October 13, 2022
US Commodity Futures Trading Commission
1155 21st Street, NW
Washington, DC 20581
Re: Governance Requirements for Derivatives Clearing Organizations (RIN 3038-AF15) (the “Proposal”)1
Dear Mr. Kirkpatrick,
The Asset Management Group of the Securities Industry and Financial Markets Association (“SIFMA AMG”)2 appreciates the opportunity to provide comments to the Commodity Futures Trading Commission (the “Commission” or “CFTC”) on the above-referenced Proposal to formalize and standardize governance practices for derivatives clearing organizations registered with the Commission (“DCOs”) to address potential conflicts between, and to promote the fair representation of, owners and participants; to establish requirements for the function and composition of DCO risk management committees (“RMCs”); and to increase transparency into DCO governance.
The CFTC Proposal springs from recommendations from the CFTC’s Market Risk Advisory Committee’s (“MRAC”) CCP Risk and Governance Subcommittee (“MRAC CCP Governance Recommendations”)3 which included representatives of DCOs, futures commission merchants (“FCMs”), and market participants including several SIFMA AMG members.
We note at the outset the parallel proposal by the Security and Exchange Commission (the “SEC”) to also address the governance of clearing agencies registered with the Commission (“RCAs”).4 Given the alignment of responsibilities of both DCOs and RCAs with respect to cleared products generally, and the fact that several are dually registered with both the CFTC and SEC, SIFMA AMG strongly believes the applicable rule sets of each of the CFTC and SEC should be fully aligned to maximize the transparency offered by such governance practices; require the engagement of clearing participants (including asset managers) with respect to material risk issues and new product offerings; and require that the views of clearing participants are considered in decision making, with the rationale for decisions contrary to participant recommendations explained to the participants and reported to the agencies for review. Note that where appropriate, we have provided comments to the SEC on the SEC Proposal aligned with our comments to the CFTC herein.
1 Governance Requirements for Derivatives Clearing Organizations, 87 Fed. Reg. 49559 (Aug. 11, 2022) (“CFTC Proposal”).
2 SIFMA AMG brings the asset management community together to provide views on U.S. and global policy and to create industry best practices. SIFMA AMG’s members represent U.S. and global asset management firms whose combined assets under management exceed $45 trillion. The clients of SIFMA AMG member firms include, among others, tens of millions of individual investors, registered investment companies, endowments, public and private pension funds, UCITS and private funds such as hedge funds and private equity funds.
3 See CFTC Market Risk Advisory Committee, CCP Risk and Governance Subcommittee, Recommendations on CCP Governance and Summary of Subcommittee Constituent Perspectives (Feb. 23, 2021), available at https://www.cftc.gov/media/6201/MRAC_CCPRGS_RCCOG022321/download.
4 Clearing Agency Governance and Conflicts of Interest, Exchange Act Release No. 34-95431 (Aug. 8, 2022), 87 Fed. Reg. 51812 (Aug. 23, 2022).