Division of Clearing and Risk

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The Division of Clearing and Risk (DCR) of the Commodity Futures Trading Commission has issued an interpretive letter clarifying that payments of variation margin, price alignment amounts and other payments in satisfaction of outstanding exposures on a counterparty’s cleared swap positions constitute “settlement” under the Commodity Exchange Act (CEA) and CFTC Regulation 39.14. The CEA and CFTC Regulation 39.14 provide that a derivatives clearing organization (DCO) must effect a settlement at least once each business day and ensure that settlements are final when effected.
Continue Reading CFTC Clarifies That Variation Margin Constitutes Settlement

The Division of Clearing and Risk (DCR) of the Commodity Futures Trading Commission has issued a report summarizing stress tests conducted by three derivatives clearing organizations (DCOs): the Chicago Mercantile Exchange (CME), ICE Clear US (ICUS) and LCH Ltd (LCH). During the stress tests, DCR evaluated whether each DCO could obtain, in a timely manner, the funds necessary to meet the settlement obligations resulting from the simultaneous default of two large clearing members. DCR also evaluated whether the need for liquidity at multiple DCOs under such circumstances might have systemic implications.
Continue Reading CFTC Conducts DCO Liquidity Stress Tests

The Commodity Futures Trading Commission has issued an order granting LedgerX LLC registration as a derivatives clearing organization (DCO). As specified in the order, LedgerX is permitted to clear fully collateralized digital currency swaps. A transaction will be fully collateralized if LedgerX holds, at all times, funds in the form of the required payment sufficient to cover the maximum possible loss a counterparty could incur upon liquidation or expiration of the contract.
Continue Reading CFTC Grants DCO Registration to LedgerX

The Division of Swap Dealer and Intermediary Oversight, the Division of Clearing and Risk and the Division of Market Oversight (collectively, the Divisions) of the Commodity Futures Trading Commission have extended relief previously provided in a series of previous no-action letters relating to transaction-level requirements for non-US swap dealers (non-US SDs). Specifically, the Divisions have granted relief to non-US SDs from certain specified “transaction-level requirements” when using personnel or agents located in the United States to arrange, negotiate or execute swaps with non-US persons that are not guaranteed affiliates or conduit affiliates of a US person.
Continue Reading CFTC Extends Relief From Transaction-Level Requirements for Non-US Swap Dealers

The staff of the Division of Clearing and Risk of the Commodity Futures Trading Commission recently released its findings from a supervisory stress test it conducted across five derivatives clearing organizations registered with the CFTC: CME Clearing, ICE Clear Credit, ICE Clear Europe, ICE Clear U.S. and LCH Clearnet Ltd. This is the first stress test that the CFTC has performed across multiple clearing organizations; such tests will be a regular part of the CFTC’s risk surveillance program going forward.
Continue Reading CFTC Staff Issues Results of Supervisory Stress Test of Clearing Organizations