On February 12, the Commodity Futures Trading Commission announced 2019 Examination Priorities (the “Examination Priorities”) for registrants of the Division of Market Oversight (DMO), Division of Swap Dealer and Intermediary Oversight (DSIO), and Division of Clearing & Risk (DCR). This marks the first time that the agency has published Examination Priorities for its divisions.
DMO’s Compliance Branch currently conducts examinations of designated contract markets to monitor their compliance with the Commodity Exchange Act (CEA) and CFTC regulations through Rule Enforcement Reviews.
DMO Examination Priorities for 2019 will focus on: (1) cryptocurrency surveillance practices; (2) surveillance for disruptive trading; (3) selected aspects of trade surveillance practices; (4) block trade surveillance practices; (5) selected aspects of market surveillance practices; and (6) real-time market monitoring practices.
DSIO’s Examinations Branch is primarily responsible for overseeing derivative markets intermediaries, including futures commission merchants (FCMs), swap dealers (SDs), major swap participants (MSPs) commodity pool operators (CPOs), commodity trading advisors, introducing brokers and retail foreign exchange dealers.
DSIO’s Compliance Branch’s 2019 Examination Priorities will focus on customer funds protections, including: (1) withdrawal of residual interest from customer accounts; (2) accepted forms of non-cash margin; (3) compliance with segregation requirements; (4) FCM use of customer depositories; and (5) FCM customer account documentation.
DCR examination of derivative clearing organizations (DCOs) will examine the DCO’s financial resources, risk management, system safeguards and cyber-security policies, practices, and procedures to assess the maturity, capabilities, and overall resilience of the DCO.
The CFTC announcement is available here.