Compliance Date for Certain FCM Risk Management Requirements Extended by CFTC | Practical Law

Compliance Date for Certain FCM Risk Management Requirements Extended by CFTC | Practical Law

The CFTC issued an extension for compliance by futures commission merchants that are clearing members of clearinghouses registered with the CFTC with certain pre-trade screening requirements in the final Dodd-Frank rules on clearing member risk management. The date for compliance has been extended until no later than June 1, 2013.

Compliance Date for Certain FCM Risk Management Requirements Extended by CFTC

Practical Law Legal Update 9-521-5958 (Approx. 3 pages)

Compliance Date for Certain FCM Risk Management Requirements Extended by CFTC

by PLC Finance
Published on 08 Oct 2012USA (National/Federal)
The CFTC issued an extension for compliance by futures commission merchants that are clearing members of clearinghouses registered with the CFTC with certain pre-trade screening requirements in the final Dodd-Frank rules on clearing member risk management. The date for compliance has been extended until no later than June 1, 2013.
On September 26, 2012, the CFTC extended the compliance date for certain requirements under final Dodd-Frank rules on risk management for futures commission merchants (FCMs), which are clearing members of registered derivatives clearing organizations (DCOs) (for more on these rules, see Legal Update, Final Dodd-Frank Rules for Swap Clearing Members Issued by CFTC).
The final rules took effect on October 1, 2012. Among other things, these rules require FCMs that are DCO clearing members to establish risk-based limits on clearing customers' swap position sizes, order sizes, margin requirements and other related factors and to screen orders for compliance with those limits.
The CFTC has granted an extension for compliance with these final rules for transactions executed on designated contract markets (DCMs) that do not have a system permitting FCMs to set pre-execution limits. The extension runs until the earlier of:
  • The date on which the DCM implements such a system.
  • June 1, 2013.
The CFTC is also extending until June 1, 2013 the time for FCMs to produce fully compliant risk management systems for give-up trades (novations of swap trades effected as part of the swap clearing process) and bunched orders. The rules also require clearing FCMs that accept give-up trades to establish limits for each customer and enter into agreements with the executing firm to enforce those limits. For more on novation and the clearing process, see Practice Note, Mechanics of Derivatives Clearing.
To learn more about the regulation of swaps and derivatives under the Dodd-Frank Act, see Practice Note, Summary of the Dodd-Frank Act: Swaps and Derivatives.