Industry Oversight
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Requesting Prior Approval of a New Derivatives Clearing Organization Rule or Rule Amendment
See, generally, CFTC Regulation 40.5.
1. The DCO must file its request electronically with the Secretary of the CFTC at submissions@cftc.gov and at the CFTC regional office having local jurisdiction over the DCO (to determine the correct regional office, consult CFTC Regulation 140.2).
2. The request must:
a. Include a Submission Cover Sheet which must be filled out in accordance with the instructions in Appendix D to 17 CFR Part 40;
b. Set forth the text of the proposed rule or rule amendment (in the case of a rule amendment, deletions and additions must be indicated);
c. Describe the proposed effective date of a proposed rule and any action taken or anticipated to be taken to adopt the proposed rule by the DCO or by its governing board or by any committee thereof, and cite the rules of the entity that authorizes the adoption of the proposed rule;
d. Explain the operation, purpose, and effect of the proposed rule, including, as applicable, a description of the anticipated benefits to market participants or others, any potential anticompetitive effects on market participants or others, how the rule fits into the DCO’s framework of self-regulation, and any other information which may be beneficial to the CFTC in analyzing the proposed rule (if a proposed rule affects, directly or indirectly, the application of any other rule of the submitting registered entity, set forth the pertinent text of any such rule and describe the anticipated effect);
e. Briefly describe any substantive opposing views expressed to the DCO by governing board or committee members, members of the entity or market participants with respect to the proposed rule that were not incorporated into the proposed rule;
f. Identify any CFTC regulation that the CFTC may need to amend, or sections of the Commodity Exchange Act (CEA) or CFTC regulations that the CFTC may need to interpret, in order to approve the proposed rule. To the extent that such an amendment or interpretation is necessary to accommodate a proposed rule, the submission should include a reasoned analysis supporting the amendment to the CFTC regulation or the interpretation; and
g. Identify with particularity information in the submission that will be subject to a request for confidential treatment and support that request for confidential treatment with reasonable justification.
Timeline for Review
In general, the review period is 45 days. To qualify for 45-day review, the request must comply with the requirements discussed above, and the DCO must not amend the proposed rule or supplement the submission, except as requested by the CFTC, during the pendency of the review period. Any amendment or supplementation not requested by the CFTC will be treated as the submission of a new filing under this section.
1. An additional 45 days, if the proposed rule raises novel or complex issues that require additional time for review or is of major economic significance, in which case the CFTC would notify the submitting DCO within the initial 45-day review period and would briefly describe the nature of the specific issues for which additional time for review would be required; or
Standard By Which the CFTC Reviews Rules or Rule Amendments Submitted for Approval
Section 5c(c)(3) of the CEA, 7 USC § 7a-2(c)(3), provides that the CFTC shall approve any new rule or rule amendment unless it finds that the rule or rule amendment would violate the CEA.
What Happens if the CFTC Does Not Approve the Rule or Rule Amendment?
The CFTC, at any time during its review under this section, may notify the DCO that it will not, or is unable to, approve the proposed rule or rule amendment. This notification will briefly specify the nature of the issues raised and the specific provision of the CEA or regulations, including the form or content requirements of this section, that the proposed rule would violate, appears to violate, or the violation of which cannot be ascertained from the submission.
This notification shall be presumptive evidence that the DCO may not truthfully certify that the same, or substantially the same, proposed rule or rule amendment does not violate the CEA or regulations thereunder.
However, this notification does not prejudice the entity from subsequently submitting a revised version of the proposed rule or rule amendment for CFTC approval or from submitting the rule or rule amendment as initially proposed pursuant to a supplemented submission.