Alert January 11, 2011

CFTC Proposes Governance Requirements and Regulations Mitigating Conflicts of Interest for Derivatives Clearing Organizations, Designated Contract Markets and Swap Execution Facilities

The CFTC issued a release proposing rules relating to the resolution of conflicts of interest in derivatives clearing organizations (“DCOs”), designated contract markets (“DCMs”) and swap execution facilities. The proposed rules would implement core principles concerning governance fitness standards and the composition of governing bodies for DCOs and DCMs, and would more generally implement new requirements to (i) reporting, (ii) identification and mitigation of conflicts of interest, (iii) transparency of governance arrangements and (iv) limitations on the disclosure or use of non-public information.  The proposal is designed to implement Sections 725(c), 735(b) and 733 of the Dodd-Frank Act and complements an October 2010 CFTC release proposing rules related to both (i) structural governance requirements and (ii) limits on ownership of voting equity and the exercise of voting power that primarily was aimed at implementing sections 725(d) and 726 of the Dodd-Frank Act.  Comments on the proposal are due on or before March 7, 2011.