CFTC Seeks Public Comment on Notice of Proposed Rulemaking Concerning Affiliations Among Certain CFTC-Regulated Entities

What Changed

• - Introduces principles‑based requirements for vertically integrated market structures involving affiliations between derivatives clearing organizations, designated contract markets, swap execution facilities, futures commission merchants, and tradin
• 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 firms.
• 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 oversight of member clearing activities and risk m
• 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 groups, including governance and supervision of affiliate
• Amends regulation 1.55 (risk disclosure to customers) so that FCMs and potentially other intermediaries must disclose material information about relevant affiliate relationships and associated conflicts of interest to customers in a clear and balance

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.
• Monitor CFTC rulemaking developments (including the Federal Register publication of the NPRM and any subsequent CFTC staff guidance or FAQs) and set internal milestones aligned with the 60‑day comment window for drafting, reviewing, and approving submissions.

Key Dates

Who is Affected