8, 2023; 90 FR 7939, Jan. 22, 2025] | (a) General. A derivatives clearing organization shall ensure that it possesses the ability to manage the risks associated with discharging the responsibilities of the derivatives clearing organization through the use of appropriate tools and procedures. (b) Risk management framework. A derivatives clearing organization shall have and implement written policies, procedures, and controls, approved by its board of directors, that establish an appropriate risk management framework that, at a minimum, clearly identifies and documents the range of risks to which the derivatives clearing organization is exposed, addresses the monitoring and management of the entirety of those risks, and provides a mechanism for internal audit. The risk management framework shall be regularly reviewed and updated as necessary. (c) Chief risk officer. A derivatives clearing organization shall have a chief risk officer who shall be responsible for implementing the risk management framework, including the procedures, policies and controls described in paragraph (b) of this section, and for making appropriate recommendations to the derivatives clearing organization's risk management committee or board of directors, as applicable, regarding the derivatives clearing organization's risk management functions. (d) [Reserved] (e) Measurement of credit exposure. A derivatives clearing organization shall: (1) Measure its credit exposure to each clearing member and mark to market such clearing member's open house and customer positions at least once each business day; and (2) Monitor its credit exposure to each clearing member periodically during each business day. (f) Limitation of exposure to potential losses from defaults. A derivatives clearing organization shall limit its exposure to potential losses from defaults by its clearing members through margin requirements and other risk control mechanisms reasonably designed to ensure that: (1) The operations of the derivatives clearing organization would not be disrupted; and (2) N… | ||||
| 17:17:1.0.1.1.32.2.7.6 | 17 | Commodity and Securities Exchanges | I | 39 | PART 39—DERIVATIVES CLEARING ORGANIZATIONS | B | Subpart B—Compliance with Core Principles | § 39.14 Settlement procedures. | CFTC | (a) Definitions —(1) Settlement. For purposes of this section, “settlement” means: (i) Payment and receipt of variation margin for futures, options, and swaps; (ii) Payment and receipt of option premiums; (iii) Deposit and withdrawal of initial margin for futures, options, and swaps; (iv) All payments due in final settlement of futures, options, and swaps on the final settlement date with respect to such positions; and (v) All other cash flows collected from or paid to each clearing member, including but not limited to, payments related to swaps such as coupon amounts. (2) Settlement bank. For purposes of this section, “settlement bank” means a bank that maintains an account either for the derivatives clearing organization or for any of its clearing members, which is used for the purpose of any settlement described in paragraph (a)(1) above. (b) Daily settlements. Except as otherwise provided by Commission order, a derivatives clearing organization shall effect a settlement with each clearing member at least once each business day, and shall have the authority and operational capacity to effect a settlement with each clearing member, on an intraday basis, either routinely, when thresholds specified by the derivatives clearing organization are breached, or in times of extreme market volatility. (c) Settlement banks. A derivatives clearing organization shall employ settlement arrangements that eliminate or strictly limit its exposure to settlement bank risks, including the credit and liquidity risks arising from the use of such bank(s) to effect settlements with its clearing members, as follows: (1) A derivatives clearing organization shall have documented criteria that must be met by any settlement bank used by the derivatives clearing organization or its clearing members, including criteria addressing the capitalization, creditworthiness, access to liquidity, operational reliability, and regulation or supervision of such bank(s). (2) A derivatives clearing organization shall monitor each approv… | |||||
| 17:17:1.0.1.1.32.2.7.7 | 17 | Commodity and Securities Exchanges | I | 39 | PART 39—DERIVATIVES CLEARING ORGANIZATIONS | B | Subpart B—Compliance with Core Principles | § 39.15 Treatment of funds. | CFTC | [76 FR 69430, Nov. 8, 2011, as amended at 85 FR 4856, Jan. 27, 2020; 88 FR 53683, Aug. 8, 2023] | (a) Required standards and procedures. A derivatives clearing organization shall establish standards and procedures that are designed to protect and ensure the safety of funds and assets belonging to clearing members and their customers. (b) Customer funds — (1) Segregation. A derivatives clearing organization shall comply with the applicable segregation requirements of section 4d of the Act and Commission regulations in this part, or any other applicable Commission regulation in this chapter or order requiring that customer funds and assets, including money, securities, and property, be segregated, set aside, or held in a separate account. (2) Commingling. In order for a derivatives clearing organization and its clearing members to commingle customer positions in futures, options, foreign futures, foreign options, and swaps, or any combination thereof, and any money, securities, or property received to margin, guarantee or secure such positions, in an account subject to the requirements of sections 4d(a) or 4d(f) of the Act, the derivatives clearing organization shall file rules for Commission approval pursuant to the requirements and standard of review of § 40.5 of this chapter. Such rule submission shall include, at a minimum, the following: (i) Identification of the products that would be commingled, including product specifications or the criteria that would be used to define eligible products; (ii) Analysis of the risk characteristics of the eligible products and of the derivatives clearing organization's ability to manage those risks, addressing any characteristics that are unusual in relation to the other products cleared by the derivatives clearing organization, such as margining, liquidity, default management, pricing, or other risk characteristics; (iii) Analysis of the liquidity of the respective markets for the eligible products, the ability of clearing members and the derivatives clearing organization to offset or mitigate the risk of such eligible products in a timely manner, without co… | ||||
| 17:17:1.0.1.1.32.2.7.8 | 17 | Commodity and Securities Exchanges | I | 39 | PART 39—DERIVATIVES CLEARING ORGANIZATIONS | B | Subpart B—Compliance with Core Principles | § 39.16 Default rules and procedures. | CFTC | [76 FR 69430, Nov. 8, 2011, as amended at 85 FR 4857, Jan. 27, 2020] | (a) General. A derivatives clearing organization shall have rules and procedures designed to allow for the efficient, fair, and safe management of events during which clearing members become insolvent or default on the obligations of such clearing members to the derivatives clearing organization. (b) Default management plan. A derivatives clearing organization shall maintain a current written default management plan that delineates the roles and responsibilities of its board of directors, its risk management committee, any other committee that a derivatives clearing organization may have that has responsibilities for default management, and the derivatives clearing organization's management, in addressing a default, including any necessary coordination with, or notification of, other entities and regulators. Such plan shall address any differences in procedures with respect to highly liquid products and less liquid products. A derivatives clearing organization shall conduct and document a test of its default management plan at least on an annual basis. The derivatives clearing organization shall include clearing members and participants in a test of its default management plan at least on an annual basis to the extent the plan relies on their participation. (c) Default procedures. (1) A derivatives clearing organization shall have procedures that would permit the derivatives clearing organization to take timely action to contain losses and liquidity pressures and to continue meeting its obligations in the event of a default on the obligations of a clearing member to the derivatives clearing organization. (2) A derivatives clearing organization shall have rules that set forth its default procedures, including: (i) The derivatives clearing organization's definition of a default; (ii) The actions that the derivatives clearing organization may take upon a default, which shall include public notice of a declaration of default on its website and the prompt transfer, liquidation, or hedging of the customer or … | ||||
| 17:17:1.0.1.1.32.2.7.9 | 17 | Commodity and Securities Exchanges | I | 39 | PART 39—DERIVATIVES CLEARING ORGANIZATIONS | B | Subpart B—Compliance with Core Principles | § 39.17 Rule enforcement. | CFTC | [76 FR 69430, Nov. 8, 2011, as amended at 85 FR 4858, Jan. 27, 2020] | (a) General. A derivatives clearing organization shall: (1) Maintain adequate arrangements and resources for the effective monitoring and enforcement of compliance (by itself and its clearing members) with the rules of the derivatives clearing organization and the resolution of disputes; (2) Have the authority and ability to discipline, limit, suspend, or terminate the activities of a clearing member due to a violation by the clearing member of any rule of the derivatives clearing organization; and (3) Report to the Commission regarding rule enforcement activities and sanctions imposed against clearing members as provided in paragraph (a)(2) of this section, in accordance with § 39.19(c)(4)(xvi). (b) Authority to enforce rules. The board of directors of the derivatives clearing organization may delegate responsibility for compliance with the requirements of paragraph (a) of this section to an appropriate committee, unless the responsibilities are otherwise required to be carried out by the chief compliance officer pursuant to the Act or this part. | ||||
| 17:17:1.0.1.1.32.3.7.1 | 17 | Commodity and Securities Exchanges | I | 39 | PART 39—DERIVATIVES CLEARING ORGANIZATIONS | Subpart C—Provisions Applicable to Systemically Important Derivatives Clearing Organizations and Derivatives Clearing Organizations That Elect To Be Subject to the Provisions of This Subpart | § 39.30 Scope. | CFTC | [78 FR 72514, Dec. 2, 2013, as amended at 83 FR 7996, Feb. 23, 2018] | (a) The provisions of this subpart apply to each of the following: a subpart C derivatives clearing organization, a systemically important derivatives clearing organization, and any derivatives clearing organization, as defined under section 1a(15) of the Act and § 1.3 of this chapter, seeking to become a subpart C derivatives clearing organization pursuant to § 39.31. (b) A systemically important derivatives clearing organization is subject to the provisions of subparts A and B of this part in addition to the provisions of this subpart. (c) A subpart C derivatives clearing organization is subject to the provisions of subparts A and B of this part in addition to the provisions of this subpart except for §§ 39.41 and 39.42. | |||||
| 17:17:1.0.1.1.32.3.7.10 | 17 | Commodity and Securities Exchanges | I | 39 | PART 39—DERIVATIVES CLEARING ORGANIZATIONS | Subpart C—Provisions Applicable to Systemically Important Derivatives Clearing Organizations and Derivatives Clearing Organizations That Elect To Be Subject to the Provisions of This Subpart | § 39.39 Recovery and wind-down for systemically important derivatives clearing organizations and subpart C derivatives clearing organizations. | CFTC | [76 FR 69430, Nov. 8, 2011, as amended at 85 FR 4862, Jan. 27, 2020] | (a) Definitions. For purposes of this section: (1) General business risk means any potential impairment of a systemically important derivatives clearing organization's or subpart C derivatives clearing organization's financial position, as a business concern, as a consequence of a decline in its revenues or an increase in its expenses, such that expenses exceed revenues and result in a loss that the derivatives clearing organization must charge against capital. (2) Wind-down means the actions of a systemically important derivatives clearing organization or subpart C derivatives clearing organization to effect the permanent cessation or sale or transfer of one or more services. (3) Recovery means the actions of a systemically important derivatives clearing organization or subpart C derivatives clearing organization, consistent with its rules, procedures, and other ex - ante contractual arrangements, to address any uncovered credit loss, liquidity shortfall, capital inadequacy, or business, operational or other structural weakness, including the replenishment of any depleted pre-funded financial resources and liquidity arrangements, as necessary to maintain the systemically important derivatives clearing organization's or subpart C derivatives clearing organization's viability as a going concern. (4) Operational risk means the risk that deficiencies in information systems or internal processes, human errors, management failures or disruptions from external events will result in the reduction, deterioration, or breakdown of services provided by a systemically important derivatives clearing organization or subpart C derivatives clearing organization. (5) Unencumbered liquid financial assets include cash and highly liquid securities. (b) Recovery and wind-down plan. Each systemically important derivatives clearing organization and subpart C derivatives clearing organization shall maintain viable plans for: (1) Recovery or orderly wind-down, necessitated by uncovered credit losses or liquidity sh… | |||||
| 17:17:1.0.1.1.32.3.7.11 | 17 | Commodity and Securities Exchanges | I | 39 | PART 39—DERIVATIVES CLEARING ORGANIZATIONS | Subpart C—Provisions Applicable to Systemically Important Derivatives Clearing Organizations and Derivatives Clearing Organizations That Elect To Be Subject to the Provisions of This Subpart | § 39.40 Consistency with the Principles for Financial Market Infrastructures. | CFTC | This subpart C is intended to establish standards which, together with subparts A and B of this part, are consistent with section 5b(c) of the Act and the Principles for Financial Market Infrastructures published by the Committee on Payment and Settlement Systems and the Board of the International Organization of Securities Commissions and should be interpreted in that context. | ||||||
| 17:17:1.0.1.1.32.3.7.12 | 17 | Commodity and Securities Exchanges | I | 39 | PART 39—DERIVATIVES CLEARING ORGANIZATIONS | Subpart C—Provisions Applicable to Systemically Important Derivatives Clearing Organizations and Derivatives Clearing Organizations That Elect To Be Subject to the Provisions of This Subpart | § 39.41 Special enforcement authority for systemically important derivatives clearing organizations. | CFTC | For purposes of enforcing the provisions of Title VIII of the Dodd-Frank Act, a systemically important derivatives clearing organization shall be subject to, and the Commission has authority under the provisions of subsections (b) through (n) of section 8 of the Federal Deposit Insurance Act (12 U.S.C. 1818) in the same manner and to the same extent as if the systemically important derivatives clearing organization were an insured depository institution and the Commission were the appropriate Federal banking agency for such insured depository institution. | ||||||
| 17:17:1.0.1.1.32.3.7.13 | 17 | Commodity and Securities Exchanges | I | 39 | PART 39—DERIVATIVES CLEARING ORGANIZATIONS | Subpart C—Provisions Applicable to Systemically Important Derivatives Clearing Organizations and Derivatives Clearing Organizations That Elect To Be Subject to the Provisions of This Subpart | § 39.42 Advance notice of material risk-related rule changes by systemically important derivatives clearing organizations. | CFTC | A systemically important derivatives clearing organization shall provide notice to the Commission in advance of any proposed change to its rules, procedures, or operations that could materially affect the nature or level of risks presented by the systemically important derivatives clearing organization, in accordance with the requirements of § 40.10 of this chapter. | ||||||
| 17:17:1.0.1.1.32.3.7.14 | 17 | Commodity and Securities Exchanges | I | 39 | PART 39—DERIVATIVES CLEARING ORGANIZATIONS | Subpart C—Provisions Applicable to Systemically Important Derivatives Clearing Organizations and Derivatives Clearing Organizations That Elect To Be Subject to the Provisions of This Subpart | §§ 39.43-39.49 [Reserved] | CFTC | |||||||
| 17:17:1.0.1.1.32.3.7.2 | 17 | Commodity and Securities Exchanges | I | 39 | PART 39—DERIVATIVES CLEARING ORGANIZATIONS | Subpart C—Provisions Applicable to Systemically Important Derivatives Clearing Organizations and Derivatives Clearing Organizations That Elect To Be Subject to the Provisions of This Subpart | § 39.31 Election to become subject to the provisions of this subpart. | CFTC | (a) Election eligibility. (1) A derivatives clearing organization that is registered with the Commission and that is not a systemically important derivatives clearing organization may elect to become a subpart C derivatives clearing organization subject to the provisions of this subpart, using the procedures set forth in paragraph (b) of this section. (2) An applicant for registration as a derivatives clearing organization pursuant to § 39.3 may elect to become a subpart C derivatives clearing organization subject to the provisions of this subpart as part of its application for registration using the procedures set forth in paragraph (c) of this section. (b) Election and withdrawal procedures applicable to registered derivatives clearing organizations —(1) Election. A derivatives clearing organization that is registered with the Commission and that is not a systemically important derivatives clearing organization may request that the Commission accept its election to become a subpart C derivatives clearing organization by filing with the Commission a completed Subpart C Election Form. The Subpart C Election Form shall include the election and all certifications, disclosures and exhibits, as provided in appendix B to this part and any amendments or supplements thereto filed with the Commission pursuant to paragraphs (b)(2) and (3) of this section. (2) Submission of supplemental information. The filing of a Subpart C Election Form does not create a presumption that the Subpart C Election Form is materially complete or that supplemental information will not be required. The Commission, at any time prior to the effective date, as provided in paragraph (b)(4) of this section, may request that the derivatives clearing organization submit supplemental information in order for the Commission to process the Subpart C Election Form, and the derivatives clearing organization shall file such supplemental information with the Commission. (3) Amendments. A derivatives clearing organization shall promptly amend its… | ||||||
| 17:17:1.0.1.1.32.3.7.3 | 17 | Commodity and Securities Exchanges | I | 39 | PART 39—DERIVATIVES CLEARING ORGANIZATIONS | Subpart C—Provisions Applicable to Systemically Important Derivatives Clearing Organizations and Derivatives Clearing Organizations That Elect To Be Subject to the Provisions of This Subpart | § 39.32 [Reserved] | CFTC | |||||||
| 17:17:1.0.1.1.32.3.7.4 | 17 | Commodity and Securities Exchanges | I | 39 | PART 39—DERIVATIVES CLEARING ORGANIZATIONS | Subpart C—Provisions Applicable to Systemically Important Derivatives Clearing Organizations and Derivatives Clearing Organizations That Elect To Be Subject to the Provisions of This Subpart | § 39.33 Financial resources requirements for systemically important derivatives clearing organizations and subpart C derivatives clearing organizations. | CFTC | [76 FR 69430, Nov. 8, 2011, as amended at 85 FR 4862, Jan. 27, 2020] | (a) General rule. (1) Notwithstanding the requirements of § 39.11(a)(1), each systemically important derivatives clearing organization and subpart C derivatives clearing organization that, in either case, is systemically important in multiple jurisdictions or is involved in activities with a more complex risk profile shall maintain financial resources sufficient to enable it to meet its financial obligations to its clearing members notwithstanding a default by the two clearing members creating the largest combined financial exposure to the derivatives clearing organization in extreme but plausible market conditions. (2) The Commission shall, if it deems appropriate, determine whether a systemically important derivatives clearing organization or subpart C derivatives clearing organization is systemically important in multiple jurisdictions. In determining whether a systemically important derivatives clearing organization or subpart C derivatives clearing organization is systemically important in multiple jurisdictions, the Commission shall consider whether the derivatives clearing organization: (i) Is a systemically important derivatives clearing organization, as defined by § 39.2; or (ii) Has been determined to be systemically important by one or more jurisdictions other than the United States pursuant to a designation process that considers whether the foreseeable effects of a failure or disruption of the derivatives clearing organization could threaten the stability of each relevant jurisdiction's financial system. (3) The Commission shall, if it deems appropriate, determine whether any of the activities of a systemically important derivatives clearing organization or a subpart C derivatives clearing organization, in addition to clearing credit default swaps, credit default futures, and any derivatives that reference either credit default swaps or credit default futures, has a more complex risk profile. In determining whether an activity has a more complex risk profile, the Commission will consider charac… | |||||
| 17:17:1.0.1.1.32.3.7.5 | 17 | Commodity and Securities Exchanges | I | 39 | PART 39—DERIVATIVES CLEARING ORGANIZATIONS | Subpart C—Provisions Applicable to Systemically Important Derivatives Clearing Organizations and Derivatives Clearing Organizations That Elect To Be Subject to the Provisions of This Subpart | § 39.34 System safeguards for systemically important derivatives clearing organizations and subpart C derivatives clearing organizations. | CFTC | [78 FR 72514, Dec. 2, 2013, as amended at 81 FR 64339, Sept. 19, 2016] | (a) Notwithstanding § 39.18(c)(2), the business continuity and disaster recovery plan described in § 39.18(c)(1) for each systemically important derivatives clearing organization and subpart C derivatives clearing organization shall have the objective of enabling, and the physical, technological, and personnel resources described in § 39.18(c)(1) shall be sufficient to enable, the systemically important derivatives clearing organization or subpart C derivatives clearing organization to recover its operations and resume daily processing, clearing, and settlement no later than two hours following the disruption, for any disruption including a wide-scale disruption. (b) To facilitate its ability to achieve the recovery time objective specified in paragraph (a) of this section in the event of a wide-scale disruption, each systemically important derivatives clearing organization and subpart C derivatives clearing organization must maintain a degree of geographic dispersal of physical, technological and personnel resources consistent with the following for each activity necessary for the daily processing, clearing, and settlement of existing and new contracts: (1) Physical and technological resources (including a secondary site), sufficient to enable the entity to meet the recovery time objective after interruption of normal clearing by a wide-scale disruption, must be located outside the relevant area of the physical and technological resources the systemically important derivatives clearing organization or subpart C derivatives clearing organization normally relies upon to conduct that activity, and must not rely on the same critical transportation, telecommunications, power, water, or other critical infrastructure components the entity normally relies upon for such activities; (2) Personnel, who live and work outside that relevant area, sufficient to enable the entity to meet the recovery time objective after interruption of normal clearing by a wide-scale disruption affecting the relevant area in which the perso… | |||||
| 17:17:1.0.1.1.32.3.7.6 | 17 | Commodity and Securities Exchanges | I | 39 | PART 39—DERIVATIVES CLEARING ORGANIZATIONS | Subpart C—Provisions Applicable to Systemically Important Derivatives Clearing Organizations and Derivatives Clearing Organizations That Elect To Be Subject to the Provisions of This Subpart | § 39.35 Default rules and procedures for uncovered credit losses or liquidity shortfalls (recovery) for systemically important derivatives clearing organizations and subpart C derivatives clearing organizations. | CFTC | (a) Allocation of uncovered credit losses. Each systemically important derivatives clearing organization and subpart C derivatives clearing organization shall adopt explicit rules and procedures that address fully any loss arising from any individual or combined default relating to any clearing members' obligations to the systemically important derivatives clearing organization or subpart C derivatives clearing organization. Such rules and procedures shall address how the systemically important derivatives clearing organization or subpart C derivatives clearing organization would: (1) Allocate losses exceeding the financial resources available to the systemically important derivatives clearing organization or subpart C derivatives clearing organization; (2) Repay any funds it may borrow; and (3) Replenish any financial resources it may employ during such a stress event, so that the systemically important derivatives clearing organization or subpart C derivatives clearing organization can continue to operate in a safe and sound manner. (b) Allocation of uncovered liquidity shortfalls. (1) Each systemically important derivatives clearing organization and subpart C derivatives clearing organization shall establish rules and/or procedures that enable it promptly to meet all of its settlement obligations, on a same day and, as appropriate, intraday and multiday basis, in the context of the occurrence of either or both of the following scenarios: (i) An individual or combined default involving one or more clearing members' obligations to the systemically important derivatives clearing organization or subpart C derivatives clearing organization; or (ii) A liquidity shortfall exceeding the financial resources of the systemically important derivatives clearing organization or subpart C derivatives clearing organization. (2) The rules and procedures described in paragraph (b)(1) of this section shall: (i) Enable the systemically important derivatives clearing organization or subpart C derivatives clearing organ… | ||||||
| 17:17:1.0.1.1.32.3.7.7 | 17 | Commodity and Securities Exchanges | I | 39 | PART 39—DERIVATIVES CLEARING ORGANIZATIONS | Subpart C—Provisions Applicable to Systemically Important Derivatives Clearing Organizations and Derivatives Clearing Organizations That Elect To Be Subject to the Provisions of This Subpart | § 39.36 Risk management for systemically important derivatives clearing organizations and subpart C derivatives clearing organizations. | CFTC | [76 FR 69430, Nov. 8, 2011, as amended at 85 FR 4862, Jan. 27, 2020] | (a) Stress tests of financial resources. In addition to conducting stress tests pursuant to § 39.13(h)(3), each systemically important derivatives clearing organization and subpart C derivatives clearing organization shall conduct stress tests of its financial resources in accordance with the following standards and practices: (1) Perform, on a daily basis, stress testing of its financial resources using predetermined parameters and assumptions; (2) Perform comprehensive analyses of stress testing scenarios and underlying parameters to ascertain their appropriateness for determining the systemically important derivatives clearing organization's or subpart C derivatives clearing organization's required level of financial resources in current and evolving market conditions; (3) Perform the analyses required by paragraph (a)(2) of this section at least monthly and when products cleared or markets served display high volatility or become less liquid, when the size or concentration of positions held by clearing members increases significantly, or as otherwise appropriate, evaluate the stress testing scenarios, models, and underlying parameters more frequently than once a month; (4) For the analyses required by paragraphs (a)(1) and (2) of this section, include a range of relevant stress scenarios, in terms of both defaulting clearing members' positions and possible price changes in liquidation periods. The scenarios considered shall include, but are not limited to, the following: (i) Relevant peak historic price volatilities; (ii) Shifts in other market factors including, as appropriate, price determinants and yield curves; (iii) Multiple defaults over various time horizons; (iv) Simultaneous pressures in funding and asset markets; and (v) A range of forward-looking stress scenarios in a variety of extreme but plausible market conditions. (5) Establish procedures for: (i) Reporting stress test results to its risk management committee or board of directors, as applicable; and (ii) Using the results to ass… | |||||
| 17:17:1.0.1.1.32.3.7.8 | 17 | Commodity and Securities Exchanges | I | 39 | PART 39—DERIVATIVES CLEARING ORGANIZATIONS | Subpart C—Provisions Applicable to Systemically Important Derivatives Clearing Organizations and Derivatives Clearing Organizations That Elect To Be Subject to the Provisions of This Subpart | § 39.37 Additional disclosure for systemically important derivatives clearing organizations and subpart C derivatives clearing organizations. | CFTC | [78 FR 72514, Dec. 2, 2013, as amended at 83 FR 7996, Feb. 23, 2018; 85 FR 4862, Jan. 27, 2020; 88 FR 53684, Aug. 8, 2023] | In addition to the requirements of § 39.21, each systemically important derivatives clearing organization and subpart C derivatives clearing organization shall: (a) Complete and publicly disclose its responses to the Disclosure Framework for Financial Market Infrastructures published by the Committee on Payment and Settlement Systems and the Board of the International Organization of Securities Commissions; (b)(1) Review and update its responses disclosed as required by paragraph (a) of this section at least every two years and following material changes to the systemically important derivatives clearing organization's or subpart C derivatives clearing organization's system or the environment in which it operates. A material change to the systemically important derivatives clearing organization's or subpart C derivatives clearing organization's system or the environment in which it operates is a change that would significantly change the accuracy and usefulness of the existing responses; and (2) Provide notice to the Commission of updates to its responses required by paragraph (b)(1) of this section following material changes no later than ten business days after the updates are made. Such notice shall be accompanied by a copy of the text of the responses that shows all deletions and additions made to the immediately preceding version of the responses; (c) Publicly disclose relevant basic data on transaction volume and values consistent with the standards set forth in the Public Quantitative Disclosure Standards for Central Counterparties published by the Committee on Payments and Market Infrastructures and the International Organization of Securities Commissions; (d) Publicly disclose rules, policies, and procedures concerning segregation and portability of customers' positions and funds, including whether each of: (1) Futures customer funds, as defined in § 1.3 of this chapter; (2) Cleared Swaps Customer Collateral, as defined in § 22.1 of this chapter; or (3) Foreign futures or foreign options secured … | |||||
| 17:17:1.0.1.1.32.3.7.9 | 17 | Commodity and Securities Exchanges | I | 39 | PART 39—DERIVATIVES CLEARING ORGANIZATIONS | Subpart C—Provisions Applicable to Systemically Important Derivatives Clearing Organizations and Derivatives Clearing Organizations That Elect To Be Subject to the Provisions of This Subpart | § 39.38 Efficiency for systemically important derivatives clearing organizations and subpart C derivatives clearing organizations. | CFTC | (a) General rule. In order to meet the needs of clearing members and markets, each systemically important derivatives clearing organization and subpart C derivatives clearing organization should efficiently and effectively design its: (1) Clearing and settlement arrangements; (2) Operating structure and procedures; (3) Scope of products cleared; and (4) Use of technology. (b) Review of efficiency. Each systemically important derivatives clearing organization and subpart C derivatives clearing organization should establish a mechanism to review, on a regular basis, its compliance with paragraph (a) of this section. (c) Clear goals and objectives. Each systemically important derivatives clearing organization and subpart C derivatives clearing organization should have clearly defined goals and objectives that are measurable and achievable, including in the areas of minimum service levels, risk management expectations, and business priorities. (d) Each systemically important derivatives clearing organization and subpart C derivatives clearing organization shall facilitate efficient payment, clearing and settlement by accommodating internationally accepted communication procedures and standards. | ||||||
| 17:17:1.0.1.1.32.4.7.1 | 17 | Commodity and Securities Exchanges | I | 39 | PART 39—DERIVATIVES CLEARING ORGANIZATIONS | D | Subpart D—Provisions Applicable to Derivatives Clearing Organizations Subject to Compliance with Core Principles Through Compliance with Home Country Regulatory Regime | § 39.50 Scope. | CFTC | The provisions of this subpart D apply to any derivatives clearing organization that is registered through the process described in § 39.3(a)(3) of this part or as otherwise provided by order of the Commission. | |||||
| 17:17:1.0.1.1.32.4.7.2 | 17 | Commodity and Securities Exchanges | I | 39 | PART 39—DERIVATIVES CLEARING ORGANIZATIONS | D | Subpart D—Provisions Applicable to Derivatives Clearing Organizations Subject to Compliance with Core Principles Through Compliance with Home Country Regulatory Regime | § 39.51 Compliance with the core principles through compliance with home country regulatory regime. | CFTC | (a) Eligibility. (1) A derivatives clearing organization shall be eligible for registration for the clearing of swaps subject to compliance with this subpart if: (i) The Commission determines that compliance by the derivatives clearing organization with its home country regulatory regime constitutes compliance with the core principles set forth in section 5b(c)(2) of the Act; (ii) The derivatives clearing organization is in good regulatory standing in its home country; (iii) The Commission determines the derivatives clearing organization does not pose substantial risk to the U.S. financial system; and (iv) A memorandum of understanding or similar arrangement satisfactory to the Commission is in effect between the Commission and the derivatives clearing organization's home country regulator, pursuant to which, among other things, the home country regulator agrees to provide to the Commission any information that the Commission deems appropriate to evaluate the initial and continued eligibility of the derivatives clearing organization for registration or to review its compliance with any conditions of such registration. (2) To the extent that the derivatives clearing organization's home country regulatory regime lacks legal requirements that correspond to those core principles less related to risk, the Commission may, in its discretion, grant registration subject to conditions that would address the relevant core principles. (b) Conditions. A derivatives clearing organization subject to compliance with this subpart shall be subject to any conditions the Commission may prescribe including, but not limited to: (1) Applicable requirements under the Act and Commission regulations. The derivatives clearing organization shall comply with: The core principles set forth in section 5b(c)(2) of the Act through its compliance with applicable legal requirements in its home country; and other requirements applicable to derivatives clearing organizations as specified in the derivatives clearing organization's regist… |
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