The Commodity Futures Trading Commission (CFTC) has approved rules governing new risk management standards for derivatives clearing organisations (DCOs) deemed systemically important, and therefore subject to heightened regulation.
The US Treasury’s Financial Stability Oversight Council categorises certain DCOs as systemically important derivatives clearing organisations (SIDCOs) which will be subject to the new CFTC rules under the Dodd-Frank Act.
Under the rules, financial resources requirements for SIDCOs involved in activities with more complex risk profiles, or those systemically important in multiple jurisdictions, have been increased.
The rules also prohibit firms classified as SIDCOs from including their available default resources in assessments and impose enhanced safeguards for business continuity and disaster recovery.
In a statement, the CFTC said the new rules met international standards established by the Bank of International Settlements (BIS) and International Organization of Securities Commissions (IOSCO), first published last year as Principles for Financial Market Infrastructures.
“The adoption of these rules is an important first step in making the CFTC’s rules for SIDCOs fully consistent with the Principles for Financial Market Infrastructures, thereby enabling them to continue to be Qualifying Central Counterparties (QCCPs) for purposes of international bank capital standards,” the CFTC statement read.
In addition to the final rules, the CFTC has issued a new set of proposed rules for SIDCOs addressing the remaining principles set out by BIS and IOSCO, focusing on governance, financial resources, and other key risk management areas. The proposed rules ensure SIDCOs maintain their status as QCCPs, which lets the entities offer lower capital charges for banks for clearing.