Submitting Derivatives Clearing Organization Rules and Rule Amendments

Derivatives Clearing Organization Rules that Must be Submitted to the CFTC

Most requirements imposed by a derivatives clearing organization (DCO) on its members—and amendments to those requirements—meet the definition of a “rule” under the CFTC’s regulations.

Under the definition in CFTC Regulation 40.1(h), “rule” includes:

any constitutional provision, article of incorporation, bylaw, rule, regulation, resolution, interpretation, stated policy, term and condition, trading protocol, agreement or instrument corresponding thereto, in whatever form adopted, and any amendment or addition thereto or repeal thereof, made or issued by a DCO or by the governing board thereof or any committee thereof.

Provisions relating to the setting of levels of margin are excepted from the definition of rule, other than provisions relating to margin for stock index futures and security futures products. (See Section 2(a)(1)(C)(v) of the Commodity Exchange Act (CEA), 7 USC 2(a)(1)(C)(v), regarding stock index futures and Section 1a(31) of the CEA, 7 USC 1a(31), regarding security futures products.)

The CFTC reviews margin rules relating to stock index futures on behalf of the Board of Governors of the Federal Reserve System.

The terms and conditions of contracts are usually set by the markets offering trading. However, terms and conditions of contracts may also be defined by derivatives clearing organization rules. “Terms and conditions” are defined in CFTC Regulation 40.1(i).

DCO rules may be submitted by self-certification or by requesting approval.

Last Updated: June 21, 2007