Since 2019, derivatives clearing organizations (DCOs) and futures commission merchants (FCMs) faithfully relied on guidance and a no-action position issued through CFTC Staff Letter 19-17 [1] to comply with DCO rules. In the several years during which the original letter was issued, DCOs and FCMs invested accordingly in anticipation that the Commission would act diligently and engage the Commission in the process to implement appropriate relief on a permanent basis. I am pleased today that, consistent with my commitment to improving rules and codifying longstanding staff positions through rulemakings that benefit from the engagement and expertise of our entire Commission, the CFTC is issuing a final rule that allocates greater protections and more importantly, provides long awaited certainty.

I fully support the final rule which protects customer funds, promotes effective DCO and FCM risk management, and balances risk management with practicability. To ensure that the final rule was workable, there were numerous discussions and extensive engagement between staff and industry, in addition to two notices of proposed rulemaking [2]. This final rule is the culmination of these efforts and serves as an example of effective collaboration with industry yielding positive results.

I thank Alicia Lewis in my office, and staff in the Division of Clearing and Risk, Market Participants Division, Office of the General Counsel, and the Office of the Chief Economist for their work on the final rule.

[1] CFTC Letter No. 19-17, July 10, 2019, available at https://www.cftc.gov/csl/19-17/download as extended by CFTC Letter No. 20-28, Sept. 15, 2020, available at https://www.cftc.gov/csl/20-28/download; CFTC Letter No. 21-29, Dec. 21, 2021, available at https://www.cftc.gov/csl/21-29/download; CFTC Letter No. 22-11, Sept. 15, 2022, available at https://www.cftc.gov/csl/22-11/download; CFTC Letter No. 23-13, Sept. 11, 2023, available at https://www.cftc.gov/csl/23-13/download; and CFTC Letter No. 24-07, June 24, 2024, available at https://www.cftc.gov/csl/24-07/download.

[2] On April 14, 2023, the Commission published in the Federal Register a notice of proposed rulemaking designed to codify the no-action position in CFTC Letter No. 19-17. Derivatives Clearing Organization Risk Management Regulations to Account for the Treatment of Separate Accounts by Futures Commission Merchants, 88 FR 22934 (Apr. 14, 2023) (First Proposal). The First Proposal sought to codify the provisions of CFTC Letter No. 19-17 in regulation 39.13, where it would have applied directly to DCOs, and only indirectly to FCMs that are clearing members of DCOs through DCO rules. The Second Proposal, which withdrew the First Proposal, sought to codify these provisions in part 1 of the Commission’s regulations, which apply to FCMs directly. Regulations To Address Margin Adequacy and To Account for the Treatment of Separate Accounts by Futures Commission Merchants, 89 FR 15312 (Mar. 1, 2024) (Second Proposal). The final rule follows from the Second Proposal.