2011-6972. Risk Management Requirements for Derivatives Clearing Organizations

AGENCY:

Commodity Futures Trading Commission.

ACTION:

Reopening of comment period.

SUMMARY:

The Commodity Futures Trading Commission (Commission) is reopening the comment period for a proposed rule that would require derivatives clearing organizations (DCOs) to report end-of-day positions for each clearing member, by customer origin and house origin, and for customer origin, separately, the gross positions of each beneficial owner.

DATES:

Submit comments on or before April 25, 2011.

ADDRESSES:

You may submit comments, identified by RIN number 3038-AC98, by any of the following methods:

• Agency Web site, via its Comments Online process: http://comments.cftc.gov. Follow the instructions for submitting comments through the Web site.
• Mail: David A. Stawick, Secretary of the Commission, Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st Street, NW., Washington, DC 20581.
• Hand Delivery/Courier: Same as mail above.
• Federal eRulemaking Portal: http://www.Regulations.gov. Follow the instructions for submitting comments.

Please submit comments by only one method.

All comments must be submitted in English, or if not, accompanied by an English translation. Comments will be posted as received to http://www.cftc.gov. You should submit only information that you wish to make available publicly. If you wish the Commission to consider information that may be exempt from disclosure under the Freedom of Information Act (FOIA), a petition for confidential treatment of the exempt information may be submitted according to the procedures established in § 145.9 of the Commission's regulations.^[1] The Commission reserves the right, but shall have no obligation, to review, pre-screen, filter, redact, refuse, or remove any or all of your submission from http://www.cftc.gov that it may deem to be inappropriate for publication, such as obscene language. All submissions that have been redacted or removed that contain comments on the merits of the rulemaking will be retained in the public comment file and will be considered as required under the Administrative Procedure Act and other applicable laws, and may be accessible under FOIA.

FOR FURTHER INFORMATION CONTACT:

Phyllis P. Dietz, Associate Director, 202-418-5449, [e-mail], Jacob Preiserowicz, Attorney-Advisor, 202-418-5432, [e-mail], Division of Clearing and Intermediary Oversight, Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st Street, NW., Washington, DC 20581; and Anne C. Polaski, Special Counsel, 312-596-0575, [e-mail], Division of Clearing and Intermediary Oversight, Commodity Futures Trading Commission, 525 West Monroe Street, Chicago, Illinois 60661.

SUPPLEMENTARY INFORMATION:

On July 21, 2010, President Obama signed the Dodd-Frank Act.^[2] Title VII of the Dodd-Frank Act ^[3] amended the Commodity Exchange Act (CEA) ^[4] to establish a comprehensive regulatory framework to reduce risk, increase transparency, and promote market integrity within the financial system. Section 725(c) of the Dodd-Frank Act amended Section 5b(c)(2) of the CEA, which sets forth core principles with which a DCO must comply to be registered and to maintain registration as a DCO.^[5]

On December 16, 2010, the Commission approved for publication in the Federal Register proposed regulations which, among other things, would implement DCO Core Principle D (Risk Management) and would establish a related reporting requirement under Core Principle J (Reporting). More specifically, the Commission proposed § 39.13(g)(8)(i) to establish customer “gross margin” requirements, and proposed § 39.19(c)(1)(iv) to establish related daily reporting requirements. The proposed regulations were published for comment in the January 20, 2011 issue of the Federal Register.^[6]

The Federal Register preamble explained that proposed § 39.13(g)(8)(i) would require a DCO to collect initial margin on a gross basis for each clearing member's customer account equal to the sum of the initial margin amounts that would be required by the DCO for each individual customer within that account if each individual customer were a clearing member. A DCO would not be permitted to net positions of different customers against one another, but it could collect initial margin for its clearing members' house accounts on a net basis.^[7]

Related to this customer gross margin requirement, the preamble further explained as follows, that proposed § 39.19(c)(1)(iv) would require DCOs to report end-of-day positions for each clearing member, by customer origin and house origin, and for customer origin, separately, the gross positions of each beneficial owner:

The Commission recently proposed a new § 39.19(c)(1)(iv) under which a DCO would be required, on a daily basis, to report the end-of-day positions for each clearing member, by origin. [footnote reference to 75 FR at 78195] In connection with the proposed § 39.13(g)(8)(i) requirement for DCOs to collect initial margin for customer accounts on a gross basis, the Commission is proposing to amend proposed § 39.19(c)(1)(iv) to additionally require a DCO, for the customer origin, to report the gross positions of each beneficial owner.^[8]

It has come to the attention of the Commission that there was an omission in the Federal Register publication of the proposed rule text setting forth the requirement for end-of-day reporting of customer positions by the gross positions of each beneficial owner. The text of proposed § 39.19(c)(1)(iv), which read “End-of-day positions for each clearing member, by customer origin and house origin” should have read, “End-of-day positions for each clearing member, by customer origin and house origin; and for customer origin, separately, the gross positions of each beneficial owner.”

In order to provide an adequate opportunity for comment on this reporting requirement, the Commission has determined to extend the comment period for proposed § 39.19(c)(1)(iv), as corrected elsewhere in this issue of the Federal Register, until April 25, 2011.

Issued in Washington, DC, on March 17, 2011, by the Commission.

David A. Stawick,

Secretary of the Commission.

Footnotes

1.  Commission regulations referred to herein are found at 17 CFR Ch. 1 (2010). They are accessible on the Commission's Web site at http://www.cftc.gov.

2.  See Dodd-Frank Wall Street Reform and Consumer Protection Act, Public Law 111-203, 124 Stat. 1376 (2010). The text of the Dodd-Frank Act may be accessed at http://www.cftc.gov/​LawRegulation/​OTCDERIVATIVES/​index.htm.

3.  Pursuant to section 701 of the Dodd-Frank Act, Title VII may be cited as the “Wall Street Transparency and Accountability Act of 2010.”

4.  7 U.S.C. 1 et seq.

5.  7 U.S.C. 5b(c)(2).

6.  76 FR 3698, Jan. 20, 2011.

7.  76 FR at 3706.

8.  Id.