Federal Register: Core Principles and Other Requirements for Designated Contracts Markets

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Dodd-Frank Timeline, Core Principles and Other Requirements for Designated Contract Markets
Final Rule Issue Effective Date Compliance Date
June 19, 2012 August 20, 2012 October 17, 2012

The Commodity Futures Trading Commission (CFTC) approved a proposal for new and revised rules, guidance and acceptable practices governing the designation and operation of designated contract markets (DCMs) at its December 1, 2010 meeting.[1]

Background

The Dodd-Frank Act amended the obligations of DCMs under the Commodity Exchange Act (CEA) in several areas, including:

  • Rolling the eight (8) criteria for designation as a contract market into the core principles for DCMs
  • Adding 5 new core principles in the following areas:
  1. Disciplinary procedures
  2. System safeguards
  3. Financial resources
  4. Diversity of boards of directors
  5. Securities and Exchange Commission (SEC) jurisdictional overlap

For more information, see U.S. Commodity Exchange Act

DCM Core Principles

This proposal would incorporate the new and amended rules, guidance, acceptable practices, and 23 core principles. It would also incorporate the trading and execution of swaps on DCMs. The core principles fall under five general guidelines:

  • Financial information and resource requirements;
  • Compliance obligations;
  • Operational capabilities;
  • Surveillance obligations; and
  • Trading and products requirements.

A DCM may also elect to become a Swap Execution Facility, a new type of entity created in the aftermath of the Dodd-Frank Act, for the "listing, trading, and processing of swaps." If a DCM operates as an SEF, it must register separately as an SEF, and, if the same platform will be shared by both the DCM and SEF, it must notify customers which entity (the DCM or SEF) is clearing the swap. The DCM is expected to monitor its markets in real-time, enact and enforce rules to support compliance, as well as enforce additional rules and regulations pursuant to the Dodd-Frank Act.[2]

Related Documents: Fact Sheet, Q&A, and Federal Register Entry



References

  1. Open Meeting on Sixth Series of Proposed Rules under the Dodd-Frank Act. CFTC. Retrieved on February 16, 2011.
  2. SEC Proposes Rules for Security-Based Swap Execution Facilities. U.S. Securities and Exchange Commission. Retrieved on February 4, 2011.

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