CFTC NEWS AND SPEECHES—CFTC approves electronic trading and bankruptcy rulemakings in year’s final open meeting - 14 December 2020

In its last open meeting for 2020, the Commission voted to finalize long-awaited rules around electronic trading and bankruptcy reforms for FCM’s and clearinghouses, as well approving a number of other final regulations.

The Commission finalized rules on electronic trading risk principles, as well as approving long-awaited Part 190 bankruptcy regulations. Prior to the meeting, the agency also approved six other final rules on a seriatim basis, which included measures relating to uncleared margin rules for swaps.

Electronic Trading Risk Principles. The electronic trading rule addresses risk controls related to automated trading systems and replaced the controversial Regulation AT proposal, which was withdrawn earlier in the year. That rule passed on a 4-1 vote, with Commissioner Behnam dissenting. Specifically, the final rule amended CFTC Regulation Part 38 and addressed the potential risk of a designated contract market’s (DCM) trading platform experiencing a market disruption or system anomaly due to electronic trading. The final rules set forth three principles applicable to DCMs relating to:


the implementation of exchange rules applicable to market participants to prevent, detect, and mitigate market disruptions and system anomalies associated with electronic trading;


the implementation of exchange-based pre-trade risk controls for all electronic orders; and,


prompt notification to Commission staff of any significant market disruptions on their electronic trading platforms.

The rule will become effective upon publication in the Federal Register. DCMs must be in full compliance with the requirements of the rule within 180 calendar days after the effective date.

Part 190 Bankruptcy Regulations. Additionally, the Commission unanimously approved amendments to CFTC Regulation Part 190, which governs bankruptcy proceedings of commodity brokers. The amendments comprehensively update Part 190 to reflect current market practices and lessons learned from past commodity broker bankruptcies. These final rules are geared to improve clarity, reduce uncertainty, and increase transparency in FCM and clearinghouse bankruptcy scenarios. This rulemaking marks the first time these rules were revised in 37 years.

Other unanimous actions. Other final rules and matters approved unanimously prior to the open meeting included the following:

  • Final rules for Margin Requirements for Uncleared Swaps for Swap Dealers and Major Swap Participants (Minimum Transfer Amount) and Margin Requirements for Uncleared Swaps for Swap Dealers and Major Swap Participants (Material Swap Exposure Definition and Initial Margin Calculation);
  • Final rules for Swap Execution Facilities (Audit Trail, Financial Resources, and CCO Requirements), Exemptions from Swap Trade Execution Requirement, and Withdrawal of Unadopted Proposals in the 2018 SEF Proposed Rule: Swap Execution Facilities and Trade Execution Requirement; and,
  • Technical amendments to reflect organizational changes.


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