Derivatives Clearing Organization General Provisions and Core Principles, 35805-35806 [2020-10809]

Agencies

• Commodity Futures Trading Commission

[Federal Register Volume 85, Number 114 (Friday, June 12, 2020)]
[Rules and Regulations]
[Pages 35805-35806]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-10809]


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COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 39

RIN 3038-AE66


Derivatives Clearing Organization General Provisions and Core 
Principles

AGENCY: Commodity Futures Trading Commission.

ACTION: Correcting amendments.

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SUMMARY: The Commodity Futures Trading Commission (Commission) is 
correcting final rules published in the Federal Register on January 27, 
2020 (final rules). The final rules, which amended certain regulations 
applicable to derivatives clearing organizations (DCOs), took effect on 
February 26, 2020. This correction amends three provisions of the final 
rules that were inadvertently modified by operation of the amendatory 
instructions and rule text in the final rules.

DATES: Effective on June 12, 2020.

FOR FURTHER INFORMATION CONTACT: Eileen A. Donovan, Deputy Director, 
202-418-5096, [email protected]; Parisa Nouri, Associate Director, 202-
418-6620, [email protected]; Division of Clearing and Risk, Commodity 
Futures Trading Commission, Three Lafayette Centre, 1155 21st Street 
NW, Washington, DC 20581.

SUPPLEMENTARY INFORMATION: On January 27, 2020, the Commission 
published final rules amending certain regulations applicable to DCOs 
to, among other things, address certain risk management and reporting 
obligations, clarify the meaning of certain provisions, simplify 
processes for registration and reporting, and codify existing staff 
relief and guidance.\1\ In renumbering Sec.  39.11(b)(1)(vi) as Sec.  
39.11(b)(1)(v), the final rules inadvertently retained Sec.  
39.11(b)(1)(vi), such that paragraphs (b)(1)(v) and (vi) were 
duplicated as identical provisions.\2\ The proposed rule text published 
on May 16, 2019 (proposed rules) \3\ illustrates the intended 
renumbering of Sec.  39.11(b)(1), and the Commission indicated in the 
preamble to the final rules its intention to renumber Sec.  
39.11(b)(1)(vi).\4\ Therefore, the Commission is making a correcting 
amendment to Sec.  39.11(b)(1) to resolve that error.
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    \1\ Derivatives Clearing Organization General Provisions and 
Core Principles, 85 FR 4800 (Jan. 27, 2020).
    \2\ The duplicate provisions state that the financial resources 
available to satisfy the requirements of Sec.  39.11(a)(1) may 
include any other financial resource deemed acceptable by the 
Commission. Commission regulations referred to herein are found at 
17 CFR chapter I.
    \3\ Derivatives Clearing Organization General Provisions and 
Core Principles, 84 FR 22226, 22268 (May 16, 2019).
    \4\ See 85 FR at 4807.
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    Further, in renumbering Sec.  39.11(e)(3)(i)-(iii) as Sec.  
39.11(e)(4)(i)-(iii), the final rules inadvertently omitted paragraphs 
(e)(4)(ii) and (iii), which were contained in the proposed rules \5\ 
and were not otherwise modified in the final rules.\6\ Therefore, the 
Commission is making a correcting amendment to Sec.  39.11(e)(4) to 
resolve that error.
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    \5\ See 84 FR at 22269 (illustrating the intended renumbering of 
Sec.  39.11(e)(3)(i)-(iii) to (e)(4)(i)-(iii)).
    \6\ The inadvertently omitted paragraphs state that a DCO's cash 
balances shall be invested or placed in safekeeping in a manner that 
bears little or no principal risk, and letters of credit shall not 
be a permissible asset for a guaranty fund.
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    Lastly, the final rules inadvertently omitted Sec.  
39.13(g)(8)(iii), which was not proposed to be modified.\7\ The 
proposed rules include Sec.  39.13(g)(8)(iii) unchanged from what was 
previously codified,\8\ and the preamble to the final rules states that 
there was no intent to change paragraph (g)(8)(iii).\9\ Thus, the 
omission of paragraph (g)(8)(iii) by operation of the amendatory 
instruction and rule text in the final rules was an inadvertent 
error.\10\ Therefore, the Commission is making a correcting amendment 
to Sec.  39.13(g)(8)(iii) to resolve that error.
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    \7\ The inadvertently omitted paragraph states that a DCO shall 
require its clearing members to ensure that their customers do not 
withdraw funds from their accounts with such clearing members unless 
the net liquidating value plus the margin deposits remaining in a 
customer's account after such withdrawal are sufficient to meet the 
customer initial margin requirements with respect to all products 
and swap portfolios held in such customer's account which are 
cleared by the DCO.
    \8\ See 84 FR at 22272.
    \9\ See 85 FR at 4828, n. 51.
    \10\ See 85 FR at 4855, 4856.
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List of Subjects in 17 CFR Part 39

    Application form, Business and industry, Commodity futures, 
Consumer protection, Default rules and procedures, Definitions, 
Enforcement authority, Participant and product eligibility, Reporting 
and recordkeeping requirements, Risk management, Settlement procedures, 
Swaps, Treatment of funds.

    In consideration of the foregoing, 17 CFR part 39 is corrected by 
making the following correcting amendments:

PART 39--DERIVATIVES CLEARING ORGANIZATIONS

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

    Authority: 7 U.S.C. 2, 7a-1, and 12a; 12 U.S.C. 5464; 15 U.S.C. 
8325.


0
2. Amend Sec.  39.11 by removing paragraph (b)(1)(vi) and adding 
paragraphs (e)(4)(ii) and (iii) to read as follows:


Sec.  39.11  Financial resources.

* * * * *
    (e) * * *
    (4)(i) * * *
    (ii) Cash balances shall be invested or placed in safekeeping in a 
manner that bears little or no principal risk; and
    (iii) Letters of credit shall not be a permissible asset for a 
guaranty fund.
* * * * *

0
3. In Sec.  39.13, add paragraph (g)(8)(iii) to read as follows:


Sec.  39.13  Risk management.

* * * * *
    (g) * * *
    (8) * * *
    (iii) Withdrawal of customer initial margin. A derivatives clearing 
organization shall require its clearing members to ensure that their 
customers do not withdraw funds from their accounts with such clearing 
members unless the net liquidating value plus the margin deposits 
remaining in a customer's account after such withdrawal are sufficient 
to meet the customer initial margin requirements with respect to all 
products and swap portfolios held in such customer's account which are 
cleared by the derivatives clearing organization.
* * * * *

    Issued in Washington, DC, on May 14, 2020 by the Commission.
Robert Sidman,
Deputy Secretary of the Commission.

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

Appendix to Derivatives Clearing Organization General Provisions and 
Core Principles--Commission Voting Summary

    On this matter, Chairman Tarbert, and Commissioners Quintenz, 
Behnam, Stump,

[[Page 35806]]

and Berkovitz voted in the affirmative. No Commissioner voted in 
negative.

[FR Doc. 2020-10809 Filed 6-11-20; 8:45 am]
BILLING CODE 6351-01-P