Alert December 28, 2010

CFTC OTC Derivatives Rulemaking – Core Principles and Other Requirements for Designated Contract Markets

The CFTC issued a release proposing new and amended rules, guidance and acceptable practices related to the designation and operation of contract markets.  The proposals are designed to implement the provisions Section 735 of the Dodd-Frank Act by (a) eliminating the stand-alone designation criteria for designation as a contract market, (b) revising the existing core principles, including incorporating therein most of the substantive elements of the former designation criteria, and (c) adding new core principles related to (i) disciplinary procedures, (ii) system safeguards, (iii) financial resources, (iv) diversity of boards of directors, and (v) the Securities and Exchange Commission, thereby requiring applicants and designated contract markets to comply with a total of 23 core principles as a condition of obtaining and maintaining designation as a contract market.  Comments on the proposals are due by February 22, 2011.