The mission of the Division of Clearing and Risk (DCR) is to enable the CFTC to meet its statutory responsibility to ensure the financial integrity of all transactions subject to the Commodity Exchange Act (CEA) and the avoidance of systemic risk in the derivatives markets. To that end, DCR oversees (1) derivatives clearing organizations (DCOs), DCO clearing members, other market participants that may pose risk to the clearing process; and (2) the clearing of swaps, futures, and options on futures, in compliance with the CEA and Commission regulations.
About the Division
DCR is responsible for the supervision and financial and risk surveillance of DCOs. DCR is also responsible for the risk surveillance of futures commission merchants (FCMs) that are clearing members, non-FCM clearing members, and other market participants that may pose risk to the clearing process including swap dealers and large traders. Finally, DCR is responsible for the oversight of positions in futures, options on futures, and swaps that are cleared by DCOs.
Division in Action
DCR is composed of four program branches—Clearing Policy, Examinations, Risk Surveillance, and International & Domestic Clearing Initiatives, along with a chief counsel. They are responsible for:
- Preparing regulations, orders, guidelines, and other regulatory work product on issues pertaining to DCOs, including the protection of customers in the bankruptcy or insolvency of an FCM or DCO;
- Reviewing DCO applications for registration, petitions for regulatory relief or exemption, and rule submissions, and making recommendations to the Commission regarding such matters;
- Reviewing DCO recovery plans and wind-down plans for consistency with Commission regulations and engaging with the FDIC and other financial regulators, both domestically and internationally, regarding planning for the potential resolution of a DCO;
- Conducting risk assessments on an annual basis to determine which DCOs to examine and the topics that should be included in the risk-based examination;
- Examination of DCOs for compliance with all relevant requirements of the CEA and Commission regulations, including examining each systemically important DCO (SIDCO) at least once a year;
- Coordination of meetings with DCOs to discuss changes in business lines, changes in technology, and other key performance metrics that feed into the risk assessment performed by the Examinations Branch. These meetings are often attended by other regulators such as the Board of Governors of the Federal Reserve (Federal Reserve) or the Securities and Exchange Commission (SEC);
- Reviewing DCO reporting to ensure compliance with CFTC regulations;
- Analyzing notifications regarding hardware or software malfunctions, cyber-security intrusions, or threats that have or may have a material impact on clearing;
- Reviewing market data and making recommendations to the Commission regarding which types of swaps might be considered for required clearing;
- Making recommendations to the Commission regarding the initial eligibility or continuing qualification of a DCO to clear swaps;
- Responding to requests from market participants for relief from the clearing requirement;
- Analyzing margin models of DCOs to assess any proposed changes as well as on an ongoing basis. In the case of SIDCOs, the Federal Reserve participates in the review of changes to margin models.
- Conducting daily risk surveillance by identifying, quantifying, and monitoring the risks posed by and to DCOs, clearing members, and their clients.
- Conducting supervisory stress tests of CCPs to assess their ability to absorb large shocks. In addition to CFTC-specific exercises, staff also collaborates with the Federal Reserve, SEC, and the Bank of England.
In addition, DCR staff participates in, and in some cases leads, several domestic and international regulatory initiatives to establish standards affecting clearinghouses and their participants and to coordinate and harmonize regulatory activities.
Clark Hutchison, Director
Sarah Josephson, Deputy Director, International & Domestic Clearing Initiatives
Sayee Srinivasan, Deputy Director, Risk Surveillance Branch
Eileen Donovan, Deputy Director, Clearing Policy Branch
Julie Mohr, Deputy Director, Examinations Branch
Robert Wasserman, Chief Counsel