The CFTC has issued a Notice of Proposed Rulemaking (NPRM) to amend Part 37 (SEFs), Part 38 (DCMs), Part 39 (DCOs), and regulations 1.52 and 1.55 to address **affiliations and vertically integrated structures** among CFTC‑regulated entities and market participants. The proposal is explicitly aimed at managing **actual and perceived conflicts of interest** in affiliated structures (e.g. exchange/clearinghouse/intermediary/market‑maker combinations) through principles‑based rules that preserve responsible innovation while reinforcing market integrity.
What Changed
- - Introduces principles‑based requirements for vertically integrated market structures involving affiliations between derivatives clearing organizations, designated contract markets, swap execution...
- Amends Part 37 to set additional governance, conflict‑management, and structural requirements for swap execution facilities where the SEF is affiliated with an intermediary or trading entity.
- Amends Part 38 to impose enhanced conflict‑of‑interest and self‑regulatory safeguards for designated contract markets that are affiliated with futures commission merchants or proprietary trading...
- Amends Part 39 to clarify and strengthen requirements on derivatives clearing organizations in group structures where the DCO is affiliated with intermediaries or other market participants, including...
- Amends regulation 1.52 (accounts and records; FCM supervisory requirements) to reflect the heightened expectations placed on futures commission merchants that are part of vertically integrated...
Suggested Considerations
- Identify and map all affiliate relationships involving CFTC‑regulated entities within your group (DCO, DCM, SEF, FCM, SD/MSP, trading entities, market makers) and document how roles and control relationships could create actual or perceived conflicts of interest.
- Conduct a gap analysis of existing governance, conflicts‑of‑interest, information‑barrier, and supervision frameworks against the anticipated principles‑based expectations for vertically integrated structures under Parts 37, 38, 39 and regulations 1.52 and 1.55.
- Review and, where necessary, enhance board‑level and committee‑level oversight arrangements for affiliated entities to ensure independent decision‑making on listing, clearing, rule enforcement, membership, and client treatment where affiliates are involved.
- Assess current customer risk disclosures, including those required under regulation 1.55 for FCMs, to determine whether affiliate relationships and related conflicts are adequately described, and prepare draft revisions that could be implemented if the new requirements are finalized.
- Engage legal, compliance, and business stakeholders for each affected entity (DCO, DCM, SEF, FCM, trading entity) to prepare a coordinated comment letter to the CFTC explaining operational impacts, potential unintended consequences, and recommendations on specific rule language.
Key Dates
- Potential adoption of final rules on affiliations requirements, depending on the volume and content of comments and Commission deliberations
- Federal Register publication date of the NPRM on affiliations (the comment deadline will run for 60 days from this publication; firms should monitor the Federal Register and CFTC website to confirm the exact date)
- CFTC issues press release announcing the Notice of Proposed Rulemaking on affiliations among CFTC‑regulated entities and indicates that comments will be accepted for 60 days following publication in the Federal Register
- End of public comment period on the proposed amendments to Parts 37, 38, 39 and regulations 1.52 and 1.55 concerning affiliations and vertically integrated market structures
Compliance Impact
Non‑compliance with the eventual affiliation rules is likely to be treated as a significant governance and market‑integrity issue, potentially affecting registration, examinations, enforcement exposure, and the viability of vertically integrated business models. Firms with complex group structures should treat this as a high‑impact regulatory development, with particular consequences for exchanges, clearinghouses, SEFs, and FCMs that rely on affiliated market‑making or intermediation.