Industry Oversight
How to Register as a Derivatives Clearing Organization
The CFTC has adopted a simplified application process for entities seeking to become registered derivatives clearing organizations (DCOs). An entity seeking DCO registration may file its application with the CFTC either via mail at its Washington, DC headquarters office or electronically via email to secretary@cftc.gov. The CFTC encourages applicants to contact CFTC staff for guidance and assistance in preparing an application for designation. Questions may be submitted via email, fax (202-418-5536) or telephone (202-418-5430). Potential applicants are encouraged to submit a draft application to the CFTC for review and feedback by the staff prior to submission of a formal application.
Except as provided under the 90-day review procedures described below, the Commission will review an application for DCO registration pursuant to the 180-day time frame and procedures specified in Section 6(a) of the Commodity Exchange Act (CEA), 7 USC § 8(a). The Commission will approve the application, register the applicant as a DCO subject to conditions, or deny the application.
Part 39 Application Procedures
Under Part 39 of the CFTC's regulations an application for registration as a DCO should include:
- A statement that the applicant is applying to become a registered DCO and that the application is being submitted pursuant to Part 39;
- A representation that the applicant will operate in accordance with the definition of DCO contained in Section 1a(9) of the CEA, 7 USC § 1a(9);
- A copy of the applicant’s rules;
- An explanation of how the applicant is able to satisfy each of the 14 core principles listed in Section 5b, 7 USC § 7a-1;
- Agreements entered into or to be entered into between or among the applicant, its operator, or its participants;
- Descriptions of relevant system test procedures, tests conducted, or test results;
- Names and telephone numbers or email addresses of persons the CFTC may contact regarding the application; and
- Any requests for confidential treatment of any part of the application. Such requests should specifically identify such parts of the application and include a reasonable justification for each.
Part 39 of the CFTC's regulations contains a complete description of the requirements for registration as a DCO. Appendix A to Part 39 provides guidance to applicants on how the specific conditions for registration may be met by an applicant.
Expedited (90-Day) Review
An applicant may request that its application be reviewed on an expedited basis and that the applicant be registered as a DCO not later than 90 days after the date of receipt of the application. The 90-day period begins on the first business day (during the business hours as defined in CFTC Regulation 40.1) that the CFTC is in receipt of the application. Unless the Commission notifies the applicant during the 90-day period that the expedited review has been terminated as described below, the Commission will register the applicant as a DCO during the 90-day period. If deemed appropriate by the Commission, the registration may be subject to conditions.
In order to receive expedited review, an applicant must demonstrate compliance with the core principles for DCOs set forth in Section 5b of the CEA, 7 USC § 7a-1, and submit all other materials, information, and documents related to the items listed above. The applicant must not amend or supplement the application, except as requested by the Commission or for correction of typographical errors, renumbering, or other non-substantive revisions, during the 90-day review period.
The Commission may terminate expedited review and review the application under the 180-day time period and procedures of Section 6(a) of the CEA, 7 USC § 8(a), if it appears to the Commission that the application: (i) is materially incomplete, (ii) fails in form or substance to meet the requirements of Part 39, (iii) raises novel or complex issues that require additional time for review, or (iv) is amended or supplemented in a material manner that has not been requested by the Commission. If expedited review is terminated, the Commission will provide written notification to the applicant specifying the reasons. The Commission also will terminate expedited review if requested in writing to do so by the applicant. DCOs also may request Commission approval of a new rule or rule amendment.
Rule Filings
Registered DCOs generally may implement any new rule or rule amendment by filing with the CFTC a certification on the business day prior to such implementation that the amended rule complies with the CEA and CFTC regulations and policies.
A registered DCO that accepts for clearing a new product that is not traded on a designated contract market or a registered derivatives transaction execution facility must submit to the Commission any rules establishing the terms and conditions of the product which make it acceptable for clearing with a certification that the clearing of the product and the rules and terms and conditions comply with the CEA and the CFTC’s regulations.
The CFTC’s requirements and procedures for self-certification filings and approval requests for new and amended rules and the clearing of new products are set forth in CFTC Regulation 40.6, CFTC Regulation 40.5, and CFTC Regulation 40.2.