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DCO to QCCP in 199 pages

The CFTC has issued its final rules for SIDCO’s and DCO’s to achieve full consistency with the International Principles for Financial Market Infrastructures. This latest set of final rules supplements the 12th August rules, aligning SIDCO’s with the PFMI’s, effectively filling in the gaps.  The 199-page rulebook now covers the following areas in detail: governance, financial resources, system safeguards, specific default rules, risk-management, additional disclosure requirements, efficiency and recovery\wind-down procedures. Full adherence to the rules will enable a SIDCO to retain or attain coveted QCCP status- registration as a QCCP enables the DCO’s counterparty to benefit from significantly lower capital charges under Basel III.  The rules additionally include the procedures and forms for a (non-systemically-important) DCO to apply for subpart C, thereby subjecting itself to the enhanced SIDCO rules, but rendering itself eligible for designation as a QCCP.

It is notable how many of the recent CFTC announcements have been essentially “tidying-up” exercises, the implication perhaps being that the substantive elements of Dodd-Frank are all in place. Such a conclusion would be, at best, premature.

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