[Federal Register Volume 88, Number 133 (Thursday, July 13, 2023)]
[Rules and Regulations]
[Pages 44675-44694]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-14361]


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COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 39

RIN 3038-AF15


Governance Requirements for Derivatives Clearing Organizations

AGENCY: Commodity Futures Trading Commission.

ACTION: Final rule.

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SUMMARY: The Commodity Futures Trading Commission (CFTC or Commission) 
is adopting amendments to its rules to require derivatives clearing 
organizations (DCOs) to establish and consult with one or more risk 
management committees (RMCs) comprised of clearing members and 
customers of clearing members on matters that could materially affect 
the risk profile of the DCO. In addition, the Commission is adopting 
minimum requirements for RMC composition and rotation, and requiring 
DCOs to establish and enforce fitness standards for RMC members. The 
Commission is also adopting requirements for DCOs to maintain written 
policies and procedures governing the RMC consultation process and the 
role of RMC members. Finally, the Commission is adopting requirements 
for DCOs to establish one or more market participant risk advisory 
working groups (RWGs) that must convene at least two times per year, 
and adopt written policies and procedures related to the formation and 
role of the RWG.

DATES: Effective July 13, 2023. DCOs must comply by July 12, 2024.

FOR FURTHER INFORMATION CONTACT: Eileen A. Donovan, Deputy Director, 
(202) 418-5096, [email protected]; Division of Clearing and Risk, 
Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st 
Street NW, Washington, DC 20581; Theodore Z. Polley III, Associate

[[Page 44676]]

Director, (312) 596-0551, [email protected]; or Joe Opron, Special 
Counsel, (312) 596-0653, [email protected]; Division of Clearing and 
Risk, Commodity Futures Trading Commission, 77 West Jackson Boulevard, 
Suite 800, Chicago, Illinois 60604.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Background
II. Amendments to Sec.  39.24(b)
III. Amendments to Sec.  39.24(c)
IV. Additional Comments
V. Related Matters
    A. Regulatory Flexibility Act
    B. Paperwork Reduction Act
    C. Cost-Benefit Considerations
    D. Antitrust Considerations

I. Background

    Section 5b(c)(2) of the Commodity Exchange Act (CEA) sets forth 
core principles with which a DCO must comply in order to be registered 
and to maintain registration as a DCO (DCO Core Principles),\1\ and 
part 39 of the Commission's regulations implement the DCO Core 
Principles. DCO Core Principle O requires a DCO to establish governance 
arrangements that are transparent, fulfill public interest 
requirements, and permit the consideration of the views of owners and 
participants.\2\ Regulation Sec.  39.24 implements this aspect of Core 
Principle O by providing minimum requirements regarding the substance 
and form of a DCO's governance arrangements.
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    \1\ 7 U.S.C. 7a-1.
    \2\ See 7 U.S.C. 7a-1(c)(2)(O)(i).
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    In August 2022, the Commission proposed several amendments to Sec.  
39.24 to enhance the Commission's DCO governance standards (the 
``Proposal'').\3\ The purpose of the Proposal was to further the 
implementation of DCO Core Principle O, which requires a DCO to 
establish governance arrangements that are transparent, fulfill public 
interest requirements, and permit the consideration of the views of 
owners and participants,\4\ by enhancing and standardizing DCO risk 
governance requirements and improving participant involvement in DCO 
risk management. The specific recommendations in the Proposal are 
consistent with recommendations made in a report by the Central 
Counterparty (CCP) Risk and Governance Subcommittee (Subcommittee) of 
the Market Risk Advisory Committee (MRAC), a discretionary advisory 
committee established by the authority of the Commission in accordance 
with the Federal Advisory Committee Act, as amended.\5\ In the 
Proposal, the Commission first proposed to require each DCO to 
establish one or more RMCs and require the DCO to require its board to 
consult with, and consider and respond to input from, its RMC(s) on 
matters that could materially affect the risk profile of the DCO. The 
Commission also proposed requirements related to the composition and 
activities of RMCs. Second, the Commission proposed to require each DCO 
to establish one or more RWGs in order to seek risk-based input (as 
opposed to commercially-driven input) from a broader array of market 
participants. The Commission also requested comment on the following 
topics that the Commission might address in a future rulemaking: (1) 
whether the Commission should require a DCO to consult with a broad 
spectrum of market participants prior to submitting any rule change 
pursuant to Sec. Sec.  40.5, 40.6, or 40.10; and (2) whether the 
Commission should require a DCO to maintain policies and procedures 
designed to enable an RMC member to share certain types of information 
it learns in its capacity as an RMC member with fellow employees in 
order to obtain additional expert opinion.
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    \3\ Governance Requirements for Derivatives Clearing 
Organizations, 87 FR 49559 (Aug. 11, 2022).
    \4\ See 7 U.S.C. 7a-1(c)(2)(O)(i).
    \5\ 5 U.S.C. App. 2; As explained in the proposing release, the 
Subcommittee, which is comprised of DCOs, clearing members, and end 
users, published a report outlining a series of recommendations to 
enhance the Commission's DCO governance standards. This report 
formed the basis for the Proposal. See MRAC CCP Risk and Governance 
Subcommittee, Recommendations on CCP Governance and Summary of 
Subcommittee Constituent Perspectives, available at https://www.cftc.gov/media/6201/MRAC_CCPRGS_RCCOG022321/download (Feb. 23, 
2021).
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    The comment period for the Proposal ended on October 11, 2022. The 
Commission received 18 substantive comment letters.\6\ After 
considering the comments, the Commission is adopting the Proposal 
subject to certain changes, as noted below.
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    \6\ The Commission received comment letters submitted by the 
following: Barclays, BlackRock, Inc., Citigroup, Inc., Goldman Sachs 
Group, Inc., JPMorgan Chase & Co., Societe Generale, T. Rowe Price, 
UBS AG, and the Vanguard Group. (Barclays, et al.); BlackRock, Inc. 
(BlackRock); Cboe Clear Digital, LLC (Cboe Digital); The Global 
Association of Central Counterparties (CCP12); Citadel; CME Group, 
Inc. (CME); Eurex Clearing AG (Eurex); Futures Industry Association 
(FIA); ForecastEx LLC (ForecastEx); FTX US (FTX); Paolo Saguato, 
Assistant Professor, George Mason University Antonin Scalia Law 
School; Intercontinental Exchange, Inc. (ICE); Investment Company 
Institute (ICI); International Swaps and Derivatives Association 
(ISDA); North American Derivatives Exchange, Inc. (NADEX); Nodal 
Clear, LLC (Nodal); The Options Clearing Corporation (OCC); and 
Securities Industry and Financial Markets Association's Asset 
Management Group (SIFMA AMG). All comments referred to herein are 
available on the Commission's website, at https://comments.cftc.gov/PublicComments/CommentList.aspx?id=7304.
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II. Amendments to Sec.  39.24(b)

    Regulation Sec.  39.24(b) sets forth requirements for a DCO's 
governance arrangements. The Commission proposed to enhance these 
requirements by requiring a DCO to: (1) establish one or more RMCs, and 
require its board to consult with, and consider and respond to input 
from, its RMC(s) on matters that could materially affect the risk 
profile of the DCO; (2) appoint clearing members and customers of 
clearing members to each RMC; (3) rotate RMC membership on a regular 
basis; (4) establish one or more RWGs; and (5) establish written 
policies and procedures regarding the RMC consultation process and the 
formation and role of each RWG.

A. Establishment and Consultation of RMC--Sec.  39.24(b)(11)

i. Proposed Sec.  39.24(b)(11)
    Proposed Sec.  39.24(b)(11) would require a DCO to maintain 
governance arrangements that establish one or more RMCs,\7\ and require 
a DCO's board of directors to consult with, and consider and respond to 
input from, its RMC(s) on all matters that could materially affect the 
risk profile of the DCO, including any material change to the DCO's 
margin model, default procedures, participation requirements, and risk 
monitoring practices, as well as the clearing of new products.\8\
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    \7\ The Commission notes that some DCOs maintain separate RMCs 
for each product type that they clear. For example, Chicago 
Mercantile Exchange, Inc.'s Clearing House Risk Committee oversees 
primarily futures and options products, and its Interest Rate Swaps 
Risk Committee oversees interest rate swaps products. See CME, 
Governance, accessed on February 3, 2022, available at https://www.cmegroup.com/education/articles-and-reports/governance.html.
    \8\ RMCs are mentioned in existing Commission regulations (see, 
e.g., Sec.  39.24(b)(7)) given that many DCOs already have them, but 
current regulations do not explicitly require a DCO to establish an 
RMC or prescribe the nature of its role.
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    Barclays et al., BlackRock, CME, Eurex, FIA, ICE, ISDA, Nodal, OCC, 
Paolo Saguato, and SIFMA AMG generally supported proposed Sec.  
39.24(b)(11).\9\
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    \9\ Eurex also stated that proposed Sec.  39.24(b)(11) aligns 
with sections (1)-(3) of Article 28 of EMIR.
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    However, CME suggested that the Commission modify proposed Sec.  
39.24(b)(11) to specify that the board is required to consult with, and 
consider and respond to ``risk-based'' input (as opposed to 
commercially-driven input) from the RMC. CME argued that the Commission 
should make clear its preference for risk-based input as

[[Page 44677]]

opposed to commercially-driven input because it is imperative to ensure 
that market participants acting as RMC members, consistent with current 
Commission regulations, prioritize the safety and efficiency of the DCO 
and support the stability of the broader financial system.
    FIA and SIFMA AMG recommended that the Commission modify proposed 
Sec.  39.24(b)(11) to require an RMC to meet at least quarterly. FIA 
further recommended that the Commission should require a DCO to provide 
regular written risk reports to RMC members between RMC meetings. FIA 
also suggested that the Commission should require an RMC to include the 
following topics as standing agenda items: stress testing results, 
sensitivity analysis, stress test scenarios review, back testing 
results, collateral composition, and financial resources.
    ForecastEx and NADEX expressed support for the concept of an RMC, 
but argue that applying the proposed RMC requirements to DCOs that 
clear only fully collateralized positions would serve no meaningful 
purpose because they carry no credit risk, which, in turn, eliminates 
or minimizes the significance of margin models, default procedures, 
participation requirements, and risk management procedures.
    ICE and OCC requested that the Commission clarify whether proposed 
Sec.  39.24(b)(11) will provide a DCO with the option to structure its 
RMC as either an advisory committee or as a board-level committee. ICE, 
which operates four registered DCOs,\10\ argued that a DCO should be 
able to choose either option, noting that some ICE DCOs have an 
advisory RMC which makes recommendations to the board, while others 
have a board-level RMC with responsibility delegated by the board for 
governance and oversight over the DCO's risk management function. ICE 
stated that the decision to establish an advisory RMC or a board-level 
RMC depends upon each DCO's size, markets, business model, and other 
regulatory requirements. OCC noted that it has delegated its risk 
management responsibilities to several board-level committees, each 
with a specific subject matter responsibility, that in most instances 
make recommendations to the board and in some instances may act on 
behalf of the board through delegated authority. OCC urged the 
Commission to collaborate with the Securities and Exchange Commission 
(SEC) to resolve what it believes to be a potential conflict between 
proposed Sec.  39.24(b)(11), which OCC believes requires an RMC to be 
an advisory committee, and recently proposed SEC regulations (SEC 
Proposal),\11\ which OCC believes require an RMC to be a committee of 
the board of directors.
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    \10\ The four DCOs are ICE Clear Credit LLC, ICE Clear Europe 
Limited, ICE Clear US, Inc., and ICE NGX Canada Inc.
    \11\ In August 2022, the SEC proposed enhancements to its 
governance requirements for central counterparties. See Clearing 
Agency Governance and Conflicts of Interest, Securities Exchange Act 
Release No. 34-95431 (Aug. 8, 2022), 87 FR 51812 (Aug. 23, 2022), 
available at https://www.sec.gov/rules/proposed/2022/34-95431.pdf.
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    OCC asked that the Commission clarify that a DCO would be permitted 
under the proposed rules to delegate various risk management 
responsibilities to multiple committees (e.g., an Audit Committee that 
oversees legal and compliance risk, and a Technology Committee that 
oversees information technology and security risks), rather than using 
a single body labeled ``risk management committee,'' so long as those 
bodies each satisfy the requirements of an RMC.
    With regard to the non-exhaustive list of matters that could 
materially affect the risk profile of the DCO included in proposed 
Sec.  39.24(b)(11), ISDA recommended that the Commission add ``rule 
enforcement policy [and] public information policy,'' while FIA 
recommended that the Commission add ``outsourcing function, system 
safeguards, access models, liquidity risk, financial resources, and 
non-default procedures.''
    Cboe Digital stated that the Commission should remove the list and 
simply require DCOs to have policies and procedures for determining 
whether a matter could affect the DCO's risk profile. It argued that 
the list is broad and undefined, and added that if the Commission is 
going to keep the list, that it should more narrowly define the 
included matters. Specifically, Cboe Digital argued that it's not clear 
whether a change to one of the included matters that is material but 
not risk-based would still need to go to the RMC. OCC recommended 
removing ``new products'' from the list of items that could materially 
affect the risk profile of a DCO, but requested that if the Commission 
retains the explicit reference to ``new products'' in the final rule, 
it limit the requirement to new ``asset classes,'' or define a subset 
of ``new products'' that would be captured by the final rule to include 
only those that have margining, liquidity, default management, pricing, 
or other risk characteristics that differ materially from those 
currently cleared by the DCO.
    The Commission agrees with CME that it is important to ensure that 
market participants serving on an RMC provide risk-based input and 
prioritize the safety and efficiency of the DCO and support the 
stability of the broader financial system, rather than the commercial 
interests of the firm they represent. For that reason, proposed Sec.  
39.24(c)(3) requires a DCO to maintain policies designed to enable its 
RMC members to provide independent, expert opinions in the form of 
risk-based input (as opposed to commercially-driven input) on all 
matters presented to the RMC for consideration.
    However, there is a distinction between the substantive merits of 
RMC members' input and their motivations for providing that input. A 
DCO's board of directors cannot reliably determine whether input from 
RMC members is motivated by the RMC members' views of the safety and 
efficiency of the DCO and financial stability, or by the commercial 
interests of the members' firms. Accordingly, the Commission declines 
to modify proposed Sec.  39.24(b)(11) to require a DCO's board of 
directors to only respond to risk-based input, as suggested by CME. In 
the interest of transparency, a DCO's board must respond on the merits 
to all substantive input from the RMC. If a DCO's board believes that 
RMC input is incorrect or misguided on the merits, the board should 
note that in its response.
    In response to comments by FIA and SIFMA AMG suggesting that the 
Commission should require an RMC to meet at least quarterly, the 
Commission believes that an RMC would generally need to meet at least 
quarterly to meet its obligation to consult with the board on all 
matters that could materially affect the risk profile of the DCO, and 
notes that many DCOs already require their RMC(s) to meet at least 
quarterly.\12\

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In an unusual circumstance in which the material risk issues facing the 
DCO would allow for more than three months to pass between RMC 
meetings, the Commission does not wish to impose a meeting on RMC 
members that are already devoting significant time to advising the 
board on risk issues. Therefore, the Commission declines to modify 
proposed Sec.  39.24(b)(11) to add a requirement that each RMC convene 
at least quarterly.
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    \12\ The Commission notes that the risk committee charters of 
CME, ICC and OCC require the committee to meet at least four times 
per year, and the LCH Limited and LCH SA risk committee charters 
require the committees to meet at least six times per year. Chicago 
Mercantile Exchange, Inc., Clearing House Risk Committee Charter, 
Sec.  3 (May 3, 2022), available at http://investor.cmegroup.com/static-files/7445789a-8aaa-46ec-8539-069e8cbf0fab; The Options 
Clearing Corporation, Risk Committee Charter Sec.  3 (May 26, 2022), 
available at https://www.theocc.com/getmedia/e71a4c1d-52dc-4c95-aeb1-98dab9159f41/risk_committee_charter.pdf.; LCH SA, Terms of 
Reference of the Risk Committee of the Board of Directors, Sec.  2.4 
(Sep. 9, 2020), available at https://www.lch.com/system/files/media_root/LCH%20SA%20-%20RiskCo%20ToRs.pdf; LCH Limited, Terms of 
Reference of the Risk Committee of the Board of Directors, Sec.  2.4 
(Jan. 4, 2023), available at https://www.lch.com/system/files/media_root/LCH-Limited-Risk-Commitee-Terms-of-Reference.pdf.
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    The Commission also declines to adopt FIA's suggestion that the 
Commission require a DCO to provide a regular written risk report to 
RMC members between RMC meetings. While the Commission recognizes the 
potential benefits of this practice, a DCO should have the flexibility 
to determine the best method of communication with its RMC members to 
ensure that they are adequately informed on material risk issues such 
that they can provide effective input to the board. Similarly, the 
Commission declines to require RMCs to have certain topics as standing 
items on its agenda. The Commission believes that a DCO's RMC is in the 
best position to identify the risks most pertinent to the DCO and 
should have the flexibility to design its meeting agenda accordingly.
    The Commission agrees with ForecastEx and NADEX that a DCO that 
requires each of its clearing members to fully collateralize its 
positions before a trade is executed has eliminated the credit risk 
associated with those positions, which, in turn, eliminates or reduces 
the significance of risk management issues including margin models, 
liquidity risk management, guaranty funds, stress testing, default 
procedures, and participation requirements. It is the Commission's 
understanding that these are the primary topics on which RMCs and RWGs 
contribute to DCO risk management. The Commission recognizes that fully 
collateralized DCOs still face operational, legal, and other risks that 
could materially affect the risk profile of the DCO. However, the 
Commission believes that given the reduction of many risks facing these 
DCOs, and the significant attendant reduction in issues for any RMC to 
address, it is not appropriate to require these DCOs to assume the 
costs associated with maintaining RMCs and RWGs that satisfy the 
requirements of this final rule. As a result, the Commission believes 
that the requirements to have an RMC and RWG are not appropriate for 
fully-collateralized DCOs. Accordingly, the Commission is adopting new 
Sec.  39.24(d) to provide that a DCO may satisfy the requirements of 
paragraphs (b)(11), (b)(12), (c)(1)(iv), and (c)(3) of Sec.  39.24 by 
having rules that permit it to clear only fully collateralized 
positions. The Commission notes that this is consistent with the 
carveouts from certain risk-related requirements that the Commission 
previously provided to fully collateralized DCOs.\13\
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    \13\ See Derivatives Clearing Organization General Provisions 
and Core Principles, 85 FR 4800, 4803-4805 (Jan. 27, 2020).
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    In response to comments by ICE and OCC asking the Commission to 
clarify whether Sec.  39.24(b)(11) will provide a DCO with the option 
to structure its RMC as either an advisory committee or as a board-
level committee, the Commission notes that proposed Sec.  39.24 seeks 
to provide a DCO with flexibility to design its governance arrangements 
in a manner that best fits its unique structure provided that it does 
so in a manner that is consistent with the minimum requirements set 
forth in Sec.  39.24, as amended by this final rule. Therefore, the 
Commission confirms that a DCO may structure its RMC as either an 
advisory committee or as a board-level committee to satisfy the 
requirements of Sec.  39.24(b)(11).\14\ Moreover, in response to OCC's 
inquiry, the Commission confirms that a DCO may delegate various risk 
management responsibilities to multiple committees, rather than a 
single body labeled ``risk management committee,'' so long as each 
committee complies with the requirements of Sec.  39.24. The Commission 
notes that the text of Sec.  39.24(b)(11), as proposed and adopted, 
explicitly acknowledges the possibility of ``one or more'' risk 
management committees.
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    \14\ If a DCO structures its RMC as an advisory committee to 
satisfy the requirements of Sec.  39.24(b)(11), it may also have a 
separate board-level RMC comprised of members of the board of 
directors.
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    In response to comments on the non-exhaustive list of matters that 
could materially affect the risk profile of the DCO included in 
proposed Sec.  39.24(b)(11), the Commission continues to believe that 
the proposed list provides DCOs with an appropriate level of guidance 
to illustrate matters that require RMC consultation. In response to 
comments by FIA and ISDA suggesting additional topics, the Commission 
notes that the list of topics in Sec.  39.24(b)(11) is meant to be 
illustrative, not exhaustive, and that all matters that could 
materially affect the risk profile of the DCO are subject to the 
consultation requirement, regardless of whether they fit in a listed 
category. Therefore, it is not necessary to endeavor to include all 
potential categories of issues that could materially affect the risk 
profile of the DCO. In response to Cboe Digital's request that the 
Commission clarify whether a material change to one of the matters 
included on the list that does not involve risk issues would still need 
to go to the RMC, the Commission notes that such a change would not 
necessarily be subject to the consultation requirement; a board is only 
required to consult with its RMC(s) on matters that could materially 
affect the risk profile of the DCO.
ii. Request for Comment--New Products
    The Commission also requested comment on whether a DCO's proposal 
to clear a new product should be categorically treated as a matter that 
could materially affect the DCO's risk profile for purposes of the 
proposed Sec.  39.24(b)(11) RMC consultation requirement given the 
potential for novel and complex risks associated with clearing new 
products. If so, the Commission requested comment on whether it should 
define what constitutes a new product for this purpose, and how should 
it do so. The Commission further questioned whether it should define 
new products to include, for example, those that have margining, 
liquidity, default management, pricing, or other risk characteristics 
that differ from those currently cleared by the DCO, or, in the 
alternative, should require DCOs to adopt policies defining what 
constitutes a new product.
    In response, BlackRock, Cboe Digital, CCP12, CME, Eurex, FTX, ICE, 
NADEX, Nodal, and OCC commented that a new product should not be 
treated categorically as a matter that could materially affect the 
DCO's risk profile. Several of these commenters (Eurex, Nodal, Cboe 
Digital, CCP12, NADEX, OCC) noted that many new contracts are simply 
extensions of, or are substantially similar to, existing contracts. 
CME, CCP12, Eurex, ICE, and Nodal stated that categorically treating 
new products as a matter that could materially affect the DCO's risk 
profile could lead to delays in product launches and unnecessary 
administrative burden. OCC argued that a categorical definition of new 
products is incompatible with OCC's unique obligation, as the only 
listed equity option clearinghouse, to clear an option on an underlying 
equity within one day after receipt of notification of a registered 
options exchange's intent to list such option.\15\
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    \15\ In support of this assertion, OCC cited generally to its 
``Plan for the Purpose of Developing and Implementing Procedures 
Designed to Facilitate the Listing and Trading of Standardized 
Options Submitted Pursuant to Section 11A(a)(3)(B) of the Securities 
Exchange Act of 1934, available at https://ncuoccblobdev.blob.core.windows.net/media/theocc/media/clearingservices/services/options_listing_procedures_plan.pdf.

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[[Page 44679]]

    CCP12 and CME argued that applying the RMC consultation requirement 
to all new products would be contrary to congressional intent. They 
noted that the Commodity Futures Modernization Act of 2000 amended the 
CEA to allow designated contract markets (DCMs) to self-certify new 
products and list them the next business day.\16\ The purpose of this, 
they argued, was to promote the ability of DCMs to innovate and respond 
quickly to competitive conditions in fast-changing markets subject to 
Commission oversight. CME further argued that Congress reaffirmed its 
support of a streamlined approach to new products in the 2010 Dodd-
Frank Wall Street Reform and Consumer Protection Act, when it 
instituted a 10-day review period for rule submissions \17\ but left 
the review period for product certifications unchanged. CME further 
noted that DCMs have the primary responsibility for listing new 
products. While CME acknowledged that a DCO is part of that process and 
needs to consider new products in light of its product eligibility 
requirements and risk management framework, CME argued that making the 
DCO bring all new products through an RMC consultation process would 
dramatically change a DCO's role by creating a two-track regulatory 
process, with the DCO's process being more onerous.
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    \16\ See 7 U.S.C. 7a-2(c)(1).
    \17\ See 7 U.S.C. 7a-2(c)(2).
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    ISDA commented that while not all new products will add risk to a 
DCO, all new products should be submitted to the RMC so it can 
determine whether board consultation is necessary.
    Eurex noted that requiring consultation only with respect to new 
products that could materially affect the risk profile of the DCO would 
harmonize with EMIR Article 28(3), which requires a risk committee to 
advise on the clearing of new classes of instruments. Eurex stated that 
it believes that if a DCO already clears a certain class of 
instruments, clearing a new product within that class would not have a 
material impact on the DCO's risk profile.
    BlackRock, Cboe Digital, FIA, ICE, OCC, and SIFMA AMG provided 
suggestions on how to define new products for purposes of the proposed 
Sec.  39.24(b)(11) RMC consultation requirement. FIA and SIFMA AMG 
agreed with the list of factors identified in the request for comment 
(different margining, liquidity, default management, pricing, or other 
risk characteristics from products already cleared) and further 
recommended that the Commission include factors from opinions published 
by the European Securities and Markets Authority (ESMA).\18\ BlackRock 
stated that if the Commission were to provide guidance on how to define 
a new product, it should include limited availability of pricing 
sources, the addition of a new asset class, or the introduction of 
exceedingly long tenors. ICE stated that while it thinks DCOs are in 
the best position to define what constitutes a new product, if the 
Commission were to provide guidance, it should focus the definition on 
new classes of products, and agreed with the factors identified in the 
Commission's request for comment. OCC stated that the Commission should 
limit the definition of ``new products'' to new ``asset classes,'' or 
define ``new products'' using the factors identified in the 
Commission's request for comment.
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    \18\ See ESMA Opinion on Article 15 and 49: Common Indicators 
for New products and Services Under Article 15 and for Significant 
Changes Under Article 49 of EMIR, available at https://www.esma.europa.eu/document/opinion-common-indicators-new-products-and-services-under-article-15-and-significant.
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    Cboe Digital, CCP12, Eurex, and ICE believe that DCOs are the best 
judge of what constitutes a new product and stated that many already 
have policies and procedures in place within their governance 
arrangements that define what constitutes a new product from a risk 
management perspective. Cboe Digital commented that the Commission 
should, instead of categorically treating new products as a matter that 
could materially affect the DCO's risk profile, require a DCO to 
establish policies and procedures to determine if a new product or a 
material change to a new product could materially impact risk. Cboe 
Digital further commented that if the Commission treats the clearing of 
a new product as a matter that must be categorically treated as 
materially affecting a DCO's risk profile, it should seek to harmonize 
the definition of a new product with the relevant definitions under 
part 40 of the Commission's regulations.
    OCC stated that the proposed rule is also potentially inconsistent 
with governance-related aspects of other Commission rules that require 
a DCO to have ``appropriate requirements'' for determining the 
eligibility of contracts for clearing, including the consideration of 
the ``[o]rganizational capacity of the [DCO] and clearing members to 
address any unusual risk characteristics of a product.'' The Commission 
notes that OCC did not identify the inconsistency. Moreover, the 
Commission notes that Regulation Sec.  39.12(b)(vii) requires a DCO to 
consider the ``operational'' (not ``organizational'') capacity of the 
DCO and its clearing members to address any unusual risk 
characteristics of a product.
    As previously noted, the Commission proposed to require a DCO's 
board to consult with its RMC if the launch of a new product 
constitutes a matter that could materially affect the risk profile of 
the DCO. However, the Commission requested comment on whether it should 
alternatively require board consultation for products that meet a new, 
to be added, definition of ``new products,'' and, if so, how the 
Commission should define ``new products'' for this purpose. After 
considering the comments, the Commission continues to believe that the 
Proposal's requirement that a DCO's board consult with its RMC if the 
launch of a new product constitutes a matter that could materially 
affect the risk profile of the DCO is appropriate. The Commission 
recognizes that many new contracts are substantially similar to 
existing contracts, and therefore requiring a DCO's board to consult 
with the RMC on all new products could result in unnecessary 
administrative costs and delays in launching new products. Moreover, 
the Commission agrees with the several commenters that stated that DCOs 
are uniquely situated to determine what constitutes a new product. The 
Commission notes that Sec.  39.24(b)(11)(i) will require DCOs to 
maintain written policies and procedures regarding the RMC consultation 
process, which includes policies and procedures for determining which 
matters could materially affect a DCO's risk profile. The Commission 
also expects each DCO to define in its policies and procedures what it 
means to ``materially affect the risk profile of the DCO.'' The 
Commission believes that the list of factors it identified in the 
request for comment for determining whether a new product could 
materially affect the risk profile of the DCO (different margining, 
liquidity, default management, pricing, or other risk characteristics 
from products already cleared) are a good starting point for DCOs as 
they draft or update their policies and procedures in this area.
    The Commission noted some confusion in the comments regarding 
whether the Proposal required board consultation with the RMC for all 
new products, or only for those that could materially affect the risk 
profile of the

[[Page 44680]]

DCO. To make it clear in the rule text that the requirement is the 
latter, the Commission is revising Sec.  39.24(b)(11) to state that the 
board must consult with its RMC(s) on the previously enumerated items 
``as well as the clearing of new products that could materially affect 
the risk profile of the derivatives clearing organization'' (added text 
in italics).

B. Policies and Procedures Governing RMC Consultation--Sec.  
39.24(b)(11)(i)

i. Proposal
    Proposed Sec.  39.24(b)(11)(i) would require a DCO to maintain 
written policies and procedures to make certain that its RMC 
consultation process is described in detail, and includes requirements 
for the DCO to document the board's consideration of and response to 
RMC input.
    BlackRock, CCP12, Eurex, Nodal, and SIFMA AMG supported proposed 
Sec.  39.24(b)(11)(i). Eurex noted that the proposed rule broadly 
aligns with Article 28(2) of EMIR and Article 15 of EU regulation 153/
2013.
    OCC argued that if a board of directors has delegated its risk 
management responsibilities to a board-level committee, there is no 
longer a need for the board to consult with and issue a response to 
that committee.
    BlackRock stated that a DCO's board should be required to respond 
to the substance of the input it receives rather than merely 
acknowledging the input was received. Doing so, it said, will bolster 
the effectiveness of RMCs and the board and will ultimately enhance 
market resiliency. SIFMA AMG commented that it is important that a 
board's response to the recommendation of the RMC, which should include 
the board's rationale for its decision, be shared with market 
participants to help inform their own decisions to continue to clear 
with that DCO, especially at DCOs where risk is mutualized across 
clearing members and clearing member customers. CCP12 and Nodal stated 
that DCOs should have discretion as to how to best document a board's 
consideration of and response to input from the RMC. They argued that 
proposed Sec.  39.24(b)(11)(i) permits DCOs to choose the best method 
of documentation and should not be revised to constrain the acceptable 
forms of meeting the documentation requirement.
    The Commission continues to believe that explicitly requiring DCOs 
to develop and maintain policies and procedures governing DCO 
consultation with its RMC(s), and to document the board's consideration 
of and response to RMC input, will promote transparency, 
accountability, and predictability, and facilitate effective oversight 
by the Commission in this area.
    In response to OCC's comment, the Commission agrees that if a board 
of directors has delegated responsibility to a board-level RMC to make 
certain risk decisions, then it has eliminated the need for the board 
to consult with the RMC with respect to those decisions.
    The Commission confirms that the requirement that a DCO document 
the board's consideration and response to RMC input requires a board to 
respond to the substance of the input it receives rather than merely 
acknowledging that input was received. However, the Commission declines 
to adopt a requirement that would make a DCO share its response to RMC 
input with all market participants. The Commission recognizes that some 
risk-related discussions may involve sensitive information that a DCO 
may not wish to share broadly. Moreover, the Commission notes that 
Sec.  39.21(a) already requires DCOs to provide market participants 
with sufficient information to enable the market participants to 
identify and evaluate accurately the risks and costs associated with 
using the services of the DCO.\19\
---------------------------------------------------------------------------

    \19\ 17 CFR 39.21(a).
---------------------------------------------------------------------------

ii. Request for Comment--RMC Meeting Minutes
    The Commission requested comment on whether DCOs should be required 
to create and maintain minutes or other documentation of RMC meetings.
    In response, BlackRock, FIA, ISDA, and NADEX stated that RMCs 
should be required to keep minutes. BlackRock argued that keeping 
minutes is necessary to promote transparency, accountability, and 
predictability, and facilitate effective oversight by the Commission in 
this area. ISDA stated that minutes of RMCs should be made available to 
RMC members and shared with the board and regulators. It argued that 
because the decisions made at the RMC meetings have an impact on a wide 
variety of market participants, DCOs should produce a summary that is 
made public and that does not include confidential information.
    In response to the comments, the Commission is revising proposed 
Sec.  39.24(b)(11)(i) to require a DCO to maintain written policies and 
procedures to make certain that ``the [RMC] consultation process is 
described in detail, and includes requirements for the [DCO] to 
document the board's consideration of and response to risk management 
committee input and create and maintain minutes of each [RMC] meeting'' 
(added text in italics). The Commission agrees with BlackRock that 
requiring RMC meeting minutes will promote transparency, 
accountability, and predictability, and facilitate effective oversight 
by the Commission in this area. In response to ISDA's suggestion that a 
DCO should be required to publish a public summary of RMC meetings, the 
Commission declines to adopt such a requirement at this time in order 
to preserve a DCO's ability to protect sensitive information, but notes 
that Sec.  39.21(c)(9) requires public disclosure of information that 
is relevant to participation in the clearing and settlement activities 
of the DCO.\20\
---------------------------------------------------------------------------

    \20\ 17 CFR 39.21(c)(9).
---------------------------------------------------------------------------

C. Representation of Clearing Members and Customers on RMC--Sec.  
39.24(b)(11)(ii)

    Proposed Sec.  39.24(b)(11)(ii) would require a DCO to maintain 
policies to make certain that an RMC includes representatives from 
clearing members and customers of clearing members. The Commission 
requested comment on whether it should adopt additional specific 
composition requirements, and if so, what those requirements should be.
    Barclays, et al., BlackRock, CME, Eurex, FIA, ICE, ISDA, and SIFMA 
AMG generally supported the proposal to require that an RMC includes 
representatives from clearing members and customers of clearing 
members.
    SIFMA AMG recommended that the Commission require no fewer than 
three clearing members and three clearing member customers on an RMC, 
and, if the overall RMC membership is ``especially large,'' that 
clearing member and customer participation must represent a 
``meaningful component'' of the RMC. ISDA questioned whether the 
proposed rule will be adequate to ensure sufficient industry input and 
challenge, and proposed an alternative rule requiring a DCO to have RMC 
members that ``cover a wide variety of organizations and roles,'' with 
no fewer than eight external members, at least 50 percent of which are 
clearing members.
    Cboe Digital and NADEX did not support requiring an RMC to include 
more than one clearing member. Cboe Digital argued that the proposed 
rule is overly prescriptive and does not account for the differences in 
size and offerings across DCOs. It argued that the Commission should 
only require a DCO to have at least one clearing member representative 
on its RMC, and that a DCO should be permitted to establish a policy 
that additional clearing member

[[Page 44681]]

RMC representatives should proportionately represent the number of 
clearing members of (or products offered by, if applicable) the DCO. 
NADEX stated that the proposed rule would not be appropriate for all 
DCOs because, for example, a newly registered DCO may only have one 
clearing member, which would make it unable to include multiple 
clearing members on an RMC.
    Cboe Digital, CCP12, NADEX, Nodal, and OCC did not support the 
proposed requirement that an RMC also include customers of clearing 
members and instead supported a principles-based approach that allows a 
DCO to decide which governance body should have customer 
representation. Nodal argued that requiring customers of clearing 
members to be on the RMC could chill dialogue between clearing members 
and DCOs. For example, a clearing member might choose not to express 
valid concerns regarding a particular product in front of a customer 
that may be interested in trading that product, due to the concern that 
the customer may seek to shift its trading to a different clearing 
member that is more supportive of the new product. In addition, Nodal 
stated that it would be difficult to obtain truly independent opinions 
on risk management matters from clearing members and customers of 
clearing members, and that the Commission should implement different 
RMC composition requirements as a result. OCC noted that ``customers'' 
is not a homogenous group and at certain DCOs it may be impossible to 
ensure each type of customer group is represented. OCC further noted 
that customers are not subject to direct mutualization; therefore, it 
may be difficult to ensure that they are not unduly motivated by their 
commercial interests. Cboe Digital argued that clearing members are 
much better suited than their customers to inform DCO risk management 
frameworks because their expertise, business purposes, and operational 
structure center around clearing risk and operations in order to fulfil 
their role of processing, clearing, and settling trades through a DCO, 
in contrast to customers whose operations can vary widely and do not 
necessarily focus on clearing operations or risk management.
    In response to the Commission's request for comment on whether it 
should adopt additional specific RMC composition requirements, 
BlackRock stated that the Commission should adopt further specific 
requirements. BlackRock gave as an example that, for members, DCOs 
could require that a minimum percentage of initial margin is 
represented across a minimum number of participants, setting such 
parameters to ensure that a meaningful level of risk is represented 
while preventing dominance by a handful of firms. FIA recommended that 
the Commission consider requiring RMCs to include DCO representatives, 
which would include, at a minimum, the President (or a designee) and 
the Chief Risk Officer. To harmonize with Article 28 of EMIR, FIA 
recommended that the Commission require that: (1) a number of 
independent members of the board of directors with the appropriate 
level of skills and expertise serve on the RMC; (2) the chair of the 
RMC be an independent member of the board; and (3) no group represented 
(clearing members, customers of clearing members, DCO and independent 
directors) have a majority. ICI recommended requiring DCOs to have a 
``meaningful proportion'' of customers on their RMCs, and recommended 
that the Commission set forth selection parameters that would ensure a 
cross-section of customers are included. ForecastEx stated that the 
Commission should prohibit affiliates of a DCO from serving as members 
of an RMC.
    NADEX argued that proposed Sec.  39.24(b)(11)(ii) should not apply 
to ``retail-focused'' DCOs. NADEX stated that for its retail-focused 
DCO, it should suffice to maintain a ``contact us'' page on its website 
with an email address, physical address, and live chat option for 
market participants to provide feedback. NADEX argued that, unlike 
traditional DCOs in which clearing members generally have expertise in 
the financial industry and risk management, the overwhelming majority 
of NADEX's customers are not industry professionals. Instead, they are 
often new to the industry, lack operational risk management experience, 
have no ownership or financial stake in the DCO, and require time and 
education to become acquainted and comfortable with self-directed 
transactions in short-term derivatives. NADEX also noted that the 
Commission stated in 2019 when considering proposed rules to define the 
term ``market participant'' for the purpose of board composition 
requirements that the Commission was ``sympathetic to [NADEX's] 
concerns that the burden and cost of including market participants that 
are primarily retail and not exposed to the risk of lost margin or the 
default of the DCO's other customers may not be warranted for fully 
collateralized, non-intermediated DCOs.'' NADEX requested the 
Commission consider an amended definition of ``market participant'' to 
substitute for the proposal's use of ``clearing member'' and ``customer 
of a clearing member'' that would allow the DCO discretion to operate 
in a manner best suited to its business model. Alternatively, NADEX 
proposed that any retail-focused DCO be exempt from this requirement in 
the event the new regulation is adopted as proposed.
    Eurex noted that the proposed requirement is consistent with 
Article 28(1) of EMIR, which requires that a CCP's risk committee be 
composed of representatives of its clearing members, independent 
members of the board, and representatives of its clients. Eurex further 
noted that EMIR Article 28(1) specifies that none of the groups of 
representatives may have a majority in the risk committee. However, 
Eurex believes that that the Commission's proposal strikes the right 
balance and does not need this further requirement.
    Finally, OCC noted that proposed Sec.  39.24(b)(11)(ii) requires an 
RMC to include ``clearing members and customers of clearing members,'' 
while the SEC Proposal requires an RMC to include ``representatives 
from owners and participants.'' OCC argued that while these terms are 
not directly inconsistent, the distinction supports the view that the 
intended meaning and role of the RMC amongst the CFTC and SEC is 
inconsistent.
    After considering the comments, the Commission is modifying 
proposed Sec.  39.24(b)(11)(ii) to clarify that the rule requires a DCO 
to maintain written policies and procedures to make certain that its 
RMC includes at least two clearing member representatives and at least 
two representatives of customers of clearing members.
    The Commission is not making any substantive changes to proposed 
Sec.  39.24(b)(11)(ii). The Commission continues to believe that 
ensuring a minimum level of clearing member and customer representation 
on RMCs will further the purpose of Core Principle O by providing a 
consistent, formalized process across all DCOs to solicit, consider, 
and address input from clearing members and customers before making 
decisions that could materially affect the risk profile of the DCO. The 
Commission also continues to believe that the rule as proposed provides 
appropriate flexibility to account for differences among DCOs in terms 
of size, business models, resources, and governance structure. 
Therefore, the Commission declines to adopt the proposals put forth by 
ISDA and SIFMA AMG that would increase the minimum number of required 
market participants, and the proposals put forth by Cboe Digital and 
NADEX to reduce the number of required clearing members.

[[Page 44682]]

    In response to NADEX's comment that the proposed rule would not be 
appropriate for all DCOs because, for example, a newly registered DCO 
may only have one clearing member, which would make it unable to 
include multiple clearing members on an RMC, the Commission notes that 
Regulation Sec.  1.3 defines a clearing member as ``any person that has 
clearing privileges such that it can process, clear and settle trades 
through a derivatives clearing organization on behalf of itself or 
others.'' \21\ Therefore, a DCO with one clearing member is only 
possible if a DCO has a single FCM clearing member that clears for all 
other participants clearing through the DCO, which is not the case at 
any DCO registered with the Commission. In the event that a DCO had a 
single FCM clearing member, and no direct clearing members from which 
to draw RMC members, it could comply with the composition requirement 
by having multiple representatives from its single clearing member on 
its RMC. While DCOs will generally benefit from selecting RMC members 
with the differing perspectives that result from working at different 
firms, a DCO would not have the ability to do so in this case. 
Similarly, the Commission notes that a DCO may have only direct 
clearing members and no customers from which to draw RMC members and 
therefore would be unable to satisfy the composition requirement with 
regard to representatives of customers of clearing members. In 
recognition of this, the Commission is modifying the text of Sec.  
39.24(b)(11)(ii) so that a DCO is only required to include on its RMC 
``if applicable, at least two representatives of customers of clearing 
members'' (added text in italics).
---------------------------------------------------------------------------

    \21\ 17 CFR 1.3.
---------------------------------------------------------------------------

    The Commission has considered the comments opposed to customer 
representation on an RMC, and continues to believe that the benefits of 
requiring customer representation on an RMC outweighs the potential 
costs. Customers provide a perspective on risk management issues that 
is different from that of the DCO and its clearing members, and as 
important stakeholders with a financial stake in the integrity of the 
DCO, they deserve an opportunity to provide input on topics such as the 
protection of customer assets and collateral at the RMC level, where 
key risk discussions take place. The Commission also disagrees with 
Nodal's argument that it would be difficult to obtain independent 
opinions on risk management matters from clearing members and customers 
of clearing members. In the Commission's experience, it is common 
practice that RMC members provide effective risk-based input directed 
at the safety of the DCO.
    After considering the responses to the Commission's request for 
comment, the Commission does not believe that it is necessary to adopt 
further specific requirements regarding RMC composition at this time. 
As noted above, the Commission believes that it is important to provide 
DCOs with a degree of flexibility in their RMC composition to account 
for differences among DCOs in terms of size, business models, 
resources, and governance structure.
    In response to NADEX's suggestion that the proposed requirement 
should not apply to ``retail focused'' DCOs, the Commission does not 
believe that ``retail focused'' is a meaningful distinction in this 
context. As previously discussed, some DCOs exclusively clear fully 
collateralized products, and the Commission agrees that because full 
collateralization addresses many critical risk issues, a fully 
collateralized DCO and its participants would not necessarily benefit 
from having an RMC. Any DCO that offers margined products, on the other 
hand, whether retail focused or not, must be able to manage the risks 
of margined products, and should have participants capable of providing 
meaningful input on the risk topics addressed by the RMC.
    Finally, in response to OCC's comment noting that proposed Sec.  
39.24(b)(11)(ii), which requires an RMC to include ``clearing members 
and customers of clearing members,'' and the SEC Proposal, which 
requires an RMC to include ``representatives from owners and 
participants,'' are not the same, the Commission acknowledges that the 
requirements are different, but does not believe this presents any 
issues in the ability of a dually-registered entity to comply with both 
requirements.

D. Rotation of RMC Membership--Sec.  39.24(b)(11)(iii)

    The Commission proposed new Sec.  39.24(b)(11)(iii), which would 
require a DCO to maintain policies to make certain that membership of 
an RMC is rotated on a regular basis. The Commission also requested 
comment on whether it should set a minimum frequency for RMC membership 
rotation, the advantages and disadvantages of doing so, and, if it does 
set a rotation frequency requirement, what that frequency should be.
    Eurex and NADEX do not believe that the Commission should adopt 
proposed Sec.  39.24(b)(11)(iii), arguing that depending on the size of 
the DCO and the qualifications of its participants to serve on an RMC, 
there may not be enough individuals suitable and interested in serving 
on the committee to rotate regularly. Eurex further argued that the 
proposed requirement does not align with EU regulation, which affords 
CCPs the discretion to determine their nomination, renomination, and 
rotation policies.
    BlackRock, Cboe Digital, CCP12, CME, ISDA, Nodal, OCC, and Paolo 
Saguato support proposed Sec.  39.24(b)(11)(iii), but do not support 
the Commission establishing a minimum frequency for RMC membership 
rotation. CCP12 and OCC stated that the importance of continuity and 
expertise as a means of effectively managing liquidity or credit risks 
(and ultimately supporting the stability of the broader system) 
outweighs any governance benefits resulting from a minimum rotation 
frequency requirement, particularly in the case of DCOs that are 
systemically important. CCP12, CME, FIA, and Nodal stated that DCOs 
have members of their risk committees with specialized knowledge of the 
DCO's risk practices and/or particular products, and such expertise 
would be hard to replace. BlackRock, FIA, ISDA, and Paolo Saguato 
stated that DCOs should be allowed to stagger RMC membership rotation. 
ForecastEx noted that in the case of a DCO with most of its activity 
coming from a few clearing members, it may be more beneficial from a 
risk management perspective to ensure that the larger clearing members 
are represented on the RMC for longer periods of time. OCC stated that 
if the Commission imposes a rotation requirement, it should clarify 
that independent directors are not subject to the requirement and that 
the rotation requirement applies to persons, not the firms they 
represent. ISDA noted that many DCO RMCs include representatives of 
management, for example the Chief Risk Officer. ISDA suggested that the 
rule should only require a DCO to rotate RMC representatives external 
to the DCO.
    FIA stated that the terms of an RMC should not restrict or limit 
appointed members' tenure. However, FIA supports DCOs defining 
transparent criteria for RMC membership, such as clearing expertise, 
market and asset class expertise, etc., and rotating on the basis of 
these relevant criteria.
    ISDA proposed a minimum length of membership of two years to 
account for the large amount of information a new RMC member needs to 
process, and the resulting time required to get up to

[[Page 44683]]

speed and become a valuable resource for the DCO. ISDA also suggested 
that it may be appropriate to institute a cap that would prevent RMC 
members from staying on for more than five consecutive years.
    SIFMA AMG recommended that the Commission require that clearing 
member and customer representatives be grouped for purposes of 
establishing a staggered rotation. For example, if a DCO chose to have 
a minimum of three RMC members from each group and a three-year 
rotation, the DCO could stagger their rotation to ensure continuity of 
expertise.
    ICE stated that prescriptive requirements on the rotation of RMC 
members also would impose a significant burden on market participants 
to supply appropriately experienced, knowledgeable, and available 
employees to participate on the RMCs, as firms may lack or be unwilling 
to commit resources to provide new individuals for rotation. ICE 
contended that should such requirements be imposed on DCOs, it may be 
appropriate for the Commission to, in parallel, impose requirements on 
market participants to supply the required amount of appropriately 
experienced employees to participate on RMCs. As the obligation to 
manage the risks of the DCO resides exclusively with the DCO, ICE 
believes the DCO has a strong incentive and is best suited to make 
determinations on RMC membership.
    ICE and OCC stated that it is unclear whether the proposed 
requirement on RMC ``rotation'' is consistent with the SEC Proposal 
requiring RMC ``reconstitution.''
    The Commission continues to believe that requiring a DCO to 
regularly rotate its RMC membership will promote the ability of 
clearing members and customers of clearing members from a broad array 
of market segments to provide their expertise, and will ensure that the 
RMC provides the DCO with varied perspectives on risk management 
matters. After reviewing the responses to the Commission's request for 
comment, the Commission declines to prescribe a minimum frequency for 
RMC member rotation. The Commission recognizes that there are risk 
management benefits associated with retaining RMC members who have 
specialized knowledge of a DCO's operations, risk practices, and/or 
particular products, and that it may be difficult to replace those 
members. A DCO may also choose to establish one or more ex officio 
management positions on its RMC, such as the DCO's president or chief 
risk officer, which it would not need to rotate off of the RMC. The 
Commission further recognizes that DCOs may also benefit from 
staggering their rotation and requiring different rotation frequencies 
for different classes of members. In response to a request by OCC that 
the Commission carve out an exception for independent directors from a 
DCO's board who serve on an RMC, the Commission notes that OCC did not 
explain a need for such a carve-out, and the Commission declines to 
provide an exception for independent directors from the rotation 
requirement at this time.\22\
---------------------------------------------------------------------------

    \22\ The Commission notes that this concern seems most relevant 
to an RMC that is structured as a board-level committee.
---------------------------------------------------------------------------

    The Commission also notes that in certain circumstances it may be 
appropriate to rotate a specific RMC member, but not the firm they 
represent, selecting another individual from the same firm to serve on 
the RMC. For example, a DCO may make this determination when a 
significant percentage of contracts cleared on the DCO are cleared by a 
relatively small number of clearing members. In response to ICE's 
comment that firms may lack or be unwilling to commit resources, 
specifically appropriately experienced, knowledgeable, and available 
employees, to meet the proposed rotation requirement, the Commission 
believes that, based on current participation in RMCs and the interest 
in participation expressed through the Commission's MRAC, there is 
adequate interest. In response to ICE and OCC's statement that it is 
unclear whether the proposed requirement on RMC ``rotation'' is 
consistent with the SEC's proposal requiring RMC ``reconstitution,'' 
the Commission, after reviewing proposed SEC Rule 17Ad-25(d)(1), 
believes that the provisions are consistent and focused on the same 
goals.
    After reviewing the comments, the Commission is adopting Sec.  
39.24(b)(11)(iii) as proposed. As discussed above, the Commission 
believes that the rule will provide a DCO with the flexibility to 
choose how to design its policies for RMC membership rotation provided 
that the DCO's policies and procedures provide for varied perspectives 
on risk management matters.

E. Establishment of RWG To Obtain Input--Sec.  39.24(b)(12)

    Proposed Sec.  39.24(b)(12) would require a DCO to establish one or 
more RWGs as a forum to seek risk-based input from a broad array of 
market participants, such that a diverse cross-section of the DCO's 
clearing members and customers of clearing members are represented, 
regarding all matters that could materially affect the risk profile of 
the DCO. In addition, proposed Sec.  39.24(b)(12) would require a DCO 
to maintain written policies and procedures related to the formation 
and role of each RWG, and require that each RWG convene at least 
quarterly.
    The Commission requested comment on whether the proposed 
requirement that each RWG convene quarterly is the appropriate 
frequency. The Commission also requested comment on whether it should 
require a DCO to document the proceedings of RWG meetings, considering 
both the transparency and accountability benefits of such a requirement 
and the potential impact of a documentation requirement on free and 
open dialogue.
    Barclays, et al., BlackRock, CCP12, CME, Nodal, OCC, Paolo Saguato, 
and SIFMA AMG generally supported the Commission's proposal to require 
a DCO to establish one or more RWGs. SIFMA AMG recommended that the 
Commission clarify that the matters required to be brought to the RWG 
are the same scope of matters to be brought to the RMC.
    Cboe Digital, Eurex, ForecastEx, NADEX, and Nodal expressed 
concerns with the proposed requirement. Cboe Digital argued that 
requiring use of an RWG for a smaller DCO, or a DCO with a homogenous 
product offering, would be arbitrary, burdensome, and superfluous given 
the functions of the DCO's RMC. Eurex noted that proposed Sec.  
39.24(b)(12) is not harmonized with EMIR or EU Regulation 152/2013, 
which leave the establishment of further committees beyond the risk 
committee to the discretion of the CCP. Moreover, Eurex argued that the 
decision to establish additional committees or working groups beyond an 
RMC for the purposes of gathering risk-based input should be left to 
the discretion of the DCO. Eurex also stated that if the Commission 
chooses to adopt Sec.  39.24(b)(12), it should allow DCOs to design 
their own policies and procedures regarding membership rotation. Nodal 
commented that the material difference between the RMC and the RWG is 
unclear and, therefore, questioned what additional risk management 
value is gained from requiring an RWG in addition to an RMC. NADEX 
stated that the proposed regulation should not be implemented because a 
DCO is in the best position to determine its governance needs based on 
its specific business and size. Moreover, it argued that it may be 
difficult for smaller DCOs to find

[[Page 44684]]

members for a second committee beyond their RMC. ICE noted that it 
faces challenges in finding available resources at firms to engage in 
various committees and advisory roles given the resource constraints 
currently present in the industry, and argued that because the proposed 
rules create various additional overlapping opportunities for input 
such as the RMC and RWG, these limited resources may be further 
strained.
    The Commission received several comments on the proposed 
requirement that each RWG convene at least quarterly. FIA and ISDA 
agreed with the proposed requirement, but CCP12, CME, Eurex, ICE, 
Nodal, OCC, and SIFMA AMG do not believe it is necessary for the 
Commission to prescribe a minimum frequency of RWG meetings. Nodal 
suggested that the Commission could revise proposed Sec.  39.24(b)(12) 
to provide that the RWG shall be convened by the DCO prior to the DCO 
making changes that could materially affect the risk profile of the 
DCO. BlackRock stated that the Commission should require RWGs to meet 
bi-annually, or more frequently if warranted by the risk issues at the 
DCO.
    The Commission also received several comments on whether the 
Commission should require DCOs to document the proceedings of RWG 
meetings. CME believes that requiring and publishing meeting minutes 
may chill open dialogue and impede progress on addressing risk issues. 
According to CME, a DCO should be able to determine whether to document 
RWG proceedings and, if so, the manner in which to do so. CCP12 
believes that the Commission should only require a DCO to document the 
topics discussed by the RWG. SIFMA AMG stated that an RWG should be 
required to document its recommendations to the RMC or board, but not 
its discussions generally. ISDA stated that DCOs should document each 
RWG meeting because of the transparency and accountability benefits, 
and also to allow members of the group that miss a meeting to 
efficiently participate in the next meeting. ISDA further argued that a 
DCO could mitigate any potential impact on free and open dialogue by 
limiting the information in the meeting minutes to discussion topics 
and points that were made by participants, omitting the identity of 
those who made the points. According to ISDA, the minutes should also 
contain areas of disagreement and document any agreement or decision 
made on the discussed topics. FIA stated that it supports the 
requirement that a DCO document the proceedings of RWG meetings. FIA 
does not believe that such a requirement will chill discussion within 
the RWG, but instead will create a record of matters discussed and 
general feedback provided. Moreover, FIA believes that the Commission 
should require that this documentation be provided to the RMC as an 
input for consideration.
    FIA believes that the firms represented on the RWG should provide 
risk-based feedback, but also that firms should be able to use this 
forum to provide views and feedback without being limited to the 
structural formality of the RMC. FIA views the RWG primarily as a forum 
to provide transparency to market participants and to allow them to 
engage in open dialogue so the DCO obtains the views of its members and 
their customers. BlackRock suggested that the role of the RWG could be 
further enhanced if RMCs were explicitly required to consider feedback 
from the RWG(s).
    After considering the comments, the Commission is adopting Sec.  
39.24(b)(12) largely as proposed, but is revising it with respect to 
the required meeting frequency for RWGs and with respect to meeting 
documentation requirements discussed below. A requirement of a 
quarterly RWG meeting may be unduly burdensome for a DCO that is not 
confronted with issues materially affecting its risk profile that would 
require RWG consultation at a given time. It is also important, 
however, that an RWG hold regular meetings to ensure that it serves as 
a consistent forum for members to discuss and provide input on risk 
matters facing a DCO in a timely manner. As a result, the Commission is 
revising Sec.  39.24(b)(12) to require that each RWG ``shall convene at 
least two times per year.''
    In response to Nodal's questioning of the material differences 
between the RMC and the RWG, and the additional risk management value 
in requiring an RWG in addition to an RMC, the Commission continues to 
believe that establishing one or more RWGs will enhance a DCO's risk 
management by providing the DCO with an expanded pool of participants 
to seek input from when considering matters that could materially 
affect the risk profile of the DCO. Some participants with valuable 
risk management insight may be reluctant to serve on an RMC due to the 
time commitment involved and thus may prefer to serve on an RWG.
    The Commission recognizes that a smaller DCO, in particular, may 
have a more difficult time finding participants to serve on its RWG, 
especially in light of RMC composition requirements, than a DCO with a 
larger membership. However, the Commission notes that a DCO with a 
smaller membership or a homogenous product offering will in most 
instances need fewer participants on its RWG to represent a diverse 
cross-section of its clearing members and customers of clearing 
members. The Commission further notes that it proposed and is adopting 
a flexible composition requirement for RWGs in order to allow DCOs to 
construct their RWGs in a manner that fits the DCO's membership 
composition and product offerings.
    In response to a comment by SIFMA AMG, the Commission confirms that 
the matters required to be brought to the RWG, ``all matters that could 
materially affect the risk profile of the [DCO],'' are the same as 
those on which the board of directors must consult with the RMC. The 
Commission expects each DCO to define in its policies and procedures 
what it means to ``materially affect the risk profile of the DCO.''
    In response to Eurex's comment on differences between Sec.  
39.24(b)(12) and European law, the Commission notes that the RWG 
requirement is not incompatible with EMIR or EU Regulation 152/2013, as 
described by Eurex, because nothing in EU Regulation 152/2013 prohibits 
a clearinghouse from establishing additional committees beyond the risk 
committee, including an RWG. The Commission confirms that Sec.  
39.24(b)(12) provides a DCO with the flexibility to design appropriate 
rotation policies for its RWG.
    The Commission received several comments regarding whether it 
should require DCOs to document the proceedings of RWG meetings. In 
response to comments from CCP12, FIA, and ISDA arguing that an RWG 
documentation requirement would provide transparency and accountability 
benefits, the Commission is revising proposed Sec.  39.24(b)(12) to add 
that a DCO must ``include requirements for the [DCO] to document and 
provide to the risk management committee, at a minimum, a summary of 
the topics discussed and the main points raised during each meeting of 
the risk advisory working group'' (added text in italics) in the 
written policies and procedures required by proposed Sec.  
39.24(b)(12). The Commission believes that requiring a DCO to document 
and provide an RWG's feedback to the RMC will help ensure that the 
RWG's input is appropriately considered in the DCO's risk governance 
process. The Commission declines to add a requirement that RMCs 
consider feedback from an RWG, but recognizes the potential risk 
management benefits

[[Page 44685]]

of RMC and RWG collaboration, and expects that many DCOs will formalize 
this collaboration in their governance arrangements. The Commission 
believes, however, that this is an area where DCOs would benefit from 
the flexibility to structure their governance arrangements in a manner 
that best suits them.

III. Amendments to Sec.  39.24(c)

A. Fitness Standards for RMC Members--Sec.  39.24(c)(1)

    The Commission proposed to amend Sec.  39.24(c) by adding new 
paragraph (c)(1)(iv) (and renumbering current paragraphs (c)(1)(iv) and 
(v) accordingly) to require a DCO to establish and enforce appropriate 
fitness standards for its RMC members.
    BlackRock, Eurex, FIA, ICE, Paolo Saguato, and SIFMA AMG stated 
that they generally agree with the Commission's proposal to require a 
DCO to establish fitness standards for its RMC members. BlackRock noted 
that the material considered by RMC members will be specialized and 
will require a certain level of experience and skills. ICE agrees with 
allowing DCOs the flexibility to determine appropriate fitness 
standards for their RMC members. Eurex noted that the Commission's 
proposal would generally harmonize with Article 28(2) of EMIR. NADEX 
stated that it doesn't think there should be an RMC requirement, but if 
there is, then RMC members should have appropriate fitness standards. 
Finally, SIFMA AMG recommended that the Commission also require DCOs to 
establish and enforce fitness standards for its RWG members. The 
Commission did not receive any comments opposed to the proposed 
requirement.
    The Commission continues to believe that proposed Sec.  
39.24(c)(1)(iv) is consistent with subsection (ii) of DCO Core 
Principle O, which requires a DCO to establish and enforce appropriate 
fitness standards for directors, members of any disciplinary committee, 
members of the DCO, any other individual or entity with direct access 
to the settlement or clearing activities of the DCO, and any other 
party affiliated with any of the foregoing individuals or entities.\23\ 
If a DCO is required to establish and consult with its RMC on all 
matters that could materially affect the risk profile of the DCO as 
proposed, the Commission believes a DCO also would need to consider the 
fitness of RMC members, recognizing that fitness standards may vary 
across DCOs. Therefore, the Commission is adopting Sec.  
39.24(c)(1)(iv) as proposed.
---------------------------------------------------------------------------

    \23\ See 7 U.S.C. 7a-1(c)(2)(O).
---------------------------------------------------------------------------

    The Commission declines to adopt a requirement that a DCO establish 
fitness standards for its RWG members. The Commission expects that 
RWG(s) will be a critical component of a DCO's overall risk management 
framework by providing insight on risk matters from a broad array of 
market participants in a more open and less formal forum than an RMC, 
so that a larger group of market participants can participate. 
Accordingly, the Commission does not believe that it is appropriate to 
require DCOs to establish fitness standards for RWG members that could 
have the unintended effect of limiting the potential pool of RWG 
members.

B. Role of RMC Members--Sec.  39.24(c)(3)

    Proposed Sec.  39.24(c)(3) would require a DCO to maintain policies 
designed to enable its RMC members to provide independent, expert 
opinions in the form of risk-based input on all matters presented to 
the RMC for consideration, and perform their duties in a manner that 
supports the safety and efficiency of the DCO and the stability of the 
broader financial system. The Commission requested comment on whether 
requiring RMC members to act as independent experts, neither beholden 
to their employers' commercial interests nor acting as fiduciaries of 
the DCO, raises any potential legal issues for those members. The 
Commission asked whether, as a matter of corporate law, RMC members 
would be forced to contend with competing duties or obligations to the 
DCO and their employer, including any duties or obligations that would 
foreclose RMC participation, and if so, how the goal of receiving 
independent, expert opinions could be achieved. The Commission also 
asked whether DCOs should be required to have policies specific to RMC 
members for managing conflicts of interest.
    Barclays, et al., BlackRock, CCP12, CME, ICE, ISDA, OCC, and SIFMA 
AMG generally supported proposed Sec.  39.24(c)(3). CCP12 stated that 
it strongly believes that RMC members' participation in a DCO's 
governance arrangements must be contingent on the members acting in a 
manner that prioritizes the safety and efficiency of the DCO and the 
stability of the broader financial system. CCP12 also believes that an 
RMC member's obligations cannot be to the commercial interests of the 
member's employer, as the role of the RMC is to provided risk-based 
input on the matters that come before it.
    CME, ICE, and OCC commented on the proposal's use of the term 
``expert'' in the context of RMC members providing ``expert opinions.'' 
ICE stated that it would not support imposing an overly strict 
interpretation of what constitutes an ``expert'' (e.g., required 
accreditation or certification requirements). CME and OCC stated that 
the Commission should substitute ``expert'' with ``informed'' as doing 
so would enable RMC members to provide independent and informed 
opinions in the form of risk-based input, without implicating the legal 
connotations that accompany the concept of ``expert opinions.'' CME 
went further to state that such a change would also prevent possible 
misinterpretation about whether the person providing the opinion must 
have a specific degree, certification, accreditation, or license to 
demonstrate the requisite expertise. CME noted that using the term 
``informed'' instead of ``expert'' would also align the proposed 
requirement with a similar provision in the SEC Proposal that requires 
``risk-based, independent, and informed'' opinion from RMC members.
    Several commenters discussed the proposed requirement for a DCO to 
maintain policies designed to enable its RMC members to provide 
``independent'' input on risk matters. ISDA stated that it is common 
practice that RMC members act not as representatives of their employer, 
but as independent experts. ISDA further stated that it is not aware 
that this practice has led to issues anywhere. Conversely, Cboe 
Digital, ForecastEx, and Nodal questioned the feasibility of ensuring 
that RMC members are able to provide independent input. Cboe Digital 
commented that while RMC members should be required to set aside 
commercial interest bias and provide only risk-based input, they will 
nonetheless likely possess a degree of implicit bias that cannot be 
untangled given the compensation paid by their employer. Cboe Digital 
also argued that the independence requirement is unnecessary because 
RMC members are already subject to a DCO's rules designed to minimize 
conflicts of interest in the decision-making process of the DCO 
established pursuant to Sec.  39.25, must meet a DCO's fitness 
standards established pursuant to Sec.  39.24(c), and must carry out 
their duties and responsibilities as prescribed by the committee's 
governing documents by applying their professional expertise through a 
risk-based lens. NADEX stated that while it believes that independent 
input is important when considering significant risk matters, policies 
requiring RMC

[[Page 44686]]

member independence are unnecessary if a board of directors contains 
one or more independent directors, because the board of directors has 
the ultimate responsibility to make major decisions. NADEX also argued 
that, if the Commission adopts the proposed requirement, DCO-DCM dual 
registrants should be exempt because Commission regulations permit DCMs 
to establish a board of directors comprised of at least 35 percent 
public directors with the same requirement applicable to executive 
committees.\24\ Therefore, NADEX argued, dual-registered entities are 
already considering independent views in their decision-making. Nodal 
argued that it would be exceptionally difficult to obtain truly 
independent opinions on risk management matters from clearing members 
and customers because they are inherently conflicted. Nodal believes 
that the Commission should revise the proposed rules to allow DCOs to 
instead design policies focused on including RMC members who would 
qualify as ``public directors,'' as defined in the CEA. ForecastEx 
commented that the Commission should recognize the tie RMC members will 
have with their employers, and design a regulation with this connection 
in mind. SIFMA AMG stated that while RMC members' contributions reflect 
a risk-based, independent, and informed opinion, the Commission should 
explicitly require clearing members and clearing member customers to 
represent the perspectives of their employers.
---------------------------------------------------------------------------

    \24\ See Guidance on, and Acceptable Practices in, Compliance 
with Core Principles, 17 CFR 38, appendix B, Core Principle 16, 
section (b)(2). The composition NADEX cites is an ``acceptable 
practice'' rather than a strict requirement. See Appendix B section 
2.
---------------------------------------------------------------------------

    In response to the Commission's request for comment on whether, as 
a matter of corporate law, RMC members would be forced to contend with 
competing duties or obligations to the DCO and their employer, NADEX 
stated that an RMC member's ability to waive their fiduciary duties to 
their employing firm would be dependent upon the company's legal entity 
type and its state of incorporation/organization, and cited recent 
legal authority from the Delaware Court of Chancery which, in the view 
of NADEX, decided that a stockholder of a Delaware corporation cannot 
waive claims against corporate directors for breach of fiduciary 
duties.\25\ NADEX further argued that because the fiduciary laws of the 
state in which each DCO is organized may differ, the proposed 
independence requirement would not be able to be applied uniformly, and 
therefore should not be implemented. Cboe Digital stated that efforts 
to attempt to ensure RMC member independence could lead to costly legal 
disputes.
---------------------------------------------------------------------------

    \25\ See Manti Holdings, LLC v. The Carlyle Group, Inc., 2022 WL 
444272 (Del. Ch. Feb. 14, 2022).
---------------------------------------------------------------------------

    OCC noted that it has several board-level risk management 
committees, and that under general corporate law principles, directors 
on those committees necessarily are fiduciaries of the DCO. OCC argued 
that this fiduciary relationship does not cause a director to lose 
independence; in fact, OCC public directors, who otherwise are 
independent from OCC, are fiduciaries to OCC by virtue of their service 
as OCC directors. OCC requested that the Commission clarify that a 
director's fiduciary duty to the DCO does not render that director non-
independent and does not violate proposed Sec.  39.24(c)(3). Absent 
such a clarification, OCC contended, it may be impossible for a 
director of a DCO to serve on an RMC at all.
    FIA commented that DCOs have governance specific to their corporate 
make-up that is governed by applicable corporate laws and that RMC 
members, as employees of their firm, may have certain duties to their 
employer. However, FIA does not think this raises any competing duties 
or obligations with RMC participation. FIA believes that an RMC's 
participant clearing members and customers are well-suited for risk 
input without requiring fiduciary obligations that may conflict with 
their individual employment.
    In response to the Commission's request for comment on whether DCOs 
should be required to have policies specific to RMC members for 
managing conflicts of interest, CCP12 stated that while DCOs already 
implement policies that set out the role of the RMC and the duties of 
their members, which may also be supplemented by a requirement for 
members to sign non-disclosure agreements, a DCO should be afforded the 
flexibility to design its own policies for the governance arrangements 
of RMCs based on the DCO's own unique structure. FIA suggested that DCO 
policies and procedures specific to RMC members for managing conflicts 
of interest would help RMC members provide appropriate input. BlackRock 
stated that the Commission should require DCOs to specify in their 
policies and procedures that RMC members would not be serving as 
fiduciaries to the DCO, particularly when acting as a fiduciary to the 
DCO may conflict with the RMC's objective of supporting the stability 
of the broader financial system. Eurex noted that Article 28(4) of EMIR 
provides that the members of the risk committee are bound by 
confidentiality requirements, and that where the chairman of the risk 
committee determines that a member has an actual or potential conflict 
of interest on a particular matter, that member must not be allowed to 
vote on that matter. Eurex believes that the Commission could harmonize 
Sec.  39.24(c)(3) with EU regulation and fulfill the same interest in 
ensuring that RMC members feel empowered to provide objective input by 
requiring that all RMC members be bound by confidentiality 
requirements, addressing the avoidance of conflicts of interest, and 
specifying that RMC members owe no fiduciary duties to DCOs. Eurex 
believes this would also reflect the best practices that DCOs already 
successfully have in place for RMCs.
    After considering the comments, the Commission is adopting proposed 
Sec.  39.24(c)(3) as modified below.
    Proposed Sec.  39.24(c)(3) would, in part, require a DCO to 
maintain policies designed to enable RMC members to provide 
``independent, expert opinions in the form of risk-based input.'' As 
explained above, CME, ICC, and OCC argued that requiring an RMC member 
to provide an ``expert'' opinion could lead to a possible 
misinterpretation about whether the person providing the opinion must 
have specific credentials to demonstrate sufficient expertise. That was 
not the Commission's intention. Rather, the Commission is requiring RMC 
members to have pre-existing risk management knowledge. Therefore, the 
Commission is adopting Sec.  39.24(c)(3) with the term ``expert'' 
replaced by ``informed.'' The Commission also notes that this change 
will harmonize Sec.  39.24(c)(3) with a similar provision in the SEC 
Proposal.\26\
---------------------------------------------------------------------------

    \26\ See supra n.9, at p. 73 (proposed rule 17Ad-25(d)(2)).
---------------------------------------------------------------------------

    In light of the confusion seen in some comments regarding the 
Commission's use of the term ``independent'' in proposed Sec.  
39.24(c)(3), the Commission is adopting Sec.  39.24(c)(3) without that 
term. The Commission's use of the term ``independent'' referred to the 
ability of an RMC member to provide risk-based input while serving on 
an RMC, rather than input motivated by the commercial interests of the 
member's employer. Because a DCO would still be required to maintain 
policies designed to enable members of the RMC to provide risk-based 
input in the absence of that term, the Commission believes this 
modification will avoid potential further confusion while preserving 
the substance of the requirement as proposed. The Commission 
nevertheless

[[Page 44687]]

notes that its use of the term ``independent'' in the Proposal did not 
refer to, as some commenters appeared to suggest, the same concept as 
board member independence, which focuses on ensuring that a board 
includes members who are not an executive, officer, or employee of the 
DCO or an affiliate thereof. The Commission believes that both types of 
independence are important to effective risk governance, but they are 
distinct concepts. Therefore, the Commission disagrees with NADEX's 
suggestion that RMC member independence is unnecessary if a board of 
directors contains one or more independent directors. Moreover, the 
Commission disagrees with comments questioning the feasibility of an 
RMC member providing independent input in light of the compensation 
paid to the RMC member by its employer. In the Commission's experience, 
it is common practice that RMC members provide effective risk-based 
input directed at the safety of the DCO.
    In discussing the concept of RMC member independence, the Proposal 
noted that RMC members should be neither beholden to their employers' 
particular interests nor acting as a fiduciary of the DCO.\27\ ICE and 
OCC noted that some RMCs operate as board-level committees, with RMC 
members who are also members of the board, and thus have legal 
fiduciary duties to the DCO. Moreover, some DCOs include key members of 
management on an RMC, such as the DCO's president or chief risk 
officer. Board members and DCO management can be valuable contributors 
to an RMC, and the Commission wants to be clear that Sec.  39.24(c)(3) 
does not prevent individuals with legal fiduciary duties to the DCO 
from serving on an RMC. For the purposes of Sec.  39.24, RMC members do 
not have fiduciary duties to the DCO by virtue of their participation 
on an RMC, and a given member's legal fiduciary duties to the DCO based 
on a role as a director or officer of the DCO are not inconsistent with 
the role of an RMC member. The DCO itself is legally obligated to 
prioritize its own safety, and to support the stability of the broader 
financial system and other relevant public interest considerations.\28\
---------------------------------------------------------------------------

    \27\ 87 FR 49561-62.
    \28\ 17 CFR 39.24(a)(1)(iii), (iv).
---------------------------------------------------------------------------

    The Commission received several responses to its request for 
comment on whether, as a matter of corporate law, RMC members would be 
forced to contend with competing duties or obligations to the DCO and 
their employer, and the related matter of whether DCOs should be 
required to have policies specific to RMC members for managing 
conflicts of interest. NADEX appears to believe that participation on 
an RMC could require RMC members to waive their fiduciary obligations 
to their employing firms, but the Commission notes that this is not the 
case for purposes of Sec.  39.24. The Commission also does not believe 
that potential variance in fiduciary laws across states presents an 
issue for RMC participation. In response to Cboe Digital's argument 
that efforts to attempt to ensure RMC members are independent to an 
extent that eliminates all bias, even implicit bias, favoring the 
commercial interests of the RMC member's employer could lead to costly 
legal disputes, the Commission notes that neither the proposed nor the 
final rule requires that degree of independence. Rather, the focus is 
on the fact that each RMC member's input, and the input of the RMC as a 
whole, should be risk-based, and focused on the safety of the DCO, the 
stability of the broader financial system, and other public interest 
considerations.
    The Commission believes that RMC members are able to manage 
conflicts of interest pursuant to the policies and procedures DCOs will 
adopt to comply with new Sec.  39.24(c)(3), as well as DCOs' existing 
conflict of interest obligations under Sec.  39.25. As suggested by 
FIA, these policies may include procedures for RMC members to recuse 
themselves in certain circumstances where there is a conflict of 
interest or the appearance of a conflict of interest, such as where the 
interests of the RMC member's employer are affected in a manner 
distinct from the interests of other clearing members or other clients 
(e.g., where DCO staff is proposing action against the clearing member 
that employs the RMC member). Also, as CCP12 suggested, a DCO may 
choose to require RMC members to sign non-disclosure agreements, as 
many currently do. Ultimately, the Commission believes, as suggested by 
CCP12, that a DCO should be afforded the flexibility to design its 
policies in this area based on the DCO's structure and concerns.

IV. Additional Comments

    The Commission in the Proposal also requested comment on the 
following topics which might be address in a future rulemaking: (1) 
whether the Commission should require a DCO to consult with a broad 
spectrum of market participants prior to submitting any rule change 
pursuant to Sec. Sec.  40.5, 40.6, or 40.10; and (2) whether the 
Commission should require a DCO to maintain policies and procedures 
designed to enable an RMC member to share certain types of information 
it learns in its capacity as an RMC member with fellow employees in 
order to obtain additional expert opinion. The Commission appreciates 
the comments it received on these topics, and while they are not 
discussed here because they were outside the scope of the Proposal, the 
Commission may address them in a future rulemaking.

V. Related Matters

A. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) requires that agencies 
consider whether the regulations they propose will have a significant 
economic impact on a substantial number of small entities and, if so, 
provide a regulatory flexibility analysis on the impact.\29\ The final 
rule adopted by the Commission will affect only DCOs. The Commission 
has previously established certain definitions of ``small entities'' to 
be used by the Commission in evaluating the impact of its regulations 
on small entities in accordance with the RFA.\30\ The Commission has 
previously determined that DCOs are not small entities for the purpose 
of the RFA.\31\ Accordingly, the Chairman, on behalf of the Commission, 
hereby certifies pursuant to 5 U.S.C. 605(b) that the regulations 
adopted herein will not have a significant economic impact on a 
substantial number of small entities. The Chairman made the same 
certification in the proposed rulemaking, and the Commission did not 
receive any comments on the RFA.
---------------------------------------------------------------------------

    \29\ 5 U.S.C. 601 et seq.
    \30\ 47 FR 18618 (Apr. 30, 1982).
    \31\ See 66 FR 45604, 45609 (Aug. 29, 2001).
---------------------------------------------------------------------------

B. Paperwork Reduction Act

    The Paperwork Reduction Act (PRA) \32\ provides that Federal 
agencies, including the Commission, may not conduct or sponsor, and a 
person is not required to respond to, a collection of information 
unless it displays a valid control number from the Office of Management 
and Budget (OMB). This final rule contains reporting and recordkeeping 
requirements that are collections of information within the meaning of 
the PRA. As the Commission noted in the Proposal, the reporting burden 
estimate for ``Requirements for Derivatives Clearing Organizations,''

[[Page 44688]]

OMB control number 3038-0076,\33\ accounted for the disclosure of new 
and updated governance arrangements required under Sec.  39.24 to the 
Commission, other relevant authorities, clearing members and their 
customers, owners of the DCO, and the public.\34\ The Commission 
requested comments regarding its PRA burden analysis in the preamble to 
the Proposal, but did not receive any responses.
---------------------------------------------------------------------------

    \32\ 44 U.S.C. 3501 et seq.
    \33\ See Derivatives Clearing Organization General Provisions 
and Core Principles, 85 FR 4800, 4831 (Jan. 27, 2020).
    \34\ See 17 CFR 39.24(b)(2).
---------------------------------------------------------------------------

    The Commission is making the following modifications to the 
Proposal in response to other comments: the Commission is adopting new 
Sec.  39.24(d) to provide that a DCO may satisfy the requirements of 
paragraphs (b)(11), (b)(12), (c)(1)(iv), and (c)(3) of Sec.  39.24 by 
having rules that permit it to clear only fully collateralized 
positions; the Commission is revising proposed Sec.  39.24(b)(11) to 
require a DCO to create and maintain minutes of each RMC meeting; the 
Commission is revising proposed Sec.  39.24(b)(11) to clarify that a 
DCO's board must consult with, and consider and respond to input from, 
the RMC on the clearing of new products that could materially affect 
the risk profile of the DCO; the Commission is modifying proposed Sec.  
39.24(b)(11)(ii) to clarify that the rule requires a DCO to maintain 
written policies and procedures to make certain that its RMC includes 
at least two clearing member representatives and, if applicable, at 
least two representatives of customers of clearing members; the 
Commission is revising proposed Sec.  39.24(b)(12) to require a DCO to 
include in its written policies and procedures related to the formation 
and role of each RWG requirements for the DCO to document and provide 
to the RMC, at a minimum, a summary of the topics discussed and the 
main points raised during each meeting of the RWG; the Commission is 
revising Sec.  39.24(b)(12) to require each RWG to meet at least two 
times per year, rather than quarterly, as originally proposed; and the 
Commission is revising proposed Sec.  39.24(c)(3) to replace the term 
``expert'' with ``informed'' and to remove the term ``independent.''
    The Commission is revising its burden estimate for OMB control 
number 3038-0076 to account for modifications to the Proposal made in 
response to comments. Specifically, the Commission believes that the 
burden will increase because DCOs will be required under Sec.  
39.24(b)(11) to create and maintain minutes of each RMC meeting, and 
under Sec.  39.24(b)(12) to document and provide to the RMC, at a 
minimum, a summary of the topics discussed and the main points raised 
during each meeting of the RWG. The Commission estimates a DCO will 
spend an average of four hours creating minutes of each RMC meeting and 
four hours documenting a summary of the topics discussed and the main 
points raised during each meeting of the RWG, which includes attending 
the meeting, taking notes, and putting the notes into the required 
format following the meeting. The Commission estimates that a DCO's RMC 
and RWG will each need to hold an average of six meetings per year to 
satisfy the Sec.  39.24(b)(11) and (12) requirements that a DCO's RMC 
and RWG address all matters that could materially affect the risk 
profile of the DCO. Therefore, as a result of the modifications, the 
revised estimated aggregate burden is as follows:
    Estimated number of respondents: 15.\35\
---------------------------------------------------------------------------

    \35\ The Commission notes that while new Sec.  39.24(d) provides 
that a DCO may satisfy the requirements of paragraphs (b)(11), 
(b)(12), (c)(1)(iv), and (c)(3) by having rules that permit it to 
clear only fully collateralized positions, such DCOs are included in 
the total estimated number of respondents because these DCOs would 
still be required to develop and disclose governance arrangements 
required by the other provisions of Sec.  39.24. The Commission's 
estimate is therefore conservative to the extent that these DCOs are 
not required to prepare and maintain minutes of each RMC meeting, 
and document and provide to the RMC, at a minimum, a summary of the 
topics discussed and the main points raised during each meeting of 
the RWG.
---------------------------------------------------------------------------

    Estimated number of reports per respondent: 18.\36\
---------------------------------------------------------------------------

    \36\ The Commission notes that the previous estimated aggregate 
burden was six reports. As described above, the commission is 
proposing 12 new reports, bringing the total to 18 reports. See 
supra n. 31.
---------------------------------------------------------------------------

    Average number of hours per report: 4.
    Estimated gross annual reporting burden: 1,080.

C. Cost-Benefit Considerations

1. Introduction
    Section 15(a) of the CEA requires the Commission to consider the 
costs and benefits of its actions before promulgating a regulation 
under the CEA or issuing certain orders.\37\ Section 15(a) further 
specifies that the costs and benefits shall be evaluated in light of 
five specific considerations identified in Section 15(a) of the CEA 
(collectively referred to herein as Section 15(a) factors) addressed 
below.
---------------------------------------------------------------------------

    \37\ 7 U.S.C. 19(a).
---------------------------------------------------------------------------

    The Commission recognizes that the final rule may impose costs. The 
Commission has endeavored to assess the expected costs and benefits of 
the final rule in quantitative terms, including PRA-related costs, 
where possible. In situations where the Commission is unable to 
quantify the costs and benefits, the Commission identifies and 
considers the costs and benefits of the applicable rules in qualitative 
terms. The lack of data and information to estimate those costs is 
attributable in part to the nature of the final rule. Additionally, any 
initial and recurring compliance costs for any particular DCO will 
depend on the size, existing infrastructure, practices, and cost 
structure of the DCO.
    To further the Commission's consideration of the costs and benefits 
imposed by the Proposal, the Commission invited comments from the 
public on all aspects of its cost-benefit considerations, including the 
identification and assessment of any costs and benefits not discussed 
by the Commission; data and any other information to assist or 
otherwise inform the Commission's ability to quantify or qualitatively 
describe the costs and benefits of the proposed amendments; and 
substantiating data, statistics, and any other information to support 
positions posited by commenters with respect to the Commission's 
discussion. The Commission did not receive any comments specific to the 
benefits and costs of the proposed changes to Sec.  39.24. To the 
extent that the Commission received comments that indirectly address 
the costs and benefits of the Proposal, those comments are discussed as 
relevant below.
    As outlined above in Section V.B., the Commission made several 
modifications in response to comments on the Proposal. The Commission 
believes that the amendments to current Sec.  39.24 may result in some 
additional costs to DCOs as compared to current Sec.  39.24.
2. Baseline
    The baseline for the Commission's consideration of the costs and 
benefits of this final rule is: (1) the DCO Core Principles set forth 
in Section 5b(c)(2) of the CEA; and (2) Sec.  39.24. DCO Core Principle 
O requires a DCO to establish governance arrangements that are 
transparent, to fulfill public interest requirements and to permit the 
consideration of the views of owners and participants, and Sec.  39.24 
implements DCO Core Principle O. Of the fifteen DCOs currently 
registered with the Commission, twelve already have some form of an 
RMC, which may have been intended, in part, to fulfill the DCO's 
compliance obligations under DCO Core Principle O and Sec.  39.24. Of

[[Page 44689]]

the fifteen DCOs currently registered with the Commission, six already 
have some form of an RWG, which may have been intended, in part, to 
fulfill the DCO's compliance obligations under DCO Core Principle O and 
Sec.  39.24. The Commission recognizes that, to the extent that DCOs 
already have in place some form of the proposed governance 
arrangements, the actual costs and benefits of the proposed regulation 
may not be significant.
3. Amendments to Sec.  39.24
a. Summary of the Final Rule
    The Commission is adopting regulations that require each DCO to 
establish an RMC and require a DCO's board of directors to consult 
with, and consider and respond to input from, the RMC on all matters 
that could materially affect the DCO's risk profile. The final rule 
also requires DCOs to: establish fitness standards for RMC members; 
maintain policies to ensure each RMC includes at least two clearing 
member representatives and, if applicable, at least two representatives 
of customers of clearing members; maintain policies that require 
rotation of the membership of each RMC on a regular basis; and maintain 
written policies and procedures regarding the RMC consultation process 
that include requirements for the DCO to document the board's 
consideration of and response to RMC input and create and maintain 
minutes of each RMC meeting. In addition, the final rule requires each 
DCO to maintain policies enabling RMC members to provide informed 
opinions in the form of risk-based input to the RMC, and to perform 
their duties in a manner that supports the DCO's safety and efficiency 
and the stability of the broader financial system.
    The final rule further requires each DCO to establish one or more 
RWGs as a forum to seek risk-based input from a broad array of market 
participants, such that a diverse cross-section of the DCO's clearing 
members and customers of clearing members are represented, regarding 
all matters that could materially affect the risk profile of the DCO. 
RWGs will be required to convene at least two times per year. In 
addition, the final rule requires each DCO to adopt written policies 
and procedures related to the formation and role of the RWG and include 
requirements for the DCO to document and provide to the RMC, at a 
minimum, a summary of the topics discussed and the main points raised 
during each meeting of the RWG.
    Finally, the Commission is adopting new Sec.  39.24(d) to allow a 
DCO to alternatively satisfy the requirements of paragraphs (b)(11), 
(b)(12), (c)(1)(iv), and (c)(3) of Sec.  39.24 by having rules that 
permit it to clear only fully collateralized positions.
b. Benefits
    The Commission believes that Sec.  39.24, as amended by this final 
rule, will promote more efficient, effective, and reliable DCO risk 
management, benefitting DCOs, clearing members, market participants, 
and the financial system more broadly. RMCs will provide a formal 
mechanism for DCOs to receive valuable input from market participants 
on critical issues including the DCO's margin model, default 
procedures, participation requirements, and risk monitoring practices, 
as well as the clearing of new products that could materially impact 
the DCO's risk profile. Moreover, codifying the requirement that a 
DCO's board of directors consult with, and consider and respond to 
input from, market participants on an RMC will formalize a widely-used 
method for engaging market participants in the risk governance process. 
This will allow DCOs to more effectively consider and address risks 
impacting DCO stability, market participant stability, and market 
resilience.
    To the extent that some DCOs already have RMCs that are compliant 
or partially compliant with this final rule, the benefits of the 
regulations are currently being realized to some degree.
    The final rule will help RMCs to be well positioned to provide 
effective risk management input to the DCO's board of directors by 
requiring DCOs to establish RMC membership fitness standards. These 
standards will help to ensure that individual RMC members are 
appropriately qualified to perform their duties. Ensuring that RMCs 
include at least two clearing member representatives and, if 
applicable, at least two representatives of customers of clearing 
members will give DCOs the benefit of these stakeholders' perspectives 
on risk management issues, and gives market participants the benefit of 
a forum for conveying their input on risk management issues. Rotating 
the membership of the RMCs on a regular basis will promote a diversity 
of perspectives. In addition, requiring DCOs to implement policies 
enabling RMC members to provide informed opinions in the form of risk-
based input, and to perform their duties in a manner that supports the 
DCO's safety and efficiency, will help ensure that RMC members feel 
empowered to provide objective input during this process. These 
requirements for RMCs and their members collectively increase the 
likelihood of effective DCO risk management. Finally, requiring DCOs to 
develop and maintain policies and procedures governing DCO board of 
directors consultation with its RMC(s), and to document the activities 
of its RMC(s), will promote transparency, accountability, and 
predictability, and facilitate effective oversight by the Commission in 
this area. After considering a comment from BlackRock arguing that 
keeping RMC minutes is necessary to promote transparency, 
accountability, and predictability, and comments from FIA, ISDA, and 
NADEX that also supported the requirement, the Commission revised 
proposed Sec.  39.24(b)(11) to require a DCO to create and maintain 
minutes of each RMC meeting.
    The requirement that each DCO establish one or more RWGs will 
further increase the likelihood of effective DCO risk management by 
providing each DCO with an expanded pool of clearing member and 
customer of clearing member representatives to consult when considering 
matters that could materially affect the risk profile of the DCO. 
Requiring DCOs to maintain written policies and procedures related to 
the formation and role of each RWG will promote transparency, 
accountability, and predictability. After considering comments from 
CCP12, FIA, and ISDA arguing that an RWG documentation requirement 
would provide transparency and accountability benefits, the Commission 
revised proposed Sec.  39.24(b)(12) to require a DCO to include in the 
written policies and procedures related to the formation and role of 
each RWG a requirement that the DCO document and provide to the RMC, at 
a minimum, a summary of the topics discussed and the main points raised 
during each meeting of the RWG.
c. Costs
    To the extent that some DCOs do not already have RMCs or would need 
to adjust the policies and procedures of their existing RMCs to comply 
with the amendments to Sec.  39.24, the final rule may impose some 
additional costs on DCOs. Costs could arise from additional hours a 
DCO's employees (or potentially outside counsel or other consultants) 
might need to spend conforming the DCO's rules and procedures to these 
requirements, drafting new or amended rules and procedures when 
necessary, and implementing these rules and procedures. Specifically, a 
DCO must draft written policies and procedures that describe the RMC 
consultation process in detail and that enable RMC members to provide 
informed opinions in the form of risk-based input on all

[[Page 44690]]

matters presented to the RMC for consideration and perform their duties 
in a manner that supports the safety and efficiency of the DCO and the 
stability of the broader financial system. In addition, a DCO must 
document the board's consideration of and response to RMC input, 
prepare minutes of each RMC meeting, and summarize the topics discussed 
and main points raised during each RWG meeting. A DCO will also be 
required to host RMC and RWG meetings as often as is necessary to 
address all matters that could materially affect the risk profile of 
the DCO, and with respect to RWGs, at least two times per year.
    As noted above, twelve of the fifteen DCOs currently registered 
with the Commission already have RMCs in place in some form, which may 
lower the cost of implementing the final rule. Further, the DCOs' 
policies implementing the final rule will likely not change 
significantly from year to year, so after the initial creation of the 
policies, the time required to create rules and procedures would be 
minimal.
    Ongoing compliance with the final rule will also impose costs. 
Establishing and maintaining an RMC will cost a DCO time to identify 
potential RMC members that meet the fitness standards when the RMC is 
initially formed, as well as each time the RMC membership is rotated. 
ICE stated that requirements on the rotation of RMC members may impose 
a significant burden on market participants to supply appropriately 
experienced, knowledgeable, and available employees to participate on 
the RMCs. However, the Commission notes that market participants will 
not be required to participate on the RMC, and the Commission believes 
that the benefits of being able to provide input will outweigh the 
costs for those that do participate.
    Operation of the RMC would require a DCO to provide information to 
the RMC as needed for its consideration, and time for the DCO's board 
to consult with the RMC and consider and respond to its input. An RMC's 
operation would also require time from its members to consider relevant 
information regarding the DCO's risk practices, and to form and deliver 
its views. These costs would, however, be dispersed among different 
participants over time due to the proposed requirement that DCOs rotate 
their RMC members regularly.
d. Section 15(a) Factors
    In addition to the discussion above, the Commission has evaluated 
the costs and benefits of the amendments to Sec.  39.24 in light of the 
following five broad areas of market and public concern identified in 
Section 15(a) of the CEA: (1) protection of market participants and the 
public; (2) efficiency, competitiveness, and financial integrity of 
futures markets; (3) price discovery; (4) sound risk management 
practices; and (5) other public interest considerations. The Commission 
believes that the final rule will have a beneficial effect on sound 
risk management practices and on the protection of market participants 
and the public.
    (1) Protection of market participants and the public: The 
Commission believes that the final rule will enhance the protection of 
market participants and the public by improving DCOs' identification 
and handling of risk and reducing the likelihood that market 
participants and the public face unexpected costs resulting from 
deficient DCO risk management. The final rule also gives market 
participants a voice in DCO risk management matters through their 
participation in RMCs and RWGs, increasing the likelihood that risks to 
market participants are adequately considered and minimized.
    (2) Efficiency, competitiveness, and financial integrity of futures 
markets: The final rule will benefit the financial integrity of the 
markets for futures and cleared swaps, and options thereon, by 
promoting sound risk management decisions through the adoption of 
minimum requirements regarding the substance and form of a DCO's 
governance arrangements. The Commission has not identified any other 
effect of the final rule on efficiency, competitiveness, and financial 
integrity.
    (3) Price discovery: The Commission has not identified any effect 
of the final rule on price discovery.
    (4) Sound risk management practices: The final rule is designed to 
support sound risk management practices at DCOs by providing a forum 
for informed risk-based input to a DCO's board of directors from 
clearing members and customers of clearing members. Requirements 
regarding RMC composition, fitness standards for RMC members, and RMC 
membership rotation all support RMCs' purpose of promoting sound risk 
management practices. In addition, the requirement that a DCO establish 
one or more RWGs is designed to further expand and diversify the 
information available to a DCO while making material risk decisions, 
and to expand opportunities for those with a stake in DCO risk 
management to provide input, which further promotes sound risk 
management.
    (5) Other public interest considerations: The Commission has not 
identified any effect of the final rule on other public interest 
considerations.

D. Antitrust Considerations

    Section 15(b) of the CEA requires the Commission to take into 
consideration the public interest to be protected by the antitrust laws 
and endeavor to take the least anticompetitive means of achieving the 
purposes of the CEA, in issuing any order or adopting any Commission 
rule or regulation.\38\
---------------------------------------------------------------------------

    \38\ 7 U.S.C. 19(b).
---------------------------------------------------------------------------

    The Commission believes that the public interest to be protected by 
the antitrust laws is the promotion of competition. In the Proposal, 
the Commission requested comment on whether: (1) the proposed 
rulemaking implicates any other specific public interest to be 
protected by the antitrust laws; (2) the proposed rulemaking is 
anticompetitive and, if it is, what the anticompetitive effects are; 
and (3) whether there are less anticompetitive means of achieving the 
relevant purposes of the CEA that would otherwise be served by adopting 
the proposed rule amendments. The Commission received one comment, from 
ISDA, stating that the proposed rules were not anticompetitive.
    The Commission has considered the final rule to determine whether 
it is anticompetitive and has identified no anticompetitive effects. 
Because the Commission has determined that the rules are not 
anticompetitive and have no anticompetitive effects, the Commission has 
not identified any less anticompetitive means of achieving the purposes 
of the CEA.

List of Subjects in 17 CFR Part 39

    Governance requirements.

    For the reasons stated in the preamble, the Commodity Futures 
Trading Commission amends 17 CFR chapter I as follows:

PART 39--DERIVATIVES CLEARING ORGANIZATIONS

0
1. The authority citation for part 39 continues to read as follows:

    Authority:  7 U.S.C. 2, 6(c), 7a-1, and 12a(5); 12 U.S.C. 5464; 
15 U.S.C. 8325; Section 752 of the Dodd-Frank Wall Street Reform and 
Consumer Protection Act, Pub. L. 111-203, title VII, sec. 752, July 
21, 2010, 124 Stat. 1749.


0
2. Amend Sec.  39.24 as follows:
0
a. Revise paragraphs (b)(9) and (10)(iii);
0
b. Add paragraphs (b)(11) and (12);

[[Page 44691]]

0
c. Redesignate paragraphs (c)(1)(iv) and (v) as paragraphs (c)(1)(v) 
and (vi) and add new paragraph (c)(1)(iv); and
0
d. Add paragraphs (c)(3) and (d).
    The revisions and additions read as follows:


Sec.  39.24  Governance.

* * * * *
    (b) * * *
    (9) Assign responsibility and accountability for risk decisions, 
including in crises and emergencies;
    (10) * * *
    (iii) Recovery and wind-down plans required by Sec.  39.39, as 
applicable;
    (11) Establish one or more risk management committees and require 
the board of directors to consult with, and consider and respond to 
input from, the risk management committee(s) on all matters that could 
materially affect the risk profile of the derivatives clearing 
organization, including any material change to the derivatives clearing 
organization's margin model, default procedures, participation 
requirements, and risk monitoring practices, as well as the clearing of 
new products that could materially affect the risk profile of the 
derivatives clearing organization. A derivatives clearing organization 
shall maintain written policies and procedures to make certain that:
    (i) The risk management committee consultation process is described 
in detail, and includes requirements for the derivatives clearing 
organization to document the board's consideration of and response to 
risk management committee input and create and maintain minutes of each 
risk management committee meeting;
    (ii) A risk management committee includes at least two clearing 
member representatives and, if applicable, at least two representatives 
of customers of clearing members; and
    (iii) Membership of a risk management committee is rotated on a 
regular basis; and
    (12) Establish one or more market participant risk advisory working 
groups as a forum to seek risk-based input from a broad array of market 
participants, such that a diverse cross-section of the derivatives 
clearing organization's clearing members and customers of clearing 
members are represented, regarding all matters that could materially 
affect the risk profile of the derivatives clearing organization. A 
derivatives clearing organization shall maintain written policies and 
procedures related to the formation and role of each risk advisory 
working group, and include requirements for the derivatives clearing 
organization to document and provide to the risk management committee, 
at a minimum, a summary of the topics discussed and the main points 
raised during each meeting of the risk advisory working group. Each 
market participant risk advisory working group shall convene at least 
two times per year.
    (c) * * *
    (1) * * *
    (iv) Members of risk management committee(s);
* * * * *
    (3) A derivatives clearing organization shall maintain policies 
designed to enable members of risk management committee(s) to provide 
informed opinions in the form of risk-based input on all matters 
presented to the risk management committee for consideration, and 
perform their duties in a manner that supports the safety and 
efficiency of the derivatives clearing organization and the stability 
of the broader financial system.
    (d) Fully collateralized positions. A derivatives clearing 
organization may satisfy the requirements of paragraphs (b)(11), 
(b)(12), (c)(1)(iv), and (c)(3) of this section by having rules that 
permit it to clear only fully collateralized positions.

    Issued in Washington, DC, on July 3, 2023, by the Commission.
Christopher Kirkpatrick,
Secretary of the Commission.

    Note:  The following appendices will not appear in the Code of 
Federal Regulations.

Appendices to Governance Requirements for Derivatives Clearing 
Organizations--Commission Voting Summary and Chairman's and 
Commissioners' Statements

Appendix 1--Commission Voting Summary

    On this matter, Chairman Behnam and Commissioners Johnson, 
Goldsmith Romero, Mersinger, and Pham voted in the affirmative. No 
Commissioner voted in the negative.

Appendix 2--Statement of Support of Chairman Rostin Behnam

    Today the Commission considered a final rule on Governance 
Requirements for Derivatives Clearing Organizations (DCOs). As I 
highlighted in remarks earlier this year, ``[t]his particular 
rulemaking has a long history, and its timing could not be more 
crucial.'' \1\ Throughout my CFTC tenure, clearinghouse or central 
counterparty (CCP) governance has remained a topic of increasing 
emphasis among domestic and international regulators. In the decade 
that followed the initial rule proposal addressing DCO 
governance,\2\ clearing members continually expressed concerns that 
their interests may not be adequately represented, considering that 
clearing members, through mutualized default funds, are the bearers 
of a majority of a CCP's tail risk.
---------------------------------------------------------------------------

    \1\ Rostin Behnam, Chairman, CFTC, Keynote Address of Chairman 
Rostin Behnam at the ABA Business Law Section Derivatives & Futures 
Law Committee Winter Meeting (Feb. 3, 2023), https://www.cftc.gov/PressRoom/SpeechesTestimony/opabehnam31.
    \2\ Governance requirements for Derivatives Clearing 
Organizations, Designated Contract Markets, and Swap Execution 
Facilities; Additional Requirements Regarding the Mitigation of 
Conflicts of Interest, 76 FR 722 (proposed Jan 6, 2011), available 
at https://www.cftc.gov/sites/default/files/idc/groups/public/@lrfederalregister/documents/file/2010-31898a.pdf.
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    Under my sponsorship, the CFTC's Market Risk Advisory Committee 
(MRAC) formed a Central Counterparty Risk and Governance 
Subcommittee to bring DCOs, clearing members, and customers together 
to make recommendations to the full MRAC and ultimately, the 
Commission, as to how they, the stakeholders, believed DCO 
governance could be improved.\3\ That Subcommittee understood the 
assignment. I hope that the completion of this rulemaking serves as 
a model of how the Commission and the public (through advisory 
committees and other means) can work together towards effective and 
attainable solutions.
---------------------------------------------------------------------------

    \3\ MRAC CCP Risk and Governance Subcommittee, Recommendations 
on CCP Governance and Summary of Subcommittee Constituent 
Perspectives, (MRAC approved Feb. 23, 2021), available at https://www.cftc.gov/About/AdvisoryCommittees/MRAC.
---------------------------------------------------------------------------

    I fully support the final rule which facilitates further 
cooperation and collaboration through risk management committees 
including representation from clearing members and customers and 
through risk advisory working groups, which will give all clearing 
members and customers--not just those on the risk management 
committee--an opportunity to have their voices heard on risk 
management issues which impact them, not just the DCO. While there 
may be more to come in this area, today's final DCO Governance rule 
promotes the safety and soundness of our DCOs and the financial 
system at large. I hope that this final rule encourages the industry 
and other stakeholders to continue to work on those issues where, so 
far, they have not reached consensus. That said, transparent and 
honest communication is a cornerstone to the success of any system. 
I am hopeful that this governance rule will establish a new, 
enhanced level of communication among participants in the clearing 
ecosystem that will serve to bridge differences in multiple areas of 
disagreement, ultimately strengthening our financial markets, which 
I know is a shared interest.

Appendix 3--Statement of Support of Commissioner Kristin N. Johnson

    I support the Commission's approval of the final rule adopting 
derivatives clearing organization (DCO) governance measures that 
establish structural and procedural mechanisms designed to improve 
efforts to identify and mitigate material risks, strengthen DCO 
resilience, and foster the integrity of our markets.

[[Page 44692]]

    DCOs provide comprehensive settlement services and take on 
counterparty risk with the assistance of clearing members to 
facilitate centralized and over-the-counter trading. DCOs also stand 
as final guarantors of performance in the event of a customer and 
clearing member default. The Dodd-Frank Wall Street Reform and 
Consumer Protection Act (Dodd-Frank Act) \1\ introduced 
groundbreaking reforms that shifted significant volumes of 
derivatives trading to clear through DCOs, giving them a key role in 
maintaining the stability and integrity of the derivatives markets 
through comprehensive and prudent risk mitigation practices. These 
practices include securely handling participant funds and assets, 
developing and administering robust forward-looking margining 
frameworks for idiosyncratic markets, consistently setting 
appropriate margin levels for trader portfolios, and collecting 
risk-based guaranty fund contributions from clearing members. DCO 
risk mitigation practices can profoundly impact individual firms 
and, depending on the systemic importance of a given DCO, the 
broader financial market.
---------------------------------------------------------------------------

    \1\ Dodd-Frank Wall Street Reform and Consumer Protection Act, 
Public Law 111-203, title VII (July 21, 2010) (codified in relevant 
part at 7 U.S.C. 7a-1).
---------------------------------------------------------------------------

    The rules adopted today arise out of recommendations that the 
Commission received from the Central Counterparty (CCP) Risk and 
Governance Subcommittee (Subcommittee) of the Market Risk Advisory 
Committee (MRAC), which I sponsor.\2\ The final rule requires DCOs 
to standup risk management committees (RMCs) comprised of clearing 
members and their customers to leverage their risk management 
expertise and formalize the role of market participants in the DCO 
governance process pursuant to DCO Core Principles.\3\ The final 
rule also requires DCOs to establish separate Risk Advisory Working 
Groups (RWGs) that would be larger than the RMCs and intended to 
seek risk-based input from a broad array of market participants. The 
different membership and purpose of the RMC and the RWG will enhance 
a DCO's risk management, and the flexibility allowed by the final 
rule as to implementation will allow DCOs to structure these groups 
in the ways best suited to their structure, size, and product 
offerings.
---------------------------------------------------------------------------

    \2\ See Report of the Central Counterparty Risk and Governance 
Subcommittee (Report), Market Risk Advisory Committee of the 
Commodity Futures Trading Commission (Feb. 23, 2021).
    \3\ DCO Core Principles O (Governance Fitness Standards), P 
(Conflicts of Interest), and Q (Composition of Governing Boards) 
collectively address governance requirements related to considering 
the views of owners and participants, adopting appropriate fitness 
standards for directors and others, minimizing and resolving 
conflicts of interest in decision-making, and including market 
participants on governing boards or committees. See 7 U.S.C. 7a-
1(c)(2)(O), (P), and (Q). DCO Core Principle O expressly directs 
each DCO to establish governance arrangements that ``permit the 
consideration of the view of owners and participants.''
---------------------------------------------------------------------------

    This rule was initially proposed on August 11, 2022, with a 
comment period that closed on October 11, 2022.\4\ Eighteen comments 
were submitted, addressing a range of questions posed in the 
proposed rulemaking and other points. I specifically want to address 
one of the issues raised by the commenters.
---------------------------------------------------------------------------

    \4\ See Governance Requirements for Derivatives Clearing 
Organizations, 87 FR 49559 (Aug. 11, 2022); see also Statement of 
Commissioner Kristin N. Johnson in Support of Proposed Rulemaking to 
Strengthen DCO Governance, July 27, 2022, https://www.cftc.gov/PressRoom/SpeechesTestimony/johnsonstatement072722b.
---------------------------------------------------------------------------

    Commenters expressed concerns regarding the potential for 
conflicts of interest by RMC members arising out of potential 
tension between their duties to their employers versus their role as 
an RMC member.\5\ There is of course a certain inherent divergence 
of views that is associated with requiring RMCs to have a diverse 
membership, but I find that any accompanying conflict arising out of 
that divergence can be managed by the DCO through application of 
appropriate policies and procedures, recognizing that RMC members 
are intended to give their best, informed opinion of risk-related 
issues considering the particular context in which they sit. I also 
agree with the view expressed by the Futures Industry Association 
that RMC policies and procedures may include procedures for an RMC 
member to recuse herself or himself in circumstances where there is 
an actual or apparent conflict of interest.
---------------------------------------------------------------------------

    \5\ See Sec.  39.24(c)(3).
---------------------------------------------------------------------------

    The Dodd-Frank Act prominently entrusts DCOs with maintaining 
the integrity of the derivatives markets through risk mitigation 
practices that can profoundly impact individual firms and the 
broader financial market. The Dodd-Frank Act amendments to the 
Commodity Exchange Act also expressly direct each DCO to establish 
governance arrangements that internalize the views of participants. 
I believe that the rules we adopt today effectively accomplish the 
articulated goals of making our markets safer and more resilient, 
and will enhance a DCO's ability to prudently manage risk. I thank 
staff in the Division of Clearing and Risk for their efforts, and 
also thank all of the entities and organizations that submitted 
comments to assist the Commission in achieving the best outcome with 
this rulemaking.

Appendix 4--Statement of Commissioner Christy Goldsmith Romero

    Transparency, accountability, predictability, and effective 
Commission oversight--these are the public interests that I wrote 
last summer in the description of our proposed governance rule. 
These public interests are foundational to clearinghouse resilience. 
They remind us that the impact of market disruptions and stress is 
felt the hardest by farmers, ranchers, and producers, who face 
rising inputs, and hardworking American families who may have to pay 
more to feed their family, drive their car, or cool and heat their 
homes.
    Commodity and derivatives markets have faced unexpected global 
challenges and disruptions over the last few years. Some were 
unexpected, hopefully once-in-a-lifetime events, like the pandemic 
and Russia's war against Ukraine. Others, like climate disasters and 
cybercrime, have been building for years, and we should expect that 
markets will continue to grapple with them indefinitely.
    As I said at a Global Markets Advisory Committee meeting, ``We 
have arrived at a time when we should expect the unexpected. By 
expecting the unexpected, exchanges, clearinghouses, intermediaries, 
the Commission, and others can prepare a game plan for future market 
challenges--a game plan that holds the lessons of past disruptions, 
but also has the flexibility to adapt to new challenges. There is 
great benefit to clear heads planning now. . . . [C]omplex issues 
impacting global derivatives markets would benefit from forward 
thinking. Working through them now with clear heads and the benefit 
of time can lead to a workable game plan that will keep markets 
functioning well during times of stress.'' \1\
---------------------------------------------------------------------------

    \1\ CFTC Commissioner Christy Goldsmith Romero, Expect the 
Unexpected in Global Markets, (Feb. 13, 2023) https://www.cftc.gov/PressRoom/SpeechesTestimony/romerostatement021323.
---------------------------------------------------------------------------

    The best game plan comes from engagement and collaboration 
between all stakeholders, specifically here, clearinghouses, their 
members, and market participants. Under the rule, the Commission 
would require a clearinghouse to consult with, consider, and respond 
on the merits to substantive input from, a risk management committee 
made up of clearing members. This consultation would be required for 
all matters that could materially affect the risk profile of the 
clearinghouse. Clearinghouses will also be required to establish a 
risk advisory working group to consider input from an even broader 
array of market participants.
    Together, clearinghouses, their members, and market 
participants, can benefit from a 360 degree view of risk, and make a 
powerful force in developing a workable game plan to keep markets 
functioning well during times of stress. The rule balances ensuring 
members' voices are adequately heard in a meaningful way, with the 
critical public service perspective of clearinghouses. The rule 
recognizes strength in numbers and diversity of opinion.
    There are several enhancements that I advanced in the proposed 
rule after speaking to many stakeholders.\2\ These enhancements are 
in addition to recommendations made by the Market Risk Advisory 
Committee (``MRAC'') in early 2021, after the pandemic, but prior to 
unprecedented levels of volatility and high prices triggered by 
Russia's war against Ukraine. I am grateful for MRAC members who 
contributed, stakeholders who shared their views with me, and for 
the staff who worked with me. I was pleased to see that the 
enhancements I advanced were substantially supported by public 
comment and are included in the final rule.
---------------------------------------------------------------------------

    \2\ CFTC Commissioner Christy Goldsmith Romero, Statement of 
Commissioner Christy Goldsmith Romero Regarding the Proposal to 
Strengthen the Resilience of Clearinghouses to Future Risk, (July 
27, 2022) https://www.cftc.gov/PressRoom/SpeechesTestimony/romerostatement072722.
---------------------------------------------------------------------------

    In particular, I advanced requirements for a clearinghouse to 
maintain written policies

[[Page 44693]]

and procedures: (1) describing in detail the consultation process 
between a clearinghouse and its risk management committee, including 
for deciding which matters could materially affect the 
clearinghouse's risk profile; and (2) governing the role of members 
of the risk management committee and risk working group including 
addressing any conflicts of interest. I also advanced the 
requirements for a clearinghouse to document: (1) the meetings of 
the risk management committee and risk working group; and (2) the 
clearinghouse's consideration of, and response to, the input of the 
risk management committee. I also advanced requirements for regular 
periodic meetings of the risk working group. I thank all who 
provided comments supporting these enhancements. I am thrilled to 
see them adopted in the final rule.
    My intent in including requirements for written policies and 
procedures, accompanied by documentation, was to ensure that our 
rule met the public's interest. Drawing on my experience as a former 
Inspector General, I have witnessed time and time again that 
requirements for policies and procedures as well as documentation 
promote transparency, accountability, and predictability, and 
facilitate effective Commission oversight.
    Policies and procedures help ensure that a game plan on how 
matters that could materially impact a clearinghouse's risk profile 
will be assessed, and who will have a say, are made now, not during 
times of market disruption. Requirements for policies, procedures, 
and documentation also promote consistency over the full range of 
clearinghouses, and may lead to best practices. This includes 
systemically significant clearinghouses and other well established 
clearinghouses who may already meet some or all of these 
requirements. It also includes new or future entrants, including in 
the digital asset space, who may not have a history of risk 
management committees, the consideration of input from clearing 
members, or policies, procedures or documentation requirements. I 
remain hopeful that these requirements will serve as a launch pad 
towards best practices that promote the public's interest in 
transparency, accountability, predictability, and effective 
oversight.
    For these reasons, I support the final rule.

Appendix 5--Statement of Support of Commissioner Caroline D. Pham

    As I've said before, one of the many proud traditions at the 
Commodity Futures Trading Commission (Commission or CFTC) is that 
Commissioners get to sponsor advisory committees comprised of 
members of the public to provide expert advice and input.\1\ The 
Final Rule on Governance Requirements for Derivatives Clearing 
Organizations (DCOs) had its roots in recommendations made by the 
Central Counterparty (CCP) Risk and Governance Subcommittee 
(Subcommittee) of the Market Risk Advisory Committee (MRAC) when 
then-Commissioner Behnam chaired the MRAC in 2021.\2\ I commend 
Chairman Behnam for his leadership of the MRAC at that time, and 
providing an example of how the industry can come together to 
propose workable solutions to issues in our markets through the 
CFTC's advisory committees.
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    \1\ See Opening Statement of Commissioner Caroline D. Pham 
before the Global Markets Advisory Committee Inaugural Meeting on 
February 13, 2023, available at https://www.cftc.gov/PressRoom/SpeechesTestimony/phamstatement021323.
    \2\ See MRAC CCP Risk and Governance Subcommittee, 
Recommendations on CCP Governance and Summary of Subcommittee 
Constituent Perspectives, available at https://www.cftc.gov/media/6201/MRAC_CCPRGS_RCCOG022321/download (Feb. 23, 2021).
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    I support today's Final Rule on Governance Requirements for 
DCOs. I would like to sincerely thank the staff of the Division of 
Clearing and Risk (DCR) for their work over many years to address 
market participants' efforts to enhance CCP risk and governance and 
codify standards, in particular Clark Hutchison, Eileen Donovan, Tad 
Polley, and Joe Opron. I especially want to express my appreciation 
to DCR staff for working with me to address my concerns to provide 
regulatory clarity and not upend existing law or standards for 
corporations and corporate governance.
    In response to the volatility and dislocations in our markets in 
recent years, CFTC staff have spent countless hours monitoring our 
registrants, making themselves available for updates, questions, and 
requests for guidance and relief under stressful circumstances.
    At the same time, market participants have come together to 
identify issues that regulators and CCPs should consider to enhance 
financial stability. Notably, one group recommended enhancing 
governance practices to obtain and address input from a broader 
array of market participants on relevant risk issues to improve CCP 
resilience.\3\
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    \3\ See A Path Forward for CCP Resilience, Recovery, and 
Resolution (Mar. 10, 2020), https://www.jpmorgan.com/content/dam/jpm/cib/complex/content/news/a-path-forward-for-ccp-resilience-recovery-and-resolution/pdf-0.pdf.
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    Our markets--relied on for risk management and price discovery--
have felt, yet ultimately withstood, the effects of the COVID-19 
pandemic and the widespread disruptions it caused. While markets 
continue to experience volatility, stresses, and dislocations,\4\ I 
am pleased that stakeholders are undertaking studies and analyses of 
the recent years and using data and observations from market 
participants to produce lessons learned that will serve as important 
guides for policymakers.
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    \4\ For instance, Treasury Secretary Yellen recently warned of 
market stress associated with the U.S. debt limit negotiations. See 
Christopher Condon, Yellen Says Treasury Pushing for Debt-Limit 
Deal, Not Prepping for Default, Bloomberg, (May 24, 2023), available 
at https://www.bloomberg.com/news/articles/2023-05-24/yellen-says-treasury-pushing-for-deal-not-prepping-for-default#xj4y7vzkg. The 
European Central Bank has described the eurozone's financial 
stability status as ``fragile.'' See Hannah Brenton, ECB warns of 
`fragile' financial stability after US banking crisis, PoliticoPro 
(May 31, 2023).
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    During all this, our DCOs have been a pillar of strength for the 
derivatives markets. As U.S. Representative Glenn ``GT'' Thompson, 
Chairman of the House Committee on Agriculture put it:
[T]he strength of our derivatives markets should not be taken for 
granted. Building deep, liquid, and safe derivatives markets is the 
result of informed trade-offs and negotiated compromises between the 
needs of different market participants. It takes constant work to 
uncover, understand, and manage the risks that can develop. 
Widespread clearing is one reason for the success of our derivatives 
markets, despite the recent turmoil. Clearing provides access to 
essential risk management tools for hedgers and creates a safer 
financial system for all Americans. Our cleared markets perform so 
well due to the public servants and professionals who work every day 
to understand and manage market risks, both at the [CFTC] and across 
the derivatives industry[.] \5\
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    \5\ Rep. Glenn ``GT'' Thompson (PA-15), Opening Statement for 
the Hearing ``Rising Risks: Managing Volatility in Global Commodity 
Derivatives Markets,'' (Mar. 9, 2023), available at https://agriculture.house.gov/news/documentsingle.aspx?DocumentID=7564. 
Among the ways in which DCOs performed well during a period of 
intense volatility, an interim CFTC staff report highlighted that 
both the size and frequency of portfolio-level breaches were well 
within risk management tolerances at our DCOs, and major DCOs had 
sufficient pre-funded collateral in the form of initial margin to 
cover any potential clearing member defaults within and across and 
CCPs. See CFTC Interim Staff Report, Cleared Derivatives Markets: 
March-April 2020, (2021), 
InterimStaffClearedDerivativesMarket0420_0621.pdf.
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    I'd like to echo Chairman Thompson's words and thank all the 
staff of the CFTC who ensure that our markets are safe and well-
functioning, no matter what challenges we face.

Upholding a Principles-Based Framework for DCOs

    Today, we are taking a forward-looking approach and adopting 
rules to strengthen our DCOs. I believe that one reason why our 
markets are resilient even during times of market stress is because 
our principles-based regulatory framework ensures that strong 
guardrails are in place, while giving our registered entities like 
DCOs flexibility to implement our Core Principles in a way that best 
fits their business and operating model. To put it another way--we 
are going to make sure that you build your house to code, but I'm 
not going to tell you what color to paint it.
    It is my hope that the Final Rule on Governance Requirements for 
DCOs is consistent with that approach by not being overly 
prescriptive. The rule requires DCOs to establish and consult with 
one or more risk management committees (RMCs) that includes 
representatives of clearing members and customers of clearing 
members on matters that could materially affect the risk profile of 
the DCO. In addition, the rule requires DCOs to establish minimum 
requirements for RMC composition and rotation, and to establish and 
enforce fitness standards for RMC members. The rule also requires 
DCOs to maintain written policies

[[Page 44694]]

and procedures governing the RMC consultation process and the role 
of RMC members. In addition to the RMC, the rule requires DCOs to 
establish one or more market participant risk advisory working 
groups (RWGs) that must convene at least twice a year, and adopt 
written policies and procedures related to the formation and role of 
the RWG.
    I appreciate that the staff took many commenters' suggestions to 
make the rule more flexible for DCOs while still adhering to the 
Part 39 Core Principles. For example, the final rule does not 
categorically treat a DCO's proposal to clear a new product as a 
matter that could materially affect the DCO's risk profile, but 
instead provides flexibility to determine materiality on a case-by-
case basis and to then require RMC consultation pursuant to Sec.  
39.24(b)(11). Staff recognized that this could result in unnecessary 
administrative costs and delays in launching new products, and, 
importantly, that DCOs are uniquely situated to determine what 
constitutes a new product.

Providing Regulatory Clarity To Promote Compliance

    I appreciate that the staff made revisions to certain rule 
provisions in response to my concerns regarding regulatory clarity. 
If a rule is confusing, it can actually inhibit compliance simply 
because it is unclear what the Commission's expectations are for our 
registered entities or registrants. Mind-reading is not a good 
approach for rule implementation.
    For example, the preamble to the final rule now provides further 
clarification that DCOs have flexibility on how they structure the 
RMC, and the difference between a DCO structuring an RMC as an 
advisory committee to satisfy Sec.  39.24(b)(11), and the risk 
management committee of a board of directors, especially for public 
companies and their subsidiaries and affiliates.
    Proposed Sec.  39.24(b)(11) required a DCO to maintain 
governance arrangements that establish one or more RMCs, and a DCO's 
board of directors to consult with, and consider and respond to 
input from, its RMC(s) on all matters that could materially affect 
the risk profile of the DCO, including any material change to the 
DCO's margin model, default procedures, participation requirements, 
and risk monitoring practices, as well as the clearing of new 
products.
    My concern--reflected in various comment letters--was that the 
proposal was unclear whether an RMC was required to be structured as 
a board-level committee, or if the RMC could be structured as an 
advisory committee, and the DCO could still have a separate risk 
management committee of the board of directors for corporate 
governance purposes. I appreciate that the preamble to the final 
rule now clarifies that if a DCO structures its RMC as an advisory 
committee to satisfy the requirements of Sec.  39.24(b)(11), it may 
also have a separate board-level risk management committee that is 
comprised of members of the board of directors that is not subject 
to Sec.  39.24(b)(11).
    If the DCO's RMC for purposes of Sec.  39.24(b)(11) was a board-
level committee, our RMC requirements would potentially conflict 
with existing standards for corporate governance. I was concerned 
the proposal inaccurately suggested a requirement that the RMC must 
be structured as a board-level committee, and consequently, that 
DCOs had to appoint clearing members and customers to their boards 
of directors to meet the requirements of Sec.  39.24(b)(11), among 
other changes to board procedures and processes. How a firm 
establishes board committees and delegates responsibilities is an 
important corporate governance decision and process, and subject to 
existing corporations law and other regulations.\6\ Comment letters 
reflected these concerns and confusion, especially since the SEC has 
proposed similar (but not identical) risk management committee 
requirements for clearing agencies, and does require that clearing 
agencies establish a board-level risk management committee.
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    \6\ See, e.g., Matteo Tonello, ``Should Your Board Have a 
Separate Risk Committee?'' Harvard Law School Forum on Corporate 
Governance (Feb. 12, 2012) (based on a Conference Board Director 
Note by Carol Beaumier and Jim DeLoach, which was adapted from Board 
Perspectives: Risk Oversight, Protiviti, Issue 24, October 2011), 
available at https://corpgov.law.harvard.edu/2012/02/12/should-your-board-have-a-separate-risk-committee/.
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    In addition, at my request, the staff has removed the word 
``independent'' from the final rule text with respect to members of 
an RMC for purposes of Sec.  39.24(b)(11), because this issue was 
already addressed by the rule's requirements for conflicts of 
interest policies and risk-based input, and it is different from the 
concept of ``independence'' for outside board directors. This issue 
becomes particularly acute if the RMC is structured as a board-level 
committee, or if a board director is serving on an RMC that is 
structured as an advisory committee. I do not believe that the 
Commission should interpret or opine on corporate governance law or 
Delaware corporations law requirements regarding the duties of the 
board of directors, including fiduciary duties. I believe that the 
proposal's concept of ``independence'' was more akin to input by RMC 
members that is informed by expertise with avoidance of conflicts of 
interest, and the final rule appropriately reflects this.

Conclusion

    In closing, I'd like to thank my fellow Commissioners and the 
staff for addressing my concerns, and especially thank the staff for 
their hard work on this rule designed to provide a forum for 
stakeholders to be engaged in the sound risk management of our 
clearing system for derivatives markets. The diverse viewpoints 
provided by stakeholders, including clearing members and their 
customers, should help to increase the dialogue between DCOs and 
clearing members and result in enhanced resilience for CCPs.

[FR Doc. 2023-14361 Filed 7-12-23; 8:45 am]
BILLING CODE 6351-01-P