On 12 September 2024, the Commodity Futures Trading Commission (US CFTC) published amendments to Regulation Part 40, impacting the rule submission procedures for designated contract markets (DCMs), swap execution facilities (SEFs), and derivatives clearing organizations (DCOs). These amendments adjust the certification process, update product certification requirements, and improve transparency for market participants, including those involved with digital assets and cryptocurrency sectors.
The amendments to Regulation Part 40 are aimed at enhancing the rule submission and certification processes for registered entities such as Designated Contract Markets (DCMs), Swap Execution Facilities (SEFs), and Derivatives Clearing Organizations (DCOs). In the Amendments the updated product certification requirement, which now mandates that entities provide more detailed information when certifying new products which includes thorough explanations on how the product complies with the legal and regulatory standards set forth by the US CFTC.
The amendments expand the rule certification process, requiring entities to offer comprehensive explanations for any new or amended rules they submit. These explanations must address how the proposed rules will affect market operations and participants. Entities need to be proactive in assessing the potential impact of new rules and providing detailed rationale during the certification process.
In line with increasing regulatory emphasis on transparency, the amendments also require that more information be made publicly available regarding rule submissions. This aims to provide market participants with better visibility into how rules are formulated and how they may affect market dynamics. Transparency of rule submissions not only promotes trust within the market but also ensures that all participants, including smaller traders and stakeholders, have access to crucial regulatory developments.
In terms of product certification, the amendments address the growing importance of digital assets such as cryptocurrencies. Registered entities seeking to certify cryptocurrency-related products need to meet more rigorous standards, ensuring that such products align with existing regulatory frameworks. This is crucial given the rapidly evolving nature of the cryptocurrency market, and it places additional responsibility on entities to thoroughly evaluate the compliance aspects of these products before they are introduced to the market.
To adhere to these amendments, entities must prioritize strengthening their compliance mechanisms. Establishing internal frameworks that focus on comprehensive documentation and legal review before submitting new rules or products will be essential. Close collaboration with legal teams and compliance officers is critical in ensuring that all regulatory requirements are met.
(Source: https://www.cftc.gov/media/11286/FederalRegister091224_RegulationPart40/download, https://www.cftc.gov/PressRoom/PressReleases/8966-24)
