Conflicts and Affiliations NPR
Summary
SIFMA and ISDA provided comments to the CFTC on its proposed rulemaking addressing conflicts of interest arising from affiliations among registered entities, including futures commission merchants, swap execution facilities, designated contract markets and derivatives clearing organizations.
Excerpt
The International Swaps and Derivatives Association, Inc. (“ISDA”) 1 and Securities Industry and Financial Markets Association (“SIFMA”) 2 (together, the “Associations”) appreciate the opportunity to comment on the Commodity Futures Trading Commission’s (“Commission” or “CFTC”) notice of proposed rulemaking on Conflicts and Affiliations (the “Proposal”) 3 . The Proposal would establish new requirements for futures commission merchants (“FCMs”), swap execution facilities (“SEFs”), designated contract markets (“DCMs”), and derivatives clearing organizations (“DCOs”) that aim to address the conflicts of interest that arise where affiliations exist among registered entities.
As the Commission recognized in its recent Memorandum of Understanding with the Securities and Exchange Commission (“SEC”) 4 , many financial services firms hold multiple registrations with both the SEC and the CFTC in order to serve their clients holistically and efficiently. For the conflicts of interest rules to be effective, it is important that the Commission focuses on affiliations that have the potential to create material conflicts of interest, rather than on the existence of affiliations among registrations or market functions alone. We believe the Proposal is generally consistent with this principle. In particular, in our view, the features that give the greatest rise to conflicts of interest are: (i) whether a registrant has regulatory oversight and enforcement authority over its competitors or the competitors of an affiliate; (ii) whether the vertically integrated structure includes a DCO that creates commercial incentives or opportunities to modify core risk-management functions of the clearinghouse, such as margin terms or default processes, to the benefit of its affiliate; (iii) whether an execution venue has the ability to give an affiliated liquidity provider competitive advantages; and (iv) whether market participants are bound by regulatory mandates with regard to the use of the vertically integrated structure (e.g., the mandatory execution of futures on a DCM).
- Since 1985, ISDA has worked to make the global derivatives markets safer and more efficient. Today, ISDA has over 1,000 member institutions from 79 countries. These members comprise a broad range of derivatives market participants, including corporations, investment managers, government and supranational entities, insurance companies, energy and commodities firms, and international and regional banks. In addition to market participants, members also include key components of the derivatives market infrastructure, such as exchanges, intermediaries, clearing houses and repositories, as well as law firms, accounting firms and other service providers. Information about ISDA and its activities is available on the Association’s website: www.isda.org.
- SIFMA is the leading trade association for broker-dealers, investment banks, and asset managers operating in the U.S. and global capital markets. On behalf of our industry’s nearly one million employees, we advocate for legislation, regulation, and business policy affecting retail and institutional investors, equity and fixed income markets, and related products and services. We serve as an industry coordinating body to promote fair and orderly markets, informed regulatory compliance, and efficient market operations and resiliency. We also provide a forum for industry policy and professional development. With offices in New York and Washington, D.C., SIFMA is the U.S. regional member of the Global Financial Markets Association (GFMA).
- Conflicts and Affiliations, 91 Fed. Reg. 50926 (Aug. 6, 2026) (hereinafter “Proposal”).
- U.S. Sec. & Exch. Comm’n & U.S. Commodity Futures Trading Comm’n, Memorandum of Understanding Regarding Harmonization in Areas of Common Regulatory Interest (Mar. 11, 2026), https://www.sec.gov/files/mou-sec-cftc-2026.pdf.