CFTC Issues Guidance on Trade Acceptance Requirements

more+
less-

The Commodity Futures Trading Commission’s Division of Clearing and Risk (Division) has advised clearing member futures commission merchants (FCMs) and derivatives clearing organizations (DCOs) of the Division’s position regarding their obligations under Rules 1.74 and 39.12(b)(7)(B), respectively. CFTC Rule 1.74 requires clearing member FCMs to “accept or reject each trade submitted by or for it or its customers as quickly as would be technologically practicable if fully automated systems were used.” Similarly, CFTC Rule 39.12(b)(7)(B) provides that DCOs must “accept or reject each trade submitted to the derivatives clearing organization for clearing by or for the clearing member or a customer of the clearing member as quickly as would be technologically practicable if fully automated systems were used.” The effective date for compliance with both rules is October 1, 2012.

The Division advised clearing member FCMs and DCOs that:

  1. With respect to Rule 1.74, clearing member FCMs must accept or reject a trade for clearing and submit it to the relevant DCO for clearing within 120 seconds after the trade has been submitted to it by or for a customer. 
  2.  With respect to Rule 39.12(b)(7)(B), DCOs must accept or reject trades no later than 60 seconds after submission.

The Division further indicated that, when the clearing requirement determinations for credit default swaps and interest rate swaps are finalized and in effect, a clearing member FCM must accept or reject a trade for clearing within 60 seconds after the trade has been submitted to it for clearing.