OCC Comment on CFTC RIN 3038-AF15 Governance Requirements for Derivatives Clearing Organizations General Provisions and Core Principles

October 07, 2022
The Options Clearing Corporation (“OCC") appreciates the opportunity to submit these comments on the above-reference proposal (“Proposal” or “Proposed Rules”) under the Commodity Exchange Act (“Exchange Act”). The Proposal would establish new requirements on derivatives clearing organizations (“DCOs”) for risk management committee composition, the consultation process with the board and the risk management committee, and the role of risk advisory working groups.

OCC believes that robust and transparent governance arrangements with relevant stakeholder input is necessary for effective DCO risk management. Over the last several years, OCC has taken steps to help ensure its governance framework provides robust management oversight and sound corporate decision-making in consideration of diverse viewpoints representing relevant stakeholders and informed by independent judgment.

As such, we generally support the Commodity Futures Trading Commission’s (“CFTC” or “Commission”) objective of codifying clearing standards for DCO governance and ensuring that viewpoints of relevant stakeholders are considered as part of the DCO’s governance process. We believe the Commission’s stated objective can be achieved by adopting, with certain slight modifications detailed below, the provision of the Proposal that would impose requirements for the establishment of: (i) a risk management committee with which the board must consult according to written policies; (ii) one or more participant risk advisory groups with representation from a diverse cross-section of clearing members and their customers; (iii) fitness standards for risk management committee members; and (iv) policies designed to enable members of the risk management committee to provide independent, informed opinion on all matters presented to it. However, as detailed below, we do not support the elements of the Proposal regarding: (i) documentation of the board’s consideration of and response to risk management committee recommendations; (ii) mandatory inclusion of clearing member customers on the risk management committee; and (iii) mandatory rotation of the composition of the risk management committee.

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