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17 CFR Part 39

RIN 3038-AF16

Derivatives Clearing Organizations Recovery and Orderly Wind-down Plans; Information 

for Resolution Planning

AGENCY: Commodity Futures Trading Commission

ACTION: Notice of Proposed Rulemaking

SUMMARY: The Commodity Futures Trading Commission (Commission or CFTC) is 

proposing amendments to certain regulations applicable to systemically important derivatives 

clearing organizations (SIDCOs) and derivatives clearing organizations (DCOs) that elect to be 

subject to the provisions in Subpart C of part 39 of the Commission’s regulations (Subpart C 

DCOs). These proposed amendments would, among other things, address certain risk 

management obligations, modify definitions, and codify existing staff guidance. The 

Commission is also proposing to amend certain regulations to require DCOs that are not 

designated as systemically important, and which have not elected to be covered by Subpart C of 

part 39, to submit orderly wind-down plans. In addition, the Commission is proposing to make 

conforming amendments to certain provisions, revise the Subpart C Election Form and Form 

DCO, and remove stale provisions. 

DATES: Comments must be received by [60 days after publication in the Federal Register].

ADDRESSES: You may submit comments, identified by “Derivatives Clearing Organizations 

Recovery and Orderly Wind-down Plans; Information for Resolution Planning” and RIN 3038-

AF16, by any of the following methods:

• CFTC Comments Portal: https://comments.cftc.gov. Select the ‘‘Submit Comments’’ 

link for this rulemaking and follow the instructions on the Public Comment Form.
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• Mail: Send to Christopher Kirkpatrick, Secretary of the Commission, Commodity 

Futures Trading Commission, Three Lafayette Centre, 1155 21st Street NW, Washington, DC 

20581.

• Hand Delivery/Courier: Follow the same instructions as for Mail, above. Please submit 

your comments using only one of these methods. To avoid possible delays with mail or in-person 

deliveries, submissions through the CFTC Comments Portal are encouraged. All comments must 

be submitted in English, or if not, accompanied by an English translation. Comments will be 

posted as received to https://comments.cftc.gov. You should submit only information that you

wish to make available publicly. If you wish the Commission to consider information that you 

believe is exempt from disclosure under the Freedom of Information Act (FOIA), a petition for 

confidential treatment of the exempt information may be submitted according to the procedures 

established in § 145.9 of the Commission’s regulations.1 The Commission reserves the right, but 

shall have no obligation, to review, pre-screen, filter, redact, refuse or remove any or all of your 

submission from https://comments.cftc.gov that it may deem to be inappropriate for publication, 

such as obscene language. All submissions that have been redacted or removed that contain 

comments on the merits of the rulemaking will be retained in the public comment file and will be 

considered as required under the Administrative Procedure Act and other applicable laws, and 

may be accessible under the FOIA.

FOR FURTHER INFORMATION CONTACT: Robert Wasserman, Chief Counsel and 

Senior Advisor, 202-418-5092, rwasserman@cftc.gov; Megan Wallace, Senior Special Counsel, 

202-418-5150, mwallace@cftc.gov; Eric Schmelzer, Special Counsel, eschmelzer@cftc.gov,

 

1 17 CFR 145.9. Commission regulations referred to herein are found at 17 CFR chapter I (2020), and are accessible 

on the Commission’s website at https://www.cftc.gov/LawRegulation/CommodityExchangeAct/index.htm.
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202-418-5967; Division of Clearing and Risk, Commodity Futures Trading Commission, Three 

Lafayette Centre, 1155 21st Street NW, Washington, DC 20581.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Background

A. The CEA and DCO Core Principles

B. Regulatory Framework for DCOs

C. Recovery and Orderly Wind-down for SIDCOs and Subpart C DCOs – Regulation 39.39

D. 2014 International Standards and Guidance on Recovery and Resolution of Financial 

Market Infrastructures

E. CFTC Letter No. 16-61

F. Additional International Standards and Guidance

G. Requirement to Submit Recovery and Orderly Wind-down Plans to the Commission –

§ 39.19(c)(4)(xxiv)

II. Amendments to Regulation 39.39 – Recovery and Orderly Wind-down for SIDCOs and 

Subpart C DCOs; Information for Resolution Planning

A. Definitions – § 39.39(a), § 39.2

B. Recovery Plan and Orderly Wind-down Plan – § 39.39(b) 

C. Recovery Plan and Orderly Wind-down Plan: Required Elements – § 39.39(c)

D. Information for Resolution Planning – § 39.39(f)

E. Renaming Regulation 39.39

III. Orderly Wind-down Plan for DCOs That Are Not SIDCOs or Subpart C DCOs

A. Requirement to Maintain and Submit an Orderly Wind-down Plan – § 39.13(k)(1)(a)

B. Notice of the Initiation of Pending Orderly Wind-down – § 39.13(k)(1)(b)

C. Orderly Wind-down Plan: Required Elements – §§ 39.13(k)(2)–(6)

D. Conforming Changes to Bankruptcy Provisions – Part 190

IV. Establishment of Time to File Orderly Wind-down Plan – § 39.19(c)(4)(xxiv)

V. Amendment to Regulation 39.34(d)

VI. Amendments to Appendix B to Part 39 – Subpart C Election Form

VII. Amendments to Appendix A to Part 39 –Form DCO

VIII. Related Matters

A. Regulatory Flexibility Act

B. Antitrust Considerations

C. Paperwork Reduction Act 

D. Cost-Benefit Considerations
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I. Background

A. The CEA, Dodd-Frank Act, and DCO Core Principles

Section 3(b) of the Commodity Exchange Act (CEA) sets forth the purposes of that Act; 

among these is “to ensure the financial integrity of all transactions subject to this act and the 

avoidance of systemic risk.” Section 5b(c)(2) of the CEA, as amended in 2010 by Title VII of 

the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act),2sets forth 

eighteen core principles with which a DCO must comply in order to be registered with the 

Commission and maintain its registration (DCO Core Principles).3 Together, the DCO Core 

Principles serve to reduce risk, increase transparency and promote market integrity within the 

financial system.4 

Title VII of the Dodd-Frank Act grants the Commission explicit authority to promulgate 

rules, pursuant to section 8a(5) of the CEA, regarding the DCO Core Principles that govern the 

activities of all DCOs in clearing and settling swaps and futures.5 Section 8a(5), in turn, 

authorizes the Commission “to make and promulgate such rules and regulations as, in the 

judgment of the Commission, are reasonably necessary to effectuate any of the provisions or to 

accomplish any of the purposes of” the CEA.

For SIDCOs in particular, Title VIII of the Dodd-Frank Act grants the Commission 

 

2 Title VII, Wall Street Transparency and Accountability Act of 2010, Pub. L. No. 111-203, 124 Stat. 1376, 1641

(2010).

3 Section 5b(c)(2) of the CEA, 7 U.S.C. 7a-1(c)(2).

4 Derivatives Clearing Organization Gen. Provisions and Core Principles, 76 FR 69334, 69334 (Nov. 8, 2011); 

Customer Clearing Documentation, Timing of Acceptance for Clearing, & Clearing Member Risk Mgmt., 77 FR 

21278, 21279 (Apr. 9, 2012) (further amending § 39.12).

5 Section 725(c) of Title VII of the Dodd-Frank Act, 124 Stat. at 1687 (2010), 7 U.S.C. 7a-1(c)(2)(A)(i).
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explicit authority to prescribe risk management standards, “taking into consideration relevant 

international standards and existing prudential requirements” governing operations related to 

payment, clearing and settlement activities and the conduct of designated activities by such 

financial institutions.

6

 Under Title VIII, the objectives and principles for those risk management 

standards are to (1) promote risk management; (2) promote safety and soundness; (3) reduce 

systemic risks; and (4) support the stability of the broader financial system.7 Combined, Titles 

VII and VIII of the Dodd-Frank Act address one of Dodd-Frank’s fundamental goals: to reduce

systemic risk through properly regulated central clearing.8 

DCOs are subject to a number of risks that could threaten their viability and financial 

strength, including risks from the default of one or more clearing members (including credit and 

liquidity risk) as well as non-default risk (including general business risk, operational risk, 

custody risk, investment risk, and legal risk). The realization of these risks has the potential to 

result in the DCO’s financial failure.9

In light of the central role DCOs perform in the markets that they serve, the disorderly 

failure of a DCO would likely cause significant disruption in such markets. In particular, 

SIDCOs play an essential role in the financial system, and thus the disorderly failure of such a 

 

6 Title VIII, Payment, Clearing, and Settlement Supervision Act of 2010, Section 805, 124 Stat. 1802, 1809, 12 

U.S.C. 5464(a)(2)(A), (B). 

7 Enhanced Risk Management Standards for Systemically Important Derivatives Clearing Organizations, 78 FR 

49663, 49665 (Aug. 15, 2013).

8 See Customer Clearing Documentation, Timing of Acceptance for Clearing, and Clearing Member Risk 

Management, 77 FR 21278, 21278 (Apr. 9, 2012).

9 CPMI-IOSCO, Recovery of financial market infrastructures (July 5, 2017) (hereinafter CPMI-IOSCO Recovery 

Guidance) at ¶ 2.1.1.
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DCO could lead to severe systemic disruptions if it caused the markets it serves to cease to 

operate effectively. Ensuring that DCOs can continue to provide critical operations and services 

as expected, even in times of extreme stress, is therefore central to financial stability. 

Maintaining provision of the critical operations and services that clearing members and others 

depend upon should allow DCOs to serve as a source of strength and continuity for the financial 

markets they serve.10

Core Principle D requires each DCO to ensure that it possesses the ability to manage the 

risks associated with discharging its responsibilities through the use of appropriate tools and 

procedures.11 Recovery planning is inherently integrated into that risk management, and 

concerns those aspects of risk management and contingency planning which address the extreme 

circumstances that could threaten the DCO’s viability and financial strength. To manage these 

risks as required by Core Principle D, a DCO needs to identify in advance, to the extent possible, 

such extreme circumstances and maintain an effective plan to enable it to continue to provide its 

critical operations and services if these circumstances were to occur. The recovery plan needs to 

address circumstances that may give rise to any default loss, including uncovered credit losses, 

liquidity shortfalls or capital inadequacy, as well as any structural weaknesses that these 

circumstances reveal. Similarly, the recovery plan needs to address DCOs’ potential non-default 

losses. The recovery plan also needs to address the need to replenish any depleted pre-funded 

financial resources and liquidity arrangements so that the DCO can remain viable as a going 

concern and continue to provide its critical operations and services. The existence of the 

 

10 Id. at ¶ 2.1.2.

11 7 U.S.C. 7a-1(c)(2)(D)(i).
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recovery plan further enhances the resilience of the DCO, and will provide market participants 

with confidence that the DCO will be able to function effectively even in extreme 

circumstances.12

Given the systemic importance of SIDCOs, each SIDCO must have a comprehensive and 

effective recovery plan designed to permit the SIDCO to continue to provide its critical 

operations and services. Subpart C DCOs, being held to similar standards as SIDCOs, also need 

to have such recovery plans. However, where a recovery plan proves, in a particular 

circumstance, to be ineffective, it is important that the DCO have a plan to wind down in an 

orderly manner. A plan for an orderly wind-down is not a substitute for having a comprehensive 

and effective recovery plan.13

The purpose of a recovery plan is to provide, with the benefit of thorough planning 

during business-as-usual operations, such information and procedures that will allow a DCO to 

effect recovery such that it can continue to provide its critical operations and services when its 

viability as a going concern is threatened. A recovery plan enables the DCO, its clearing 

members, their clients, and other relevant stakeholders, to prepare for such extreme 

circumstances, increases the probability that the most effective tools to deal with a specific stress 

will be used and reduces the risk that the effectiveness of recovery actions will be hindered by

uncertainty about which tools will be used. The recovery plan will also assist the Federal 

Deposit Insurance Corporation (FDIC) as resolution authority under Dodd-Frank Title II14 in 

 

12 CPMI-IOSCO Recovery Guidance, at ¶ 2.2.1.

13 Id. at ¶ 2.2.2.

14 12 U.S.C. 5381 et. seq. (“Orderly Liquidation Authority”). While orderly wind-down as discussed here proceeds 

under the authority of the DCO, FDIC would act as receiver in conducting an orderly liquidation under Title II.
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preparing and executing their resolution plans for a DCO.15

While the implementation of the recovery plan is the responsibility of the DCO itself, 

which accordingly also has to have the power to make decisions and take action in accordance 

with its rules, under Title II resolution, that responsibility and power will pass to the FDIC as 

receiver instead. Many recovery tools will also be relevant to a DCO under Title II resolution, 

not least because FDIC would “step into the shoes” of the DCO16 and accordingly would be able 

to enforce implementation of contractual loss or liquidity shortfall allocation rules, to the extent 

that any such rules exist, and have not been exhausted before entry into resolution.17

To accomplish these ends, this Notice of Proposed Rulemaking (NPRM) is proposing, 

among other things: (1) for SIDCOs and Subpart C DCOs, that they should incorporate certain 

subjects and analyses in their viable plans for recovery and orderly wind-down; and (2) for all 

other DCOs, that they should maintain viable plans for orderly wind-down that incorporate

substantially similar subjects and analyses as the proposed requirements for SIDCOs and Subpart 

C DCOs. 

B. Regulatory Framework for DCOs

Part 39 of the Commission’s regulations implements the DCO Core Principles, including 

Core Principles D and R, which require “that the [DCO] possesses the ability to manage the risks 

associated with discharging the responsibilities of the [DCO] through the use of appropriate tools 

 

15 CPMI-IOSCO Recovery Guidance at ¶ 2.3.1.

16 12 U.S.C. 5390(a)(1)(A)(i) (upon appointment as receiver for a covered financial company, FDIC succeeds to “all 

rights, titles, powers, and privileges of the covered financial company and its assets, and of any stockholder, 

member, officer, or director of such company”).

17 CPMI-IOSCO Recovery Guidance at ¶ 2.2.3.
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and procedures,”18 and “a well-founded, transparent, and enforceable legal framework for each 

aspect of the [DCO].”19 Subpart B of part 39 establishes standards for compliance with the DCO 

Core Principles for all DCOs.20 Subpart C of part 39 establishes additional standards for

compliance with the DCO Core Principles for SIDCOs,

21 i.e., DCOs designated systemically 

important by the Financial Stability Oversight Council (FSOC) for which the Commission acts 

as the Supervisory Agency.

22 The Subpart C regulations also apply to DCOs that elect to be 

subject to the requirements in Subpart C.

23

 

18 Section 5b(c)(2)(D) of the CEA, 7 U.S.C. 7a-1(c)(2)(D) (“Core Principle D – Risk Management”).

19 Section 5b(c)(2)(R) of the CEA, 7 U.S.C. 7a-1(c)(2)(R) (“Core Principle R – Legal Risk”).

20 17 CFR 39.9-39.27.

21 17 CFR 39.30–39.42. Subpart C flows from Title VIII of the Dodd-Frank Act, which Congress enacted to 

mitigate systemic risk in the financial system and to promote financial stability. Section 802(b) of the Dodd-Frank 

Act. 

The term “systemically important” means “a situation where the failure of or a disruption to the functioning of a 

financial market utility . . . could create, or increase, the risk of significant liquidity or credit problems spreading 

among financial institutions or markets and thereby threaten the stability of the financial system of the United 

States.” Section 803(9) of the Dodd-Frank Act; see also 12 CFR 1320.2 (Definitions - Systemically important and 

systemic importance). A “financial market utility” (FMU) includes “any person that manages or operates a 

multilateral system for the purpose of transferring, clearing, or settling payments, securities, or other financial 

transactions among financial institutions or between financial institutions and the person.” Section 803(6)(A) of the 

Dodd-Frank Act; see also 12 CFR 1320.2 (Definitions – Financial market utility). 

Section 804 of the Dodd-Frank Act requires the FSOC to designate those FMUs that FSOC determines are, or are 

likely to become, systemically important. Three CFTC-registered DCOs, Chicago Mercantile Exchange, Inc. 

(CME), ICE Clear Credit LLC (ICC), and Options Clearing Corporation (OCC), were designated as systemically 

important by the FSOC in 2012. Press Release, Financial Stability Oversight Council Makes First Designations in 

Effort to Protect Against Future Financial Crises (Jul. 18, 2012), available at https://www.treasury.gov/presscenter/press-releases/Pages/tg1645.aspx. The bases for the designations are available at 

https://home.treasury.gov/policy-issues/financial-markets-financial-institutions-and-fiscal-service/fsoc/designations. 

The Commission is the Supervisory Agency for CME and ICC; the U.S. Securities and Exchange Commission is the 

Supervisory Agency for OCC. See 12 CFR 1320.2 (Definition of Supervisory Agency).

22 17 CFR 39.2.

23 In the Commission’s experience, DCOs based in the United States that have banks as clearing members have 

elected to be subject to Subpart C in order to achieve status as a qualified central counterparty (QCCP), while U.S.-

based DCOs that do not have banks as clearing members have not made that election.
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Section 805 of the Dodd-Frank Act directs the Commission to consider relevant 

international standards and existing prudential requirements when prescribing risk management 

standards for SIDCOs.

24

 In 2013 the Commission determined that, for purposes of meeting the 

Commission’s statutory obligation pursuant to Section 805(a)(2)(A) of the Dodd-Frank Act, the 

international standards most relevant to the risk management of SIDCOs are the PFMI.

25

 

 

In July 2012, the Basel Committee on Banking Supervision, the international body that sets standards for the 

regulation of banks, published the “Capital Requirements for Bank Exposures to Central Counterparties” (Basel 

CCP Capital Requirements), which describes standards for capital charges arising from bank exposures to central 

counterparties (CCPs) related to over-the-counter derivatives, exchange-traded derivatives, and securities financing 

transactions. (DCOs are referred to as CCPs in international standards and guidance.) The Basel CCP Capital 

Requirements create financial incentives for banks, including their subsidiaries and affiliates, to clear financial 

derivatives with CCPs that are prudentially supervised in a jurisdiction where the relevant regulator has adopted 

rules or regulations that are consistent with the standards set forth in the Principles for Financial Market 

Infrastructures (PFMI), published in April 2012 by the Bank for International Settlements’ (BIS) Committee on 

Payment and Settlement Systems (renamed the Committee on Payments and Market Infrastructures (CPMI)) and the 

Technical Committee of the International Organization of Securities Commissions (IOSCO) (collectively referred to 

as CPMI-IOSCO). The PFMI is available at http://www.iosco.org/library/pubdocs/pdf/IOSCOPD377.pdf. 

A QCCP is defined as an entity that (i) is licensed to operate as a CCP and is permitted by the appropriate regulator 

to operate as such, and (ii) is prudentially supervised in a jurisdiction where the relevant regulator has established 

and publicly indicated that it applies to the CCP, on an ongoing basis, domestic rules and regulations that are 

consistent with the PFMI. See Basel Committee on Banking Supervision, Credit Risk Framework § 50.3, available 

at https://www.bis.org/basel_framework/chapter/CRE/50.htm?inforce=20191215&published=20191215. The 

failure of a CCP to achieve QCCP status could result in significant costs to its bank clearing members (or banks that 

are customers of its clearing members). 

The U.S. banking regulators, including the Board of Governors of the Federal Reserve (Federal Reserve), FDIC, and 

the Office of the Comptroller of the Currency, have adopted capital standards that are consistent with the Basel 

Committee’s standards. For example, under the FDIC’s regulations, the capital requirement for a clearing member’s 

prefunded default fund contribution to a qualifying CCP can be as low as 0.16% of that default fund contribution. 

12 CFR 324.133(d)(4). By contrast, the capital requirement for a clearing member’s prefunded default fund 

contribution to a non-qualifying CCP is 100% of that default fund contribution. 12 CFR 324.10(a)(1)(iii), (b)(3) 

(requiring capital of 8% of risk-weighted asset amount), 12 CFR 324.133(d)(2) (setting risk-weighted asset amount 

for default fund contributions to non-qualifying CCP at 1,250% of the contribution (1,250% * 8% = 100%)). See 

also 12 CFR 324.133(c)(3) (applying a risk weight of 2% to transactions with a QCCP).

The Federal Reserve and Office of the Comptroller of the Currency have similar regulations.

24 Section 805(a)(2) of the Dodd-Frank Act, 12 U.S.C. 5464(a)(2)(A).

25 78 FR 49663 at 49666. The PFMI consist of twenty-four principles addressing the risk management and 

efficiency of a financial market infrastructure’s (FMI’s) operations. Subpart C reflects the following PFMI 

principles: Principle 2 (Governance); Principle 3 (Framework for the comprehensive management of risks); 

Principle 4 (Credit risk); Principle 6 (Margin); Principle 7 (Liquidity risk); Principle 9 (Money settlements); 

Principle 14 (Segregation and portability); Principle 15 (General business risk); Principle 16 (Custody and 
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C. Recovery and Orderly Wind-down for SIDCOs and Subpart C DCOs – § 39.39

The Commission established regulations for the recovery and wind-down of a SIDCO 

and Subpart C DCO in 2013 with the promulgation of § 39.39.

26

 Regulation 39.3927 was 

codified to protect the members of a SIDCO or Subpart C DCO, as well as their customers, and

the financial system more broadly, from the consequences of a disorderly failure of a DCO 

consistent with Principles 3 and 15 of the PFMI.28 Regulation 39.39 also promotes the concepts 

in Core Principles B (Financial Resources), D (Risk Management), G (Default Rules and 

Procedures), I (System Safeguards), L (Public Information), O (Governance Fitness Standards), 

and R (Legal Risk) of Section 5b(c)(2) of the CEA.

29

 

Regulation 39.39(a) defines the terms “general business risk,” “wind-down,” “recovery,” 

“operational risk,” and “unencumbered liquid financial assets.”30 

Regulation 39.39(b) requires SIDCOs and Subpart C DCOs to maintain viable plans for 

“(1) recovery or orderly wind-down, necessitated by uncovered credit losses or liquidity 

 

investment risks); Principle 17 (Operational risk); Principle 21 (Efficiency and effectiveness); Principle 22 

(Communication procedures and standards); and Principle 23 (Disclosure of rules, key procedures, and market data).

26 Derivatives Clearing Organizations and International Standards, 78 FR 72476, 72494 (Dec. 2, 2013). 

27 17 CFR 39.39. References in the remainder of this section are to the existing regulations.

28 See 78 FR 72476 at 72494-95. Principle 3 of the PFMI requires an FMI to have a sound risk management 

framework “for comprehensively managing legal, credit, liquidity, operational, and other risks.” PFMI Principle 3, 

at 32. Principle 15 of the PFMI requires an FMI to “identify, monitor, and manage its general business risk and hold 

sufficient liquid net assets funded by equity to cover potential general business losses so that it can continue 

operations and services as a going concern if those losses materialize. Further, liquid net assets should at all times be 

sufficient to ensure a recovery or orderly wind-down of critical operations and services.” PFMI Principle 15, at 88.

29 See generally 78 FR 72476.

30 17 CFR 39.39(a)(1)-(5).
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shortfalls; and separately, (2) recovery or orderly wind-down necessitated by general business 

risk, operational risk, or any other risk that threatens the [DCO’s] viability as a going concern.”

31

 

Regulation 39.39(c)(1) requires SIDCOs and Subpart C DCOs to identify scenarios that 

may potentially prevent it from being able to meet its obligations, provide its critical operations 

and services as a going concern and assess the effectiveness of a full range of options for 

recovery and orderly wind-down.32 Regulation 39.39(c)(1) further requires the plans to include 

procedures for informing the Commission when the recovery plan is initiated or wind-down is 

pending.33 

Regulation 39.39(c)(2) requires SIDCOs and Subpart C DCOs to have procedures for 

providing the Commission and the FDIC with information needed for resolution planning.34 

Regulation 39.39(d) requires that the recovery and wind-down plans of SIDCOs and 

Subpart C DCOs be supported by resources sufficient to implement those recovery or winddown plans. This paragraph is not being amended.35

Regulation 39.39(e) requires SIDCOs and Subpart C DCOs to maintain viable plans, 

approved by the SIDCO’s or Subpart C DCO’s board of directors and updated regularly, for 

 

31 17 CFR 39.39(b)(1) and (2). 

32 17 CFR 39.39(c)(1). The identification of scenarios and analysis by the DCO allows the DCO to more effectively 

and efficiently meet its obligations promptly, and may provide a DCO with a better understanding of its clearing 

members’ obligations, the extent to which the DCO would have to perform its obligations to its clearing members in 

times of stress, and the ability to better plan for doing so. The scenarios and analysis in the wind-down plan are 

necessary in the event that recovery is not possible and resolution is not available.

33 Id.

34 17 CFR 39.39(c)(2).

35 17 CFR 39.39(d).
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raising additional financial resources in a scenario in which it is unable to comply with any 

financial resource requirements set forth in part 39.36 This paragraph is not being amended.

Regulation 39.39(f) allows the Commission, upon request, to grant a SIDCO and Subpart 

C DCO up to one year to comply with any provision of § 39.39 or of § 39.35 (default rules and 

procedures for uncovered credit losses or liquidity shortfalls).37 

For DCOs that neither have been designated systemically important nor elected to 

become Subpart C DCOs, no regulation currently requires that they maintain viable recovery 

plans or orderly wind-down plans. This NPRM is proposing that all DCOs be required to 

maintain viable orderly wind-down plans.

D. 2014 International Standards and Guidance on Recovery and Resolution of Financial 

Market Infrastructures

In 2014, CPMI-IOSCO published guidance for financial market infrastructures (FMIs) on 

the recovery planning process and the content of the recovery plans.

38

 The 2014 CPMI-IOSCO 

Recovery Guidance interpreted the principles and key considerations under the PFMI relevant to 

recovery and orderly wind-down plans and planning, in particular PFMI Principles 3 and 15. 

The guidance also provided a menu of recovery tools separated into five categories: tools to 

allocate uncovered losses caused by participant default; tools to address uncovered liquidity 

 

36 17 CFR 39.39(e).

37 17 CFR 39.39(f).

38 CPMI-IOSCO, Recovery of financial market infrastructures (Oct. 15, 2014) (hereinafter 2014 CPMI-IOSCO 

Recovery Guidance). FMIs as a category include DCOs, CCPs, central securities depositories, payment systems, 

and trade repositories. SIDCOs are thus systemically important FMIs.
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shortfalls; tools to replenish financial resources; tools for a CCP to re-establish a matched book; 

and tools to allocate losses not related to participant default.39 

The Financial Stability Board (FSB) had, in 2011, published a set of Key Attributes of 

Effective Resolution Regimes for Financial Institutions,

40 and enhanced those standards with, as 

relevant here, an Annex on Resolution of Financial Market Infrastructures in 2014.

41

 The Key 

Attributes FMI Annex calls for ongoing recovery and resolution planning for systemically 

important FMIs (a category that includes SIDCOs).

42

 The Key Attributes FMI Annex also calls

for such FMIs “to maintain information systems and controls that can promptly produce and 

make available, both in normal times and during resolution, relevant data and information 

needed by the authorities for the purposes of timely resolution planning and resolution.”43 

E. CFTC Letter No. 16-61

In July 2016, the staff of the Division of Clearing and Risk (DCR) issued an advisory 

letter, described therein as “guidance,” regarding the content of a SIDCO’s and Subpart C 

DCO’s recovery and orderly wind-down plans, consistent with Subpart C, in particular § 39.39, 

 

39 Id. at 12-16.

40 FSB, Key Attributes of Effective Resolution Regimes for Financial Institutions (Oct. 2011).

41 FSB, Key Attributes of Effective Resolution Regimes for Financial Institutions, Appendix II-Annex I: Resolution 

of Financial Market Infrastructures (FMIs) and FMI Participants (Oct. 15, 2014) (hereinafter Key Attributes FMI 

Annex). The Key Attributes FMI Annex is “to be read alongside [the] PFMI which require systemically important 

FMIs to have a comprehensive and effective recovery plan.” Id. at 57.

42 Id. ⁋ 11.1, at 68 (stating “FMIs that are systemically important should be subject to a requirement for ongoing 

recovery and resolution planning”).

43 Id. ⁋ 12.1, at 70 (listing 7 areas of information that should be made available to authorities, including: FMI rules, 

default fund, and loss allocation rules; stakeholders; data and information for effective and timely risk control during 

resolution; the status of obligations of participants; links and interoperability arrangements with other FMIs; 

participant collateral; and netting arrangements).
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and the accompanying rule submissions designed to effectuate those plans.

44 CFTC Letter No. 

16-61 highlighted subjects that staff believed these DCOs should analyze in developing a 

recovery plan and wind-down plan, including: the range of scenarios that may prevent the DCO 

from being able to meet its obligations and to provide its critical operations and services;

recovery tools; wind-down scenarios and options; interconnections and interdependencies;

agreements to be maintained during recovery and wind-down; financial resources; governance;

notifications; assumptions; updates; and testing.45 The advisory letter also recommended 

questions that a DCO should consider and the analysis of those questions that a DCO should 

undertake and provide to the Commission in instances where a DCO concludes that a rule should 

be changed.

46

 

F. Additional International Guidance on Standards

In July 2017, CPMI-IOSCO issued further guidance on the PFMI related to the 

development of recovery plans for CCPs.

47 The (2017) CPMI-IOSCO Recovery Guidance 

 

44 CFTC Letter No. 16-61, Recovery Plans and Wind-down Plans Maintained by Derivatives Clearing Organizations 

and Tools for the Recovery and Orderly Wind-down of Derivatives Clearing Organizations, (July 16, 2016) 

(hereinafter CFTC Letter No. 16-61), available at: https://www.cftc.gov/csl/16-61/download. DCR staff was 

responding to requests from DCOs for guidance and clarification on the types of information and analysis that 

should be included in the requisite plans. The advisory letter explains staff’s expectations following its preliminary 

reviews of submitted recovery plans, wind-down plans, and proposed rule changes, and issues addressed at a DCRsponsored public roundtable. The transcript of the roundtable is available at 

https://www.cftc.gov/PressRoom/Events/opaevent_cftcstaff031915.

45 CFTC Letter No. 16-61, at 4. The guidance was not intended to be an exhaustive checklist of information and 

analysis, and did not address resolution planning. Id. at 3 n.11.

46 Id. at 15-19.

47 Supra fn. 9. The guidance as revised in 2017 is referred to herein as the CPMI-IOSCO Recovery Guidance. 

CPMI-IOSCO also issued guidance on the resilience of CCPs. CPMI-IOSCO, Resilience of central counterparties: 

further guidance on the PFMI (July 5, 2017) (providing guidance on governance, stress testing for both credit and 

liquidity exposures, coverage, margin, and a CCP's contribution of its financial resources to losses).
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updated the 2014 CPMI-IOSCO Recovery Guidance to provide clarification on the 

implementation of recovery plans, replenishment of financial resources, non-default related 

losses, and transparency with respect to recovery tools and their application. Similarly, the FSB 

issued further guidance on CCP resolution and resolution planning.48 The 2017 FSB Resolution 

Guidance sets out recommended powers for resolution authorities to maintain the continuity of 

critical CCP functions, details on the use of loss allocation tools, and provides steps that 

resolution authorities should take to implement crisis management groups and develop resolution 

plans. In August 2022, CPMI-IOSCO published a discussion paper on CCP practices to address 

non-default losses in which the paper noted positively, among other things, the practice of testing 

and reviewing a CCP’s recovery plan at least annually.

49

 

G. Requirement to Submit Recovery and Wind-down Plans to the Commission –

§ 39.19(c)(4)(xxiv)

In 2020, the Commission amended its reporting requirements under § 39.19 to require a 

DCO that is required to maintain recovery and wind-down plans pursuant to § 39.39(b) to submit 

its plans to the Commission no later than the date on which it is required to have the plans.50 The 

rule also permits a DCO that is not required to maintain recovery and wind-down plans, but 

which nonetheless maintains such plans, to submit the plans to the Commission.51 Additionally, 

 

48 FSB, Guidance on Central Counterparty Resolution and Resolution Planning (July 5, 2017) (hereinafter 2017 FSB 

Resolution Guidance).

49 CPMI-IOSCO, A discussion paper on central counterparty practices to address non-default loses (Aug. 4, 2022)

(NDL Discussion Paper).

50 Derivatives Clearing Organizations General Provisions and Core Principles, 85 FR 4800, 4822 (Jan. 27, 2020); 

17 CFR 39.19(c)(4)(xxiv).

51Id.
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if a DCO revises its plans, the DCO must submit the revised plans to the Commission along with 

a description of the changes and the reason for the changes.52 

II. Amendments to Regulation 39.39 – Recovery and Orderly Wind-down for SIDCOs and 

Subpart C DCOs; Information for Resolution Planning

In 2013, the Commission promulgated broad rules for a SIDCO’s and Subpart C DCO’s 

recovery and wind-down plans, including a rule that each SIDCO and Subpart C DCO must have 

procedures for providing the Commission and the FDIC with information needed for purposes of 

resolution planning.

53

 At that time, practice with respect to recovery and wind-down planning 

was in a nascent state of development, and the relevant global standard-setting bodies, CPMIIOSCO and the FSB, had not completed work establishing guidance for implementing 

international standards addressing recovery and resolution for FMIs.54 

The Commission is proposing to further align the rules under § 39.39 with the 

international standards and guidance promulgated since 2013,55 and to codify certain of the 

related guidance in CFTC Letter No. 16-61. The proposed amendments to § 39.39 include 

 

52 Id.

53 78 FR 72476, 72494 (codifying § 39.39(c)(2)).

54 See, e.g., CPMI-IOSCO, Consultative report, Recovery of financial market infrastructures, at ⁋ 1.2.1 (Aug. 2013) 

(distinguishing recovery planning from resolution planning and noting that “[a]spects of the consultation report 

concerning FMI resolution have been included in a new draft annex and will be included in an assessment 

methodology for the [FSB’s] Key Attributes”). CPMI-IOSCO, Consultative report, Recovery and resolution of 

financial market infrastructures, at ⁋ 1.4 (July 2012) (outlining the features for effective recovery and resolution 

regimes for FMIs in accordance with the FSB’s “Key Attributes for Effective Resolution Regimes for Financial 

Institutions”).

55 The Commission actively participated in the development of those standards and guidance in its role as a member 

of the relevant working groups (the CPMI-IOSCO Policy Standing Group and Steering Group and the Financial 

Stability Board Financial Market Infrastructure Cross-Border Crisis Management Group and Resolution Steering 

Group), and of the Board of IOSCO, one of the parent committees of CPMI-IOSCO.
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specifying the required elements of a SIDCO’s or Subpart C DCO’s recovery and orderly winddown plans, amending the requirement to have procedures to provide information needed for 

purposes of resolution planning, and specifying the types of information that should be provided 

to the Commission for resolution planning. Additionally, the Commission proposes to change 

the title of the regulation, amend and add definitions, and to delete certain provisions.

These proposed revisions and amendments to § 39.39 are consistent with the 

Commission’s obligation under § 805(a) of the Dodd-Frank Act to consider, in prescribing risk 

management standards pursuant to its authority under that provision with respect to SIDCOs,

international standards in implementing regulations relating to risk management.56 Moreover, 

the Commission views the relevant international standards under the PFMI, as well as the related 

guidance, including the CPMI-IOSCO Recovery Guidance, as helpful in informing its approach 

with respect to other DCOs in the context of recovery and orderly wind-down. These proposed 

revisions and amendments are reasonably necessary to effectuate Core Principle D57 (Risk 

Management) and to accomplish the purposes of the CEA, in particular, “to ensure the financial 

integrity of all transactions subject to [the CEA] and the avoidance of systemic risk.”58 The 

proposed changes also respond to comments received from SIDCOs and Subpart C DCOs over 

time.

As set forth in section III, the Commission is additionally proposing to require that all 

other DCOs maintain and submit to the Commission an orderly wind-down plan that 

 

56 See Section 805(a) of the Dodd-Frank Act, 12 U.S.C. 5464(a).

57 Section 5b(c)(2)(D)(i) of the CEA, 7 U.S.C. 7a-1(c)(2)(D)(i).

58 Section 3(b) of the CEA, 7 U.S.C. 5(b).
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incorporates substantially similar information and procedures. With respect to DCOs broadly,

these proposed revisions and amendments should lead to more effective DCO compliance and 

risk management, provide greater clarity and transparency for registered DCOs and DCO 

applicants, and increase overall confidence and efficiency in the swaps and futures markets.59 

Among the risks associated with discharging the risk management responsibilities of a DCO60 is 

the risk that, due to either default losses or non-default losses, the DCO will be unable to meet its 

obligations or provide its critical functions and will need to wind down. In such an event, an 

effective orderly wind-down plan should facilitate timely decision-making and the continuation 

of critical operations and services so that the orderly wind-down may occur in an orderly and 

expeditious manner. 

A DCO needs to prepare for circumstances—especially those that are sudden, 

unexpected, and on too large a scale for the DCO to timely recover—for which a DCO may not 

have the resources to continue as a going concern. A viable orderly wind-down plan promotes 

the goal of ensuring, at a minimum, that the DCO has sufficient resources, capabilities and legal 

authority to implement the tools and procedures for orderly wind-down activities. To the extent 

that the Commission’s bankruptcy regulations look to a DCO’s orderly wind-down plan,

61 an 

effective orderly wind-down plan will allow for the efficient management of events. 

 

59 See 76 FR at 69334-35 (a legally enforceable regulatory framework “provides assurance to market participants 

and the public that DCOs are meeting minimum risk standards” which “can serve to increase market confidence,” 

“free up resources that market participants might otherwise hold,” and “reduce search costs that market participants 

would otherwise incur”).

60 See Core Principle D(i), Section 5b(c)(2)(D)(i) of the CEA, 7 U.S.C. 7a-1(c)(2)(D)(i).

61 See, e.g., 17 CFR 190.15(c) (“In administering a proceeding under this subpart, the trustee shall, in consultation 

with the Commission, take actions in accordance with any recovery and wind-down plans maintained by the debtor 

and filed with the Commission pursuant to § 39.39 of this chapter, to the extent reasonable and practicable, and 

consistent with the protection of customers.”)
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To advance the DCO Core Principles’ aims of, among other things, strengthening the risk 

management practices of DCOs, enhancing legal certainty for DCOs, clearing members and 

market participants, and safeguarding the public, the Commission is proposing to require that all 

DCOs maintain and submit orderly wind-down plans with the subjects and analyses included 

herein. Additionally, the Commission is proposing revised subjects and analyses for the 

recovery plans that SIDCOs and Subpart C DCOs must maintain.

A. Definitions – § 39.39(a), § 39.2

Currently, the definitions relevant to recovery and orderly wind-down planning are 

contained in § 39.39(a). The Commission is proposing to move two of those definitions, “winddown” and “recovery,” to § 39.2, as orderly wind-down will apply to all DCOs, and recovery is 

thematically linked to orderly wind-down. Because these definitions would apply to all DCOs, 

the Commission is proposing technical corrections to eliminate the references to SIDCOs and 

Subpart C DCOs in both. 

The Commission is changing the term “wind-down” to "orderly wind-down”62 and is 

defining it as a DCO’s actions to “effect the permanent cessation, sale, or transfer, of one or 

more of its critical operations or services, in a manner that would not increase the risk of 

significant liquidity, credit, or operational problems spreading among financial institutions or 

markets and thereby threaten the stability of the U.S. financial system.”

63 The Commission 

 

62 The definition also provides for the use of the term “wind-down” as a shorter form of “orderly wind-down.”

63 This definition of “orderly wind-down” would align more closely with the corresponding definition in the Federal 

Reserve’s Regulation HH (Designated Financial Market Utilities), 12 CFR 234.2(g), but would additionally address 

“operational problems spreading among financial institutions or markets,” consistent with the U.S. Securities and 

Exchange Commission’s recent rule proposal. Covered Clearing Agency Resilience and Recovery and Wind-Down 

Plans, 88 FR 34708, 34717 (May 30, 2023). 
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intends the amended definition to focus the attention of DCOs on issues of financial stability in 

planning for and executing an orderly wind-down.

64 Given the financial crisis that preceded and 

informed Dodd-Frank’s passage, and the purpose of the CEA to ensure the avoidance of 

systemic risk, the Commission believes an important goal of an orderly wind-down should be to 

avoid an increased risk of significant liquidity, credit, or operational problems spreading among 

financial institutions or markets.

The Commission is also proposing to amend the definition of “recovery” by replacing the 

reference to “capital inadequacy" with “inadequacy of financial resources” in order to tie the 

definition of “recovery” more closely to the framework of Part 39,

65 and to move that definition, 

as revised, to § 39.2, in alphabetical order. Neither the recovery plan nor the orderly wind-down 

plan may assume government intervention or support. 

The Commission is proposing to delete the definitions of “general business risk” and 

“operational risk,” and instead to import those definitions, as modified, as part of the definition 

of the term “non-default losses.” The Commission is also proposing to add a definition of the 

term “default losses.” Recovery plans and orderly wind-down plans are required to address both 

default losses and non-default losses.

The Commission is proposing to define default losses to include both uncovered credit 

losses or liquidity shortfalls created by the default of a clearing member in respect of its 

 

64 DCOs must already consider issues of financial stability in their governance arrangements. 17 CFR

39.24(a)(1)(iv) (requiring that a DCO’s governance arrangements “[e]xplicitly support the stability of the broader 

financial system and other relevant public interest considerations”).

65 See, e.g., Regulation 39.11 (enumerating the requirements for financial resources a DCO must maintain to 

discharge its responsibilities); § 39.39(d) (enumerating the requirements for financial resources a SIDCO and 

Subpart C DCO must maintain to support its recovery plan and wind-down plan).
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obligations with respect to cleared transactions. In this context, uncovered credit losses arise 

from the DCO’s holding an insufficient value of resources to meet its obligations. For example, 

the DCO is obligated to pay, today, variation margin of $10 billion in U.S. dollar cash, but only 

has $8 billion of resources available. Similarly, in this context, a liquidity shortfalls arise from 

the DCO holding resources that are not in the correct form to meet its obligations. For example, 

the DCO is obligated to pay, today, variation margin of $10 billion in U.S. dollar cash, but only 

has $8 billion of U.S. dollar cash available, even though it may additionally have more than $2 

billion (worth, at present market value) of securities that it is unable to convert promptly into 

U.S. dollar cash.66 The definition also focuses on the clearing member’s obligations with respect 

to cleared transactions. Thus, if the clearing member defaults on its obligations for facilities 

rental, or in its obligations in its role as a service provider to the DCO, those would not be 

“default losses” for this purpose.

The Commission is proposing to define non-default losses to mean losses from any cause, 

other than default losses, that may threaten the DCO’s viability as a going concern. This portion 

of the definition is derived from former § 39.39(b)(2), which required SIDCOs and Subpart C 

DCOs to “maintain viable plans for” “(1) Recovery or orderly wind-down necessitated by” the 

risks that are currently proposed to be included in “default losses” (i.e., uncovered credit losses 

or liquidity shortfalls” as well as “(2) Recovery or orderly wind-down necessitated by general 

business risk, operational risk, or any other risk that threatens the [DCO’s] viability as a going 

concern” (emphasis added). 

 

66 Another example of a liquidity shortfall is a currency mismatch. For example, assume that the U.S. dollar to Euro 

exchange rate is $1.10/€1.00. The DCO has a variation margin obligation, today, of €1 billion, and only has 

resources available for the purpose of making payment of $1.1 billion. That would also be a liquidity shortfall.
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The former definition specifically included, as potential sources of loss, “general business 

risk” and “operational risk.” The definitions in § 39.39 will now apply to all DCOs, and thus are 

being moved to § 39.2. In order to ensure that DCOs consider, as part of their planning process, 

the full set of potential non-default losses, the definition of non-default losses is proposed to 

explicitly include, though not be limited to, losses arising from risks often referred to as (1) 

general business risk, (2) custody risk, (3) investment risk, (4) legal risk, and (5) operational 

risk.67 To avoid unnecessary questions of taxonomy, however, these terms are not proposed to 

be separately defined, rather, the substance of these definitions are being included as instances of 

non-default losses.

Under the first group, losses arising from general business risk, the Commission proposes 

to import the previous definition of “general business risk” in § 39.39(a)(1), deleting references 

to SIDCOs or subpart C DCOs as surplusage. This results in “(i) any potential impairment of a 

derivatives clearing organization's financial position, as a business concern, as a consequence of 

a decline in its revenues or an increase in its expenses, such that expenses exceed revenues and 

result in a loss that the derivatives clearing organization must charge against capital.”

Under the second group, losses arising from custody risk, the Commission proposes to 

adopt the discussion of custody risk in the CPMI-IOSCO Recovery Guidance.68 This results in 

“(ii) losses incurred by the derivatives clearing organization on assets held in custody in the 

 

67 See NDL Discussion Paper § 2.1 (“Generally, CCPs consider a range of NDL scenarios that may arise from risks 

relevant to their business activities, including general business risk, operational risk, investment risk, custody risk 

and legal risk.”). See also Guidance on Financial Resources to Support CCP Resolution and on the Treatment of 

CCP Equity in Resolution (FSB 2020) at §1.2 (“Hypothetical non-default loss scenarios").

68 See CPMI-IOSCO Recovery Guidance ¶ 3.2.5 (“[A]n FMI can be exposed to custody risk and could suffer losses 

on assets held in custody in the event of a custodian’s (or subcustodian’s) insolvency, negligence, fraud, poor 

administration or inadequate record-keeping.”)
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event of a custodian’s (or sub-custodian’s) insolvency, negligence, fraud, poor administration or 

inadequate record-keeping.”

Under the third group, losses arising from investment risk, the Commission proposes to 

adapt the discussion of investment risk in the CPMI-IOSCO Recovery Guidance.69 This 

adaptation results in “(iii) losses incurred by the derivatives clearing organization from 

diminution of the value of investments of its own or its participants’ resources, including cash or 

other collateral.”

Under the fourth group, losses arising from legal risk, the international guidance is less 

helpful. The CPMI-IOSCO Recovery Guidance does not define “legal risk;” the FSB guidance 

simply notes that “legal, regulatory or contractual penalties could lead to significant losses or 

uncertainty for the CCP and can take a long time to materialise fully.” Losses from legal risk 

can arise from causes other than “penalties”: For example, in the realm of contract or tort, a 

DCO may be responsible for compensating a plaintiff for the DCO’s breach of contract, or for 

the plaintiff’s damages caused by, e.g., the DCO’s negligence. In the realm of regulatory 

litigation, there may be remedies other than penalties, including, e.g., restitution or 

disgorgement. Accordingly, the Commission is proposing to broadly include “(iv) losses from 

adverse judgments, or other losses, arising from legal, regulatory, or contractual obligations, 

including damages or penalties, and the possibility that contracts that the derivatives clearing 

organization relies upon are wholly or partly unenforceable.”

Finally, under the fifth group, losses arising from operational risk, the Commission is 

proposing to draw from the prior definition of operational risk, adding a few additional important 

 

69 See id. (“Investment risk is the financial risk faced by an FMI when it invests its own or its participants’ resources, 

such as cash or other collateral.”)
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categories. Specifically, the Commission is proposing to add references to (1) the actions of 

malicious actors and (2) the possibility of disruption from internal events. Cyber risk is

increasing, and organizations’ operations are exposed to risk from malicious (threat) actors, who 

might include employees and third-party providers, criminals, terrorists, and nation-states. 

Thus, the Commission proposes to recognize explicitly the peril from what has been described as 

“malicious action by third parties intent on creating systemic harm or disruption, with 

concomitant financial losses.”70 Including a reference to “malicious actions (whether by internal 

or external threat actors)” should help protect market participants and the public by potentially 

improving the DCO’s ability to identify vulnerabilities from malicious actors, safeguard its 

systems from such actors, and address possible losses that might occur if, despite the DCO’s 

system safeguards, malicious actors detect and act upon any cyber vulnerabilities. 

The Commission is also proposing to add a reference to the possibility of disruption from 

internal events (the current definition of operational risk refers only to “disruptions from external 

events”). Examples of these internal events include fire as well as flooding (due to, e.g., 

malfunctions of sprinkler systems). This expansion to the definition should also help protect 

market participants and the public, by potentially improving the DCO’s ability to identify 

vulnerabilities to its systems and operations from internal events, mitigate those vulnerabilities, 

and address possible losses that might occur if, despite the DCO’s efforts, such vulnerabilities 

disrupt its systems or operations.

 

70 CPMI, Cyber resilience in financial market infrastructures, at 7 (Nov. 2014); see also CPMI-IOSCO, Guidance on 

cyber resilience for financial market infrastructures (June 2016). See generally Executive Order No. 14028, 

Improving the Nation’s Cybersecurity, 86 FR 26633 (May 12, 2021), available at: 

https://www.whitehouse.gov/briefing-room/presidential-actions/2021/05/12/executive-order-on-improving-thenations-cybersecurity/.
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Accordingly, the Commission is proposing to refer specifically to non-default losses 

“(v) occasioned by deficiencies in information systems or internal processes, human errors, 

management failures, malicious actions (whether by internal or external threat actors), 

disruptions to services provided by third parties, or disruptions from internal or external events 

that result in the reduction, deterioration, or breakdown of services provided by the derivatives 

clearing organization.”

B. Recovery Plan and Orderly Wind-down Plan – § 39.39(b)

Regulation 39.39(b) currently requires each SIDCO and Subpart C DCO to maintain 

viable plans for (1) recovery or orderly wind-down, necessitated by uncovered credit losses or 

liquidity shortfalls; and, separately, (2) recovery or orderly wind-down necessitated by general 

business risk, operational risk, or any other risk that threatens the DCO’s viability as a going 

concern.71 Regulation 39.19(c)(4)(xxiv) currently requires a SIDCO or Subpart C DCO that is 

required to maintain recovery and wind-down plans pursuant to § 39.39(b) to submit those plans 

to the Commission no later than the date on which the DCO is required to have the plans.72 The 

Commission is proposing amendments to these provisions as set forth below. 

The Commission is maintaining existing regulations 39.39(d) and (e).73 Accordingly, the 

recovery and orderly wind-down plans of SIDCOs and Subpart C DCOs must continue to 

 

71 17 CFR 39.39(b)(1) and (2).

72 17 CFR Regulation 39.19(c)(4)(xxiv).

73 Regulation 39.39(d)(2) provides, in part: "Each [SIDCO] and [Subpart C DCO] shall maintain sufficient 

unencumbered liquid financial assets, funded by the equity of its owners, to implement its recovery or wind-down 

plans . . . . [T]he [SIDCO] or [Subpart C DCO] shall analyze its particular circumstances and risks and maintain any 

additional resources that may be necessary to implement the plans. . . . The plan shall include evidence and analysis 

to support the conclusion that the amount considered necessary is, in fact, sufficient to implement the plans." 

Regulation 39.39(e) provides, in part: "All [SIDCOs] and [Subpart C DCOs] shall maintain viable plans for raising 
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include evidence and analysis to support the conclusion that they have sufficient financial 

resources—as set forth in regulation 39.39(d)(2)—to implement their recovery and wind-down 

plans. Should this proposed rulemaking be adopted, that analysis would be informed by the 

analyses SIDCOs and Subpart C DCOs would be required to engage in under proposed 

regulation 39.39(c). Consistent with regulation 39.39(e), moreover, SIDCOs and Subpart C 

DCOs must continue to maintain viable plans for raising additional financial resources where 

they are unable to comply with any financial resources requirements provided in Part 39.

1. Submission of plans for recovery and orderly wind-down – § 39.39(b)(1) 

The Commission is proposing to amend § 39.39(b)(1) and (2) by combining the 

paragraphs into one paragraph, § 39.39(b)(1), and cross-referencing the reporting requirement in

§ 39.19(c)(4)(xxiv). Proposed § 39.39(b)(1) would require each SIDCO and Subpart C DCO to 

maintain and, consistent with § 39.19(c)(4)(xxiv), submit to the Commission, viable plans for 

recovery and orderly wind-down, and supporting information, due to, in each case, default losses

and non-default losses.74 The Commission is not proposing to require that the recovery plan and 

orderly wind-down plan be submitted as separate documents. However, the analysis for the 

recovery portion and wind-down portion must be set forth clearly. 

The Commission requests comment on these proposed revisions.

2. Notice of Initiation of the Recovery Plan and of Pending Orderly Wind-down – § 

39.39(b)(2), § 39.13(k)(1), and § 39.19(c)(4)(xxv) 

 

additional financial resources, including, where appropriate, capital, in a scenario in which the [SIDCO] or [Subpart 

C DCO] is unable, or virtually unable, to comply with any financial resources requirements set forth in this part." 

74 In Section IV below, discussing the reporting requirement in § 39.19(c)(4)(xxiv), the Commission explains the 

reason for adding the term “and supporting information.”
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Current § 39.39(c)(1) includes, in part, the requirement that recovery plans and winddown plans “include procedures for informing the Commission, as soon as practicable, when the 

recovery plan is initiated or wind-down is pending.”75 The Commission proposes to move this 

requirement to § 39.39(b)(2) and to amend the requirement to state explicitly that in addition to 

having procedures in place for informing the Commission that the recovery plan is initiated or 

that orderly wind-down is pending, the SIDCO or Subpart C DCO must notify the Commission, 

as soon as practicable, when the recovery plan is initiated or orderly wind-down is pending. This 

is not a substantive change since the requirement to have procedures in place to provide notice 

necessarily implies that such notice to the Commission will occur; however, the Commission 

believes that explicitly stating this requirement will ensure that the SIDCO or Subpart C DCO

understands this requirement.

Additionally, the Commission proposes to require that these DCOs’ notice that the 

recovery plan is initiated or orderly wind-down is pending also be provided to clearing 

members.76 Timely notification of events to clearing members is essential to enable them to 

prepare for a transition by the DCO into recovery or orderly wind-down. The Commission 

proposes that each SIDCO and Subpart C DCO that files a recovery plan and orderly wind-down 

plan under this section must notify clearing members (in addition to the Commission) that 

recovery is initiated or that orderly wind-down is pending as soon as practicable. As discussed 

below in Section III, the Commission proposes that DCOs that are neither SIDCOs nor Subpart 

 

75 17 CFR 39.39(c)(1).

76 CFTC Letter No. 16-61, at 14 (referencing § 39.21, “Public information,” which requires a DCO to “make 

information concerning the rules and the operating and default procedures governing the clearing and settlement 

systems of the DCO available to market participants”).
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C DCOs notify the Commission and clearing members as soon as practicable when recovery77 is 

initiated or orderly wind-down is pending.

The Commission proposes to add new § 39.19(c)(4)(xxv) to require that each DCO notify 

the Commission and clearing members as soon as practicable when the DCO has initiated its 

recovery plan or orderly wind-down is pending. 

The Commission requests comment on these proposed changes. 

3. Establishment of Time to File Recovery Plan and Orderly Wind-down Plan –

Proposed § 39.39(b)(3)

The Commission is proposing to establish the timing of the filing of recovery plans and 

orderly wind-down plans. In 2013, the Commission acknowledged commenters’ concerns that 

additional time may be required to comply with § 39.39 because relevant global standards were 

still in the consultative phase. The Commission promulgated § 39.39(f) to allow a SIDCO or 

Subpart C DCO to apply for up to one year to comply with § 39.39. Regulation 39.39(f) 

therefore created various dates for SIDCOs and Subpart C DCOs to file the plans required by § 

39.39(b). 

Commenters again requested a specific date to submit recovery plans and wind-down 

plans in response to the May 2019 notice of proposed rulemaking codifying §

39.19(c)(4)(xxiv).78 In the January 2020 final rule, the Commission noted the date by which a 

 

77 While, under the proposal, a DCO that is neither a SIDCO nor a subpart C DCO is not required to have a recovery 

plan, if such a DCO does initiate recovery, it will be required to notify the Commission and clearing members. 

78 See, e.g., Comment letter filed by the Futures Industry Association and the International Swaps and Derivatives 

Association (ISDA), at 21 (Sept. 13, 2019), available at 

https://comments.cftc.gov/PublicComments/CommentList.aspx?id=2985&ctl00_ctl00_cphContentMain_MainConte

nt_gvCommentListChangePage=2.
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SIDCO or new Subpart C DCO is required to maintain a recovery plan and wind-down plan 

depends upon when the DCO is designated as systemically important or elects Subpart C status, 

whether it requests relief under § 39.39(f), and whether the Commission grants such relief.79 The 

Commission determined that § 39.39(f) prevented the establishment of a date certain for 

submitting plans to the Commission.80 This proposal will, if adopted and finalized by the 

Commission, codify the elements of a recovery plan and wind-down plan required under 

paragraph (b) of § 39.39, and remove the uncertainty concerning the filing deadline. The need to 

request an extension of time for up to one year to comply with the requirements of § 39.39 (and § 

39.35) will be obviated by the fixed deadline for newly designated SIDCOs to develop and 

maintain a recovery plan and a wind-down plan.

81 The Commission is proposing to require a 

DCO to submit a recovery plan and orderly wind-down plan and supporting information (to the 

extent it has not already done so) as required by proposed § 39.39(b) within six months of the 

date the DCO is designated as a SIDCO, or as part of its election to become subject to the 

provisions of Subpart C set forth in § 39.31, and annually thereafter.

82

 

The Commission has preliminarily determined to require that a newly designated SIDCO 

should file a complete recovery plan and (to the extent it has not already done so) orderly wind-

 

79 85 FR at 4822. 

80 Id.

81 Regulation 39.35 covers the default rules and procedures for uncovered credit losses or liquidity shortfalls 

(recovery) for SIDCOs and Subpart C DCOs. 

 

82 As discussed in section III below, it is being proposed that all DCOs will be required to maintain orderly winddown plans on and after the effective date of this rule with respect to that requirement. As discussed further below, 

it is proposed that the effective date of that orderly wind-down plan requirement will be six months after this rule 

may be finalized. To address the possibility that a DCO may be designated a SIDCO or may elect Subpart C status 

during that intervening period, such a DCO will be required to maintain and file an orderly wind-down plan to the 

extent it has not already done so.
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down plan consistent with part 39 within six months of the date of designation for the following 

reasons. First, in order to be designated as a SIDCO, the DCO must be a DCO registered with 

the CFTC. All DCOs must comply with, and demonstrate compliance as requested by the 

Commission, applicable provisions of the CEA and the Commission’s regulations, including 

Subparts A and B of part 39, in order be registered. Second, the Commission expects that most 

of the larger DCOs for which future designation may be forthcoming have elected to be subject 

to Subpart C, and therefore, have recovery plans in place. Among those DCOs that are not 

currently subject to Subpart C, most are foreign-based DCOs that are subject to standards in their 

home jurisdictions that are consistent with the PFMI, and thus such foreign-based DCOs are 

required to have both recovery and orderly wind-down plans.83 Third, upon notification that the 

FSOC is considering whether to designate a DCO systemically important, the DCO will be 

aware of the enhanced regulatory requirements for SIDCOs included in subpart C of part 39 of 

the Commission’s regulations.84 Finally, staff issued CFTC Letter No. 16-61 and its non-binding 

guidance in 2016. DCOs registered with the Commission and the clearing industry in general are

likely familiar with the staff letter and have probably been following developments related to this 

proposal; hence, the Commission has preliminarily determined not to require a longer delay. 

The Commission is clarifying that a DCO that elects to be subject to Subpart C of the 

Commission’s regulations must file a recovery plan and (in the event it has not already done so)

an orderly wind-down plan, and supporting information, as part of its election to be subject to the 

 

83 See text accompanying fn. 207, infra.

84 12 CFR 1320.11(a), 1320.12(a); Authority to Designate Financial Market Utilities as Systemically Important, 76 

FR 44763 (Jul. 27, 2011).
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provisions of Subpart C.85 The Commission continues to expect that a DCO will not elect status 

as a Subpart C DCO before it is in full compliance with the regulations in Subpart C. 

The Commission is proposing § 39.39(b)(3) to require a SIDCO to file a recovery plan,

and supporting information, within six months of its designation as systemically important by the 

FSOC. The Commission is also proposing to require that a DCO that elects to be subject to the 

provisions of Subpart C must file a recovery plan and (to the extent it has not already done so) an 

orderly wind-down plan, and supporting information for these plans, as part of the DCO’s 

election to be subject to the provisions of Subpart C. The Commission is proposing that such 

plans be updated thereafter on an annual basis.

The Commission requests comment on this aspect of the proposal.

C. Recovery Plan and Orderly Wind-down Plan: Required Elements – § 39.39(c)

Regulation 39.39(c)(1) currently requires that a SIDCO and Subpart C DCO develop a 

recovery plan and orderly wind-down plan that includes scenarios that may potentially prevent it 

from being able to meet its obligations, provide its critical operations and services as a going 

concern, and assess the effectiveness of a full range of options for recovery or orderly winddown. At the time the Commission was promulgating current § 39.39(c)(1), commenters had 

requested specificity regarding the required elements of a recovery plan.

86 The Commission 

declined to provide that specificity because the international guidance relevant to such plans was 

 

85 The Commission is proposing to amend Exhibit F-1 to the Subpart C election form to require the submission of 

the recovery and orderly wind-down plans, and supporting information, as well as a demonstration of how those 

plans comply with the requirements of Subpart C.

86 See, e.g., Comment letter of ISDA at 2-3 (Sept. 16, 2013), filed in response to the Notice of Proposed 

Rulemaking, Derivatives Clearing Organizations and International Standards, 78 FR 50260 (Aug. 16, 2013), 

available at https://comments.cftc.gov/PublicComments/CommentList.aspx?id=1391. 
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not final when § 39.39 was adopted in 2013. After the international guidance was finalized, staff 

issued CFTC Letter No. 16-61, which provides informal guidance from DCR concerning those 

elements. Supervisory experience shows that the recovery plans and orderly wind-down plans of 

SIDCOs and Subpart C DCOs are generally consistent with the staff guidance in Letter No. 16-

61; thus, most, if not all, of the requirements described below are already incorporated into the 

plans submitted by the DCOs currently subject to § 39.39. The Commission has preliminarily 

determined to codify the staff guidance into the Commission’s part 39 regulations. The 

Commission has preliminarily determined to specify the required elements that a SIDCO or 

Subpart C DCO must include in its recovery plan and orderly wind-down plan at this time. 

The Commission proposes to replace § 39.39(c) in its entirety. Proposed § 39.39(c)

would reflect, to the extent the Commission considers appropriate, the guidance on international 

standards related to recovery plans and orderly wind-down plans adopted by the global standardsetting bodies since 2013,

87 and certain of the DCR staff guidance set forth in CFTC Letter No. 

16-61.

88

As a general matter, the Commission believes that a DCO’s recovery plan and orderly 

wind-down plan required by § 39.39(b) should include summaries that provide an overview of 

the plans, and descriptions of how the plans will be implemented, in order to enhance both the 

understanding of the persons who need to use the plans and the Commission’s ability to evaluate 

the plans as part of its supervisory program. Proposed § 39.39(c) would also require that the 

description of each plan include the identification and description of the DCO’s critical 

 

87 E.g., CPMI-IOSCO Recovery Guidance.

88 See 17 CFR 39.39(c)(1).
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operations and services, interconnections and interdependencies, resilient staffing arrangements, 

obstacles to success, stress scenario analyses, potential triggers for recovery and orderly winddown, available recovery and orderly wind-down tools, analysis of the effect of any tools

identified, lists of agreements to be maintained during recovery and orderly wind-down, 

descriptions of governance arrangements, and testing. These proposed plan requirements are 

necessary for the plan to be viable, i.e., capable of working successfully, are consistent with the 

international guidance discussed above, and should be considered the minimum that a SIDCO or 

Subpart C DCO must include in its recovery plan and orderly wind-down plan. The Commission 

proposes to add these requirements as new proposed § 39.39(c). For clarity and completeness, 

specific requirements will be set forth in paragraphs (c)(1) through (c)(8), as discussed below.

The Commission requests comment on this approach, and on each of the proposed 

specific requirements.

1. Critical Operations and Services, Interconnections and Interdependencies, and 

Resilient Staffing – § 39.39(c)(1)

The Commission is proposing to add new § 39.39(c)(1) requiring recovery plans and 

orderly wind-down plans to identify and describe the SIDCO’s and Subpart C DCO’s critical 

operations and services, including internal and external service providers; ancillary services 

providers; financial and operational interconnections and interdependencies; aggregate cost 

estimates for the continuation of services; plans for resilient staffing arrangements for continuity 

of operations into recovery or orderly wind-down; plans to address the risks that the failure of 

each critical operation and service poses to the DCO, and a description of how such failures 

would be addressed; and a description of how the SIDCO and Subpart C DCO will ensure that 

the services continue through recovery and orderly wind-down.
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In developing a viable plan, both the CPMI-IOSCO Recovery Guidance and CFTC Letter 

No. 16-61 stress the importance of identifying the critical operations and services that the DCO 

provides, and the financial and operational interconnections and interdependencies among the 

DCO and its relevant affiliates, internal and external service providers, and other relevant 

stakeholders.89 The Commission agrees that each recovery plan and orderly wind-down plan 

should identify and describe the critical operations and services that the DCO provides to 

clearing members and other financial market participants. As CPMI-IOSCO stated in its 

guidance, “[t]he purpose of identifying critical services is to focus the recovery plan on the 

FMI’s ability to continue to provide these services on an ongoing basis, even when it comes 

under extreme stress.”90 The Commission agrees that for purposes of recovery planning in §

39.39, when determining whether a service is “critical,” the DCO must consider “the importance 

of the service to the [DCO]’s participants and other FMIs, and to the smooth functioning of the 

markets the [DCO] serves and, in particular, the maintenance of financial stability.”

91

 

The Commission anticipates that the DCO’s ability to provide critical services may also 

be affected by issues relating to certain services that are ancillary to the critical service, and thus 

issues relating to these ancillary services should be included in the recovery and orderly winddown plan. The Commission agrees with the analysis in the CPMI-IOSCO Recovery Guidance

that, “even if a specific service is judged not to be critical, a systemically important FMI needs to 

take account of the possibility that losses or liquidity shortfalls relating to the provision of that 

 

89 CPMI-IOSCO Recovery Guidance, at § 2.4; CFTC Letter No. 16-61, at 10-11. 

90 CPMI-IOSCO Recovery Guidance, at § 2.4.2.

91 Id.
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noncritical service could threaten its viability and thus necessitate implementation of its recovery 

plan so that it can continue to provide those services that are judged to be critical. An FMI needs 

to have a recovery plan that covers all the scenarios that could threaten its viability.”

92

 

The Commission believes that a DCO’s recovery plan and orderly wind-down plan 

should identify and analyze a DCO’s financial and operational interconnections and 

interdependencies. Such an analysis is important to foster, and to provide transparency into, the 

ability of the DCO to implement each of its recovery plan and orderly wind-down plan. For 

instance, the recovery plan should account for the possibility that an affiliated entity in the 

financial sector may fail, resulting in a cascade of failures and resultant defaults on all 

obligations to the DCO, including with respect to services that the DCO depends upon to 

complete its operations. A DCO’s recovery plan and orderly wind-down plan should also 

identify the DCO’s critical internal and external service providers, the risks that the failure of 

each provider poses to the DCO, how such failures would be addressed, and how the DCO would 

ensure that the services would continue into recovery and orderly wind-down.

93

 Similarly, the 

DCO should consider the impact of any disruption in services or operations it provides to 

clearing members and financial market participants. In this regard, CFTC Letter No. 16-61 

recommended that a DCO’s recovery plan include the identification and analysis of “the 

financial and operational interconnections and interdependencies among the DCO and its 

relevant affiliates, internal and external service providers and other relevant stakeholders.”94 

 

92 Id. at § 2.4.4. n.13.

93 Id.

94 CFTC Letter No. 16-61, at 10.
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In considering and analyzing the magnitude of the costs that it needs to plan for 

associated with recovery or orderly wind-down, the DCO should consider the likely increase in 

certain of its expenses compared to its business-as-usual operating budget, including, for 

example, legal fees, accounting fees, financial advisor fees, the costs associated with employee 

retention programs, and other incentives in order to maintain critical staff. Other costs, such as 

marketing or those associated with the development of new products, may decrease. For 

purposes of orderly wind-down planning in particular, the DCO shall proceed under the 

conservative assumption that any resources consumed during recovery will not be available to 

fund critical operations and services in wind-down. 

The DCO’s analysis of its critical operations and services should also describe the impact 

of the multiple roles and relationships that a single financial entity may have with respect to the 

DCO including affiliated entities and external entities.

95 For instance, a single external entity 

(including a set of affiliated entities) may act as a clearing member, a settlement bank, custodian 

or depository bank, liquidity provider or counterparty. If such a single external entity defaults in 

one of its roles e.g., as a clearing member, it will likely default in all of them. 96 An entity 

affiliated with the DCO may be relied upon for a variety of services, such as those related to 

information technology, human resources, or facilities. In order to support the viability of its

 

95 Id.

96 A financial conglomerate/bank holding company structure may operate through a set of legal entities (e.g., a 

broker-dealer/futures commission merchant separate from a bank separate from an information technology service 

provider), each of which has different relationships with the DCO. Based on past experience with insolvencies of 

financial firms (e.g., Refco, Lehman, MF Global), once one of these affiliates fails, the others are likely to follow it 

into bankruptcy or receivership proceedings quickly.
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recovery or orderly wind-down plan, the DCO should address the contingency that its affiliate 

may not be able to perform those services.

Consistent with the CPMI-IOSCO Recovery Guidance, the Commission believes that a 

DCO’s recovery plan should consider how its design and implementation may affect another 

FMI, and coordinate the relevant aspects of their plans.97 Given the interconnected nature of the 

financial services ecosystem, supporting financial stability requires the recovery plan and orderly 

wind-down plan of each DCO to identify and address contingencies and consequences.

Recovery and orderly wind-down planning must also identify potential risks that may 

arise in recovery and orderly wind-down if financial weakness or failure in one of the DCO’s

business lines or affiliated legal entities spreads to others. The recovery and orderly wind-down 

plans must describe how the DCO has planned for resilient staffing arrangements for continuity 

of operations since it is not feasible to maintain a critical service without the concomitant 

personnel. As part of planning for recovery, each SIDCO and Subpart C DCO should also 

explain how the DCO will retain, and address the potential loss of, the services of personnel 

filling mission-critical roles during extreme stress. The DCO may additionally be vulnerable to 

key person risk; accordingly, plans for resilient staffing arrangements should identify, to the 

extent applicable, key person risk within the DCO or (as relevant) affiliated legal entities that the 

DCO relies upon to provide its critical operations and services, and how the DCO has planned 

for this risk.

The Commission requests comment on this aspect of the proposal.

2. Recovery Scenarios and Analysis – § 39.39(c)(2) 

 

97 CPMI-IOSCO Recovery Guidance, at § 2.4.14.
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The Commission is proposing to add new § 39.39(c)(2) to specify scenarios that must be 

addressed in the SIDCO’s or Subpart C DCO’s recovery plan, to the extent, in each case, that

such scenario is possible. The Commission believes that the current requirement that a SIDCO

or Subpart C DCO “shall identify scenarios that may potentially prevent it from being able to 

meet its obligations” is too broad and allows for planning gaps. 

To support a systematic planning process that will foster these DCOs’ ability to recover 

effectively from situations of unprecedented stress, the Commission is proposing to adopt 

portions of CFTC Letter No. 16-61 describing the analysis that should take place for each 

scenario considered in the recovery plan; namely: (1) a description of the scenario; (2) the events 

that are likely to trigger the scenario; (3) the DCO’s process for monitoring events triggering the 

scenario; (4) the market conditions, operational and financial difficulties and other relevant 

circumstances that are likely to result from the scenario; (5) the potential financial and 

operational impact of the scenario on the DCO and on its clearing members, internal and external 

service providers and relevant affiliated companies, both in an orderly market and in a disorderly 

market; and (6) the specific steps the DCO would anticipate taking when the scenario occurs or 

appears likely to occur including, without limitation, any governance or other procedures in 

order to implement the relevant recovery tools and to ensure that such implementation occurs in 

sufficient time for the recovery tools to achieve their intended effect.98 The Commission 

believes that this six-part analysis is integral to viability of a SIDCO’s and Subpart C DCO’s 

recovery plan and orderly wind-down plan. The Commission expects that each of these DCOs

will undertake such analysis for each scenario described in its recovery plan and its orderly

 

98 CFTC Letter No. 16-61, at 6-7.
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wind-down plan. The Commission is proposing in § 39.39(c)(2) that each recovery plan and 

orderly wind-down plan contain the described analysis.

In order to promote the comprehensiveness of these DCOs’ recovery plans, the 

Commission is also proposing to require that each recovery plan describe certain “commonly 

applicable scenarios,” most of which are described in CFTC Letter No. 16-61, to the extent such 

scenarios are possible in light of the DCO’s activities.

99 Those scenarios include: (1) settlement 

bank failure; (2) custodian bank failure; (3) scenarios resulting from investment risk; (4) poor 

business results; (5) the financial effects from cybersecurity events; (6) fraud (internal, external, 

and/or actions of criminals or of public enemies); (7) legal liabilities, including liabilities related 

to the DCO‘s obligations with respect to cleared transactions and those not specific to its 

business as a DCO (e.g., tort liability); (8) losses resulting from interconnections and 

interdependencies among the DCO and its parent, affiliates, and/or internal or external service 

providers (e.g., the financial effects of the inability of a service provider to provide key systems 

 

99 Id. at 5-6. These scenarios are described as “commonly applicable” because, in the Commission’s judgment, all 

DCOs will plausibly be vulnerable to most of these scenarios occurring, that is, most scenarios will be possible and, 

if such a scenario occurs, it may damage the DCO’s financial position sufficiently to require recovery or orderly 

wind-down. 

The reference to scenarios that are “possible” should not be confused with a reference to scenarios that are “likely.” 

Thus, if a DCO deposits all relevant funds as cash with a federally regulated and insured depository institution, and 

in no circumstances invests them, then a scenario of losses resulting from investment risk would not be possible. On 

the other hand, while regulation of depository institutions and FDIC insurance makes a loss due to failure of such a 

depository bank extraordinarily unlikely, it is not impossible, and thus is a scenario that should be addressed in the 

recovery and orderly wind-down plans. See, e.g., NDL Discussion Paper § 2.1 (“[L]ow risk is not zero risk, and 

consequently, CCPs should have a plan to address [non-default losses (NDL)] from these scenarios should they 

materialize. Some CCPs, however, do not include certain types of NDL scenario[s] in their planning because these 

CCPs seem to assume that regulated financial institutions or central securities depositories pose zero custody [or 

depository] risk, or that legal risk cannot cause an NDL (because Principle 1 of the PFMI requires a legal basis with 

‘a high degree of certainty’). These approaches appear to be inconsistent with the standards set forth in the PFMI.”)
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or services);

100 and (9) any other risks relevant to the DCO’s activities. In addition to these 

scenarios, the Commission is proposing to require SIDCOs and Subpart C DCOs to include in 

their recovery plan the following additional scenarios: (1) credit losses or liquidity shortfalls 

created by single and multiple clearing member defaults in excess of prefunded resources 

required by law; (2) liquidity shortfall created by a combination of clearing member default and 

a failure of a liquidity provider to perform; (3) depository bank failure; and (4) losses resulting 

from interconnections and interdependencies with other CCPs (whether or not those CCPs are 

registered with the Commission as DCOs). For any of those scenarios enumerated above that the 

DCO determines are not possible in light of its activities, the DCO should provide its reasoning 

for not considering it. Finally, the Commission is proposing that a DCO must include at least two 

scenarios involving multiple failures (e.g., a member default occurring simultaneously, or nearly 

so, with a failure of a service provider) that, in the judgment of the DCO, are particularly 

relevant to the DCO’s business.101 The Commission believes that a DCO should describe how it 

is prepared for these additional exigencies in order to demonstrate to the market and its clearing 

members that it is prepared to meet the demands of possible market stresses.

The Commission requests comment on this aspect of the proposal.

3. Recovery and Orderly Wind-down triggers – § 39.39(c)(3)

 

100 For loss scenarios resulting from interconnections and interdependencies among the DCO and its parent or 

affiliates, the DCO should consider, to the extent applicable, how its organizational structure may impact the 

specific steps it would anticipate taking.

101 The term “in the judgment of the DCO, are particularly relevant” is being used rather than “are most relevant” to 

avoid the implication that it would be necessary to conduct an analysis ranking with precision the relevance of 

different combinations. Rather, staff of the DCO should exercise their professional judgement in selecting at least 

two particularly relevant combination scenarios. It is highly unlikely that no such combinations (or only one) would 

be possible.
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Thorough planning also requires that a SIDCO or Subpart C DCO be prepared to 

determine when recovery or orderly wind-down is necessary, that is, when the recovery plan or 

orderly wind-down plan should be “triggered.” Some triggers might be automatic (e.g., because 

the DCO is insolvent) while others may not be obvious, and many will necessarily involve the 

exercise of judgment and discretion (e.g., the DCO is suffering ongoing business losses that 

appear likely to lead to insolvency, or an adverse legal judgment that involves large financial 

liability appears likely). 

The CPMI-IOSCO Recovery Guidance and CFTC Letter No. 16-61 each advise that a 

SIDCO’s and Subpart C DCO’s recovery plan and wind-down plan should define the criteria, 

both quantitative and qualitative, that they would use to determine, or to guide its discretion in 

determining, when to implement the recovery plan and the wind-down plan, i.e., the trigger(s).102 

The Commission believes that defining those criteria (including conducting the analysis 

necessary to do so) would materially aid these DCOs both in developing effective plans, and in 

preparing to address events that lead to such triggers. While the CPMI-IOSCO Recovery 

Guidance references only recovery plans, the Commission believes that a similar analysis should 

apply to planning for consideration of orderly wind-down. The Commission also believes that 

the identification of possible triggers would project confidence to the public that these DCOs will 

continue to function in extreme circumstances (such as recovery), and convey that these DCOs

have a plan to consider wind-down in an orderly manner if recovery is ineffective. 

 

102 See CPMI-IOSCO Recovery Guidance, at §§ 2.4.6-2.4.8; CFTC Letter No. 16-61, at 7. 
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The CPMI-IOSCO Recovery Guidance states that there may be some triggers that 

“should lead to a pre-determined information-sharing and escalation process within the FMI’s 

senior management and its board of directors and to careful consideration of what action should 

be taken.”

103

 The Commission agrees that planning for such an information-sharing and 

escalation process as part of the DCO’s governance is an important part of ensuring that the 

DCO is prepared to deal with contingencies. Accordingly, the Commission is proposing new 

§ 39.39(c)(3)(i) to require that a SIDCO’s or Subpart C DCO’s recovery plan discuss the criteria 

that may trigger both implementation and consideration of implementation of the recovery plan, 

and the process that these DCOs have in place for monitoring for events that are likely to trigger 

the recovery plan. With respect to the orderly wind-down plan, the DCO must discuss the 

criteria that may trigger consideration of implementation of the plan, realizing the importance of 

discretion in determining whether to implement orderly wind-down (in contrast to recovery, a 

terminal process), and the process that the DCO has in place for monitoring for events that may 

trigger consideration of implementation of the orderly wind-down plan.

For similar reasons, the Commission is proposing § 39.39(c)(3)(ii) to require the recovery 

plan and orderly wind-down plan each to include a description of the information-sharing and 

escalation process within the SIDCO’s and Subpart C DCO’s senior management and the board 

of directors. These DCOs must have a defined process that will include the factors the DCO 

considers most important in guiding the board of directors’ exercise of judgment and discretion 

with respect to recovery and orderly wind-down plans in light of the relevant triggers and that 

process.

 

103 CPMI-IOSCO Recovery Guidance, at § 2.4.8.
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The Commission requests comment on this aspect of the proposal.

4. Recovery Tools – § 39.39(c)(4)

By the end of 2013, CPMI-IOSCO had not completed their consultative work 

establishing guidance for use in implementing the PFMI. Their final guidance was published in 

October 2014 and amended in July 2017. The CPMI-IOSCO Recovery Guidance does not 

advise authorities to prescribe specific recovery tools; rather the guidance “provides an overview 

of some of the tools that an FMI may include in its recovery plan, including a discussion of 

scenarios that may trigger the use of recovery tools and characteristics of appropriate recovery

tools in the context of such scenarios.”104 CFTC Letter No. 16-61 adopts a similar approach in 

that it does not prescribe the tools that a DCO should use during recovery. Rather, the letter sets 

forth a detailed analysis that staff expects a DCO should undertake in its recovery plan to meet 

its obligations or provide its critical operations and services as a going concern.

105

 

The Commission declines to prescribe specific tools that SIDCOs and Subpart C DCOs 

must include in their recovery plans. Each DCO is different, and a variety of tools may be 

available to a particular DCO in each specific scenario. Rather, these DCOs should have 

discretion to decide on which tools to include, so long as the set of tools chosen meets standards

designed to protect indirect participants (e.g., clients, end users), direct participants (i.e., clearing 

members), the DCO itself, and other relevant stakeholders (including, in the case of SIDCOs, the 

financial system more broadly): (1) the set of tools should comprehensively address how the 

DCO would continue to provide critical operations and services in all relevant scenarios; (2) each 

 

104 Id. at 1; see also id. at § 4.1 (summarizing specific recovery tools).

105 CFTC Letter No. 16-61, at 7-8.
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tool should be reliable, timely, and have a strong legal basis; (3) the tools should be transparent 

and designed to allow those who would bear losses and liquidity shortfalls to measure, manage 

and control their exposure to losses and liquidity shortfalls; (4) the tools should create 

appropriate incentives for the DCO’s owners, direct and indirect participants, and other relevant 

stakeholders; and (5) the tools should be designed to minimize the negative impact on direct and 

indirect participants and the financial system more broadly.106

The Commission expects that each SIDCO and Subpart C DCO will consider in its 

planning process tools that meet the full scope of financial deficits that the DCO may need to

remediate: (1) tools to allocate uncovered losses by a clearing member default: e.g., the DCO’s 

own capital (sometimes referred to as “skin-in-the-game”), cash calls (sometimes referred to as 

assessments), and gains-based haircutting (sometimes referred to as variation margin gains 

haircutting); (2) tools to address uncovered liquidity shortfalls: e.g., liquidity from third-party 

institutions and non-defaulting107 clearing members; (3) tools to replenish financial resources: 

e.g., cash calls and recapitalization;108 (4) tools to establish a matched book: e.g., auctions and

tear-ups; and (5) tools to allocate losses not covered by a clearing member default: e.g., capital,

recapitalization, and insurance.

To provide these DCOs with some flexibility, the Commission is proposing to require 

that each DCO’s recovery plan include a complete description and analysis of the tools it 

 

106 See CPMI-IOSCO Recovery Guidance, at § 3.3.1.

107 In the context of default losses, the defaulting participants cannot be relied upon to provide any resources. In the 

context of non-default losses, all participants are, at least in the first instance, non-defaulting participants.

108 Cf. id. at § 2.4.9. While the CPMI-IOSCO Recovery Guidance refers to capital, § 39.11(b) recognizes that 

financial resources include, but are not limited to, capital.
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proposes to use to cover shortfalls from the stress scenarios identified by the DCO that are not 

covered by pre-funded financial resources, or where the DCO does not have sufficient liquid 

resources or liquidity arrangements to meet its obligations in the correct form and in a timely 

manner. Additionally, the Commission expects each DCO will be prepared to implement tools 

to deal with other losses or liquidity shortfalls, including those from non-default risks that may 

materialize more slowly, and tools to increase the DCO’s financial resources where necessary in 

order to implement its plans. Finally, to support the planning process, the description of 

recovery tools in the recovery plan should include, at a minimum, any discretion the DCO has in 

the use of the tool, whether the tool is mandatory or voluntary, and the governance processes and 

arrangements for determining which tools to use, and to what extent. 

Accordingly, the Commission is proposing § 39.39(c)(4) to require a SIDCO or Subpart 

C DCO to have a recovery plan that includes the following: (i) a description of the tools that the 

DCO would expect to use in each scenario required by proposed paragraph (b) of this section

that comprehensively addresses how the DCO would continue to provide critical operations and 

services; (ii) the order in which each such tool would be expected to be used; (iii) the time frame 

within which each such tool would be expected to be used; (iv) a description of the governance 

and approval processes and arrangements within the DCO for the use of each tool available, 

including the exercise of any available discretion; (v) the processes to obtain any approvals 

external to the DCO (including any regulatory approvals) that would be necessary to use each of 

the tools available, and the steps that might be taken if such approval is not obtained;109 (vi) the 

 

109 Thus, while (iv) focuses on internal governance and approval processes such as among DCO officers and 

committees, (v) focuses on external approval processes, if any, such as approvals by a regulator with the legal 

authority or practical power to require approval of the use of a tool.
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steps necessary to implement each such tool; (vii) a description of the roles and responsibilities 

of all parties, including non-defaulting clearing members, in the use of each such tool; (viii)

whether the tool is mandatory or voluntary; (ix) an assessment of the likelihood that the tools, 

individually and taken together, would result in recovery; and (x) an assessment of the associated 

risks from the use of each such tool to non-defaulting clearing members and those clearing 

members’ customers with respect to transactions cleared on the DCO, linked financial market 

infrastructures, and the financial system more broadly. For those scenarios involving non-default 

losses, all clearing members are non-defaulting.

The Commission requests comment on this aspect of the proposal. With respect to the 

types of recovery tools in particular, the Commission welcomes comment whether DCOs use, or 

would anticipate using, any tools not identified above in order to meet the full scope of financial 

deficits a DCO in recovery may need to remediate.

5. Orderly Wind-down Scenarios and Tools – § 39.39(c)(5)

As discussed further below, planning for orderly wind-down overlaps significantly, 

though not totally, with planning for recovery. There may be circumstances where the SIDCO or 

Subpart C DCO attempts to recover but fails, upon which it should have a plan, as well as 

sufficient capital, to transition to and execute an orderly wind-down. SIDCOs and Subpart C 

DCOs must therefore plan for both recovery and orderly wind-down. 

Proposed § 39.39(c)(5) would require a SIDCO’s or a Subpart C DCO’s orderly winddown plan to identify scenarios that could prevent it from being able to meet its obligations, and 

to identify tools which may be used in the orderly wind-down of the DCO. CFTC Letter No. 16-

61 states that a DCO’s analysis of its wind-down options “should contain many of the elements 
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of a DCO’s analysis of its recovery tools.”110 The letter calls for the wind-down plan to identify 

and analyze in detail, with respect to each scenario, nine required elements as well as “the 

manner in which liquidity requirements would be managed during service closure” and how 

essential support services would be maintained during the wind-down period.

111

 The letter also 

calls for the wind-down plan to address obstacles to each option, and the viability of the options 

in light of the obstacles. 

The Commission recognizes that, to plan effectively for orderly wind-down, considering 

the scenarios and recovery tools described in the DCO’s recovery plan must precede the DCO’s 

analysis of the events that would trigger consideration of implementation of the orderly winddown plan, and the use of the DCO’s orderly wind-down options.112

 A DCO’s orderly winddown plan should therefore include a description of the point or points in the recovery plan, for 

each scenario, where recovery efforts would likely be deemed to have failed and consideration of 

implementing the orderly wind-down plan would be triggered. The orderly wind-down plan 

should then describe at what point the DCO will no longer be able to meet its obligations or 

provide its critical services as a going concern. Once these scenarios are identified, the plan 

should describe the tools available to the DCO to effectuate an orderly wind-down. The DCO 

should, therefore, explain in its wind-down plan how it would plan to accomplish an orderly 

wind-down, taking into account the time it anticipates it would take to implement the plan. The 

orderly wind-down plan should include a complete analysis of the wind-down tools the DCO 

 

110 CFTC Letter No. 16-61, at 9.

111 Id. at 10.

112 See id. at 9.
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would anticipate using, both individually and together. In order to support a thorough planning 

process that is consistent with the international standards, the Commission has preliminarily 

determined that for each wind-down tool, the DCO should describe any discretion it has in the 

use or sequencing of the wind-down tool for each scenario, any obstacles to the use of a 

particular tool, the governance and approval processes for the tools available, and how the DCO 

is planning for the viability of the tools in light of any identified obstacles. 

To support a systematic planning process that will foster the DCO’s ability to wind-down 

in an orderly manner in situations of unprecedented stress, where recovery is infeasible, 

proposed § 39.39(c)(5) incorporates certain of the staff guidance included in CFTC Letter No. 

16-61, as well as international standards and guidance issued since the 2013 rulemaking. 

Proposed § 39.39(c)(5) would require each SIDCO and Subpart C DCO to identify scenarios that 

may prevent it from meeting its obligations or providing its critical services as a going concern, 

describe the tools that it would expect to use in an orderly wind-down that comprehensively 

address how the DCO would continue to provide critical operations and services, describe the 

order in which each such tool would be expected to be used,113 establish the time frame within 

which each such tool would be expected to be used, describe the governance and approval 

processes and arrangements within the DCO for the use of each of the tools available, including 

the exercise of any available discretion, describe the processes to obtain any approvals external 

to the DCO (including any regulatory approvals) that would be necessary to use each of the tools 

available, and the steps that might be taken if such approval is not obtained, set forth the steps 

necessary to implement each such tool, describe the roles and responsibilities of all parties, 

 

113 It may be the case that certain tools may be used concurrently.
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including non-defaulting clearing members, in the use of each such tool, provide an assessment 

of the likelihood that the tools, individually and taken together, would result in orderly winddown, and provide an assessment of the associated risks to non-defaulting clearing members and 

those clearing members’ customers with respect to transactions cleared on the DCO, linked 

financial market infrastructures, and the financial system more broadly. 

The Commission requests comment on this aspect of the proposal. The Commission 

specifically requests comment on whether the scope of clearing member customers that are 

focused upon (i.e., “those clearing members’ customers with respect to transactions cleared on 

the” DCO) is appropriately broad, and appropriately framed.

6. Agreements to be Maintained During Recovery and Orderly Wind-down –

§ 39.39(c)(6)

A DCO has a variety of contractual arrangements that must be maintained during 

business as usual, in times of stress, and recovery and orderly wind-down, such as those with 

clearing members, affiliates, linked central counterparties, counterparties, external service 

providers, and other third parties.114 These contractual arrangements include the DCO’s rules 

and procedures, agreements to provide operational, administrative and staffing services, 

intercompany loan agreements, mutual offset agreements or cross-margining agreements, and 

credit agreements.115 Also, a DCO’s recovery plan and orderly wind-down plan should identify 

and analyze the implications of the various contractual arrangements that the DCO maintains and 

 

114 Id. at 11.

115 Id.
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describe the actions that the DCO has taken to ensure that its operations can continue during

recovery and orderly wind-down despite the termination or alteration of relevant contracts.116 

Contracts may contain covenants, material adverse change clauses, or other provisions 

that could subject such contracts to alteration or termination as a result of the implementation of 

the recovery plan or orderly wind-down plan, and thus render the continuation of the DCO’s 

critical operations and services difficult or impracticable. Therefore, the Commission believes 

that each DCO’s recovery plan and orderly wind-down plan should be supported by the DCO’s 

review and analysis of the DCO’s contracts associated with the provision of those critical 

operations or services to determine if those contracts contain such provisions. Where such 

contractual provisions are present and enforceable against the DCO, it will need to have 

alternative methods to continue those critical operations and services. The DCO’s recovery plan 

and orderly wind-down plan should describe the actions that the DCO has taken to ensure that its 

operations can continue during recovery and orderly wind-down despite these contractual 

provisions. The orderly wind-down plan should also consider whether the contractual 

relationships the DCO relies upon to perform its critical operations and services would transfer to 

a new entity in the event of the creation of a new entity or the sale or transfer of the business to 

another entity in an orderly wind-down. Furthermore, the Commission believes that a 

requirement that a DCO have plans in place to ensure that its critical operations and services will 

continue into recovery and orderly wind-down is consistent with the PFMI and is crucial to 

 

116 Id. Note that CFTC Letter No. 16-61 calls for the same, i.e., determine whether any contractual arrangements 

include covenants, material adverse change clauses or other provisions that would permit a counterparty to alter or 

terminate the agreement as a result of the implementation of the DCO’s recovery plan or wind-down plan.
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providing “a high degree of confidence” that the DCO will continue its operations and “serve as 

a source of financial stability even in extreme market conditions.”117

The DCO’s recovery plan and orderly wind-down plan must also identify and describe 

any licenses, and contracts in which the DCO is the licensee, upon which the DCO may rely to 

provide its critical operations and services. Such licenses should be included in the DCO’s 

analysis of its contractual arrangements that must continue into recovery and wind-down. 

The Commission is proposing § 39.39(c)(6) to provide that a SIDCO or Subpart C DCO

must determine which of its contracts, arrangements, agreements, and licenses associated with 

the provision of its critical operations and services as a DCO are subject to alteration or 

termination as a result of implementation of the recovery plan or orderly wind-down plan. The 

recovery plan and orderly wind-down plan must describe the actions that the DCO has taken to 

ensure that its critical operations and services will continue during recovery and wind-down

despite such alteration or termination. 

The Commission requests comments on this aspect of the proposal.

7. Governance – § 39.39(c)(7)

While current § 39.39 does not explicitly address the need for a DCO to have an effective 

governance structure to implement its recovery or orderly wind-down plans, the Commission has 

preliminarily determined to require an effective governance structure in order to enable the DCO 

to implement such plans effectively. The CPMI-IOSCO Recovery Guidance supports the 

Commission’s determination, and recommends that the DCO’s board of directors or equivalent 

 

117 PFMI at 36 (section on credit and liquidity risk management). 
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governing body formally endorse the recovery plan.

118

 In addition, the guidance calls for “an 

effective governance structure and sufficient resources to support the recovery planning process 

and implementation of its recovery plan, including any decision-making processes.”119 

According to the CPMI-IOSCO Recovery Guidance, an “effective governance structure” 

includes “clearly defining the responsibilities of board members, senior executives and business 

units, and identifying a senior executive responsible for ensuring that the FMI observes recovery 

planning requirements and that recovery planning is integrated into the FMI’s overall governance 

process.”120 The guidance also states that the FMI’s board should consider the interests of all 

stakeholders who are likely to be affected by the recovery plan when developing and 

implementing it, and the FMI “should have clear processes for identifying and appropriately 

managing the diversity of stakeholder views and any conflicts of interest between stakeholders 

and the FMI.”121 

CFTC Letter No. 16-61 provided guidance to align the regulation promulgated in 2013 

with the 2014 CPMI-IOSCO Recovery Guidance. CFTC Letter No. 16-61 advised that a DCO’s 

recovery plan and wind-down plan should set forth all relevant governance arrangements and 

recommends that a DCO’s recovery plan and wind-down plan: (1) identify the persons 

responsible for the development, review, approval, and ongoing monitoring and updating of the 

DCO’s recovery plan and wind-down plan; (2) describe the involvement of the DCO’s clearing 

 

118 CPMI-IOSCO Recovery Guidance, at § 2.3.3.

119 Id.

120 Id.

121 Id. at § 2.3.4.
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members in the development, review, and updating of the recovery plan and wind-down plan, 

and in assessing the effects of the recovery plan on clearing members; (3) describe how the costs 

and benefits of various recovery tools are taken into account during the decision-making process; 

(4) describe the recovery plan and wind-down plan approval and amendment process; 

(5) describe the specific roles and responsibilities of the DCO’s Board of Directors, relevant 

committees, and other employees and clearing members in activating the recovery plan and 

wind-down plan and in implementing various aspects thereof including, without limitation, the 

use of recovery tools and wind-down options; and (6) the discretion of such persons and entities 

in activating the recovery plan and wind-down plan, the parameters for exercise of such 

discretion, where such discretion may be exercised, and the governance processes for the 

exercise of such discretion.122

The Commission believes that, in order to develop thorough plans, and to be prepared to 

implement those plans effectively, a SIDCO or Subpart C DCO must implement and maintain 

transparent governance arrangements related to recovery and wind-down that are consistent with 

the above standards and that recognize “one size does not fit all.” DCOs are required to have 

governance rules and arrangements in place both for business-as-usual operations and in times of 

extreme stress in order to meet DCO Core Principle O.

123

 DCO Core Principle O requires a 

DCO to establish governance arrangements that are transparent to fulfill public interest 

requirements and to permit the consideration of the views of owners and participants.124 

 

122 CFTC Letter No. 16-61, at 13. 

123 Section 5b(c)(2)(O)(i) of the CEA, 7 U.S.C. 7a-1(c)(2)(O).

124 Id.
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In furtherance of Core Principle O, and to support the effectiveness of these plans and 

ensure their formal review, the Commission is proposing new § 39.39(c)(7) to require each 

SIDCO’s and Subpart C DCO’s recovery plan and orderly wind-down plan to be annually 

reviewed and formally approved by the board of directors, and to describe an effective 

governance structure that clearly defines the responsibilities of the board of directors, board 

members, senior executives, and business units. Each plan must also describe the processes that 

the DCO will use to guide its discretionary decision-making relevant to each plan, including 

those processes for identifying and managing the diversity of stakeholder views and any conflict 

of interest between stakeholders and the DCO.

The Commission requests comment on this aspect of the proposal.

8. Testing – § 39.39(c)(8)

In CFTC Letter No.16-61, staff recommended that SIDCOs and Subpart C DCOs include 

in their recovery and wind-down plans procedures for regularly testing the viability of such plans

and that testing, where applicable, be conducted with the participation of clearing members.125 

Additionally, the recovery plan and wind-down plan should identify the types of testing that will 

be performed, the frequency with which the plans will be tested, to whom the findings will be

reported, and the procedures for updating the recovery plan and wind-down plan in light of the 

testings’ findings.126 Likewise, the CPMI-IOSCO Recovery Guidance provides that FMIs 

should, for the purpose of “ensur[ing] that the recovery plan can be implemented effectively,”

test and review the recovery plan at least annually as well as following changes materially 

 

125 CFTC Letter No. 16-61, at 15.

126 Id.
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affecting the recovery plan.

127

 As an example, it states that testing may be conducted through

periodic simulation and scenario exercises.

128

 The CPMI-IOSCO Recovery Guidance also states

that an “FMI should update its recovery plan as needed following the completion of each test and 

review.”

129

In 2022, CPMI-IOSCO issued a discussion paper building on PFMI Principles 3 

(Framework for the Comprehensive Management of Risks) and 15 (General Business Risk), the 

purpose of which was “to facilitate the sharing of existing practices to advance industry efforts 

and foster dialogue on [CCPs’] management of potential losses arising from non-default events . 

. . in particular in the context of recovery or orderly wind-down.”

130

 Summarizing the responses 

of CCPs, the discussion paper observes, “In general, responding CCPs perform annual reviews of 

their recovery plans” and “[a]lmost all responding CCPs conduct crisis management drills.”

131

 

The responding CCPs also informed CPMI-IOSCO that they “use crisis management drills to 

improve their decision-making capabilities and their capacity to address potential [non-default

losses] by improving their understanding of scenarios and tools, and testing assumptions about 

the effectiveness of specific tools.”132 The discussion paper quotes one CCP’s response in 

 

127 CPMI-IOSCO Recovery Guidance, at ¶ 2.3.8.

128 Id.

129 Id.

130 NDL Discussion Paper, at 2 (Executive Summary). 

131 Id. at § 4.

132 Id.
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particular explaining that crisis management exercises helped improve its operational readiness 

and identify the need for higher insurance coverage.133

In addition, the discussion paper highlights that CCPs engage in discussion-based 

exercises involving the internal governance structure and external partners and stakeholders, 

which “appears to facilitate a better understanding of roles and responsibilities before a crisis 

occurs” and “serve[s] to reduce the likelihood of purely ad hoc decision-making on the allocation 

of [non-default losses] in a crisis, while still giving decision-makers the flexibility to respond to 

the unique circumstances of any particular crisis.”

134

 The responding CCPs reported that testing 

typically involves a wide range of internal stakeholders and, in some cases, external stakeholders

as well.

135

 This greater involvement in testing “enhances the quality of such exercises by 

strengthening the tie between the exercise and reality of how stakeholders will react.”136

According to the discussion paper, testing “may permit CCPs to enhance the tools and 

resources for identifying, measuring, monitoring and managing [non-default loss] risks” and has 

“the potential to increase participants’ understanding of the types of scenario[s] that could

generate [non-default losses], the range of magnitudes of such losses and their roles and 

responsibilities in addressing [nondefault losses],”

137 which could result in an “increase [in] the 

operational effectiveness” of the CCPs’ plans.138 

 

133 Id.

134 Id.

135 Id.

136 Id.

137 Id.

138 Id.
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The Commission believes that the testing and reviewing practices described in the 

foregoing paragraphs will materially contribute to the effectiveness of recovery and orderly 

wind-down plans. Although the CPMI-IOSCO discussion paper focused on existing practices 

with respect to non-default losses, the reasoning will also apply to default losses. Periodic 

testing has the potential to demonstrate whether a SIDCO’s or Subpart C DCO’s tools and 

resources will sufficiently cover financial losses resulting both from participant defaults and nondefault losses and whether these DCOs’ rules, procedures, and governance facilitate a viable 

recovery or orderly wind-down. Further, testing the DCO’s infrastructure is an effective means 

of revealing deficiencies or weaknesses which could hamper recovery or wind-down efforts, and 

providing an opportunity to remediate them in advance.

Thus, the Commission is proposing new § 39.39(c)(8) to require that the recovery plan 

and orderly wind-down plan of each SIDCO and Subpart C DCO include procedures for testing 

the viability of the plans, including testing of the DCO’s ability to implement the tools that each 

plan relies upon. The recovery plan and the orderly wind-down plan must include the types of 

testing that will be performed, to whom the findings of such tests are reported, and the 

procedures for updating the recovery plan and orderly wind-down plan in light of the findings 

resulting from such tests. The testing must be conducted with the participation of clearing 

members, where the plan depends on their participation, and the DCO must consider including

external stakeholders that the plan relies upon, such as service providers, to the extent practicable 

and appropriate. 

Testing must occur following any material change to the recovery plan or orderly winddown plan, but in any event not less than once annually. The plans shall be updated in light of 

the findings of such tests. 
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The Commission requests comment on this aspect of the proposal. The Commission 

specifically requests comment as to whether the rule should require that the SIDCO or Subpart C 

DCO include (rather than simply consider including) external stakeholders that the plan relies 

upon in the testing. The Commission also specifically requests comment on the proposed 

requirement that tests be conducted not less than annually: would a different minimum 

frequency be more appropriate?

D. Information for resolution planning – § 39.39(f)

As discussed above,

139 when the Commission adopted regulations for recovery and winddown plans in 2013, CPMI-IOSCO and the FSB were in the initial phase of drafting guidance for 

resolution planning consistent with PFMI Principle 3, Key Consideration 4, which states that “an 

FMI should also provide relevant authorities with the information needed for purposes of 

resolution planning.”140 Consistent with that standard, current § 39.39(c)(2) requires a SIDCO or 

Subpart C DCO to have procedures for providing the Commission and the FDIC with 

information needed for purposes of resolution planning.

141

 

The Commission proposes to update its regulations to align § 39.39(c)(2), as new § 

39.39(f), with the additional standards and guidance applicable to resolution planning for 

systemically important FMIs adopted since 2013.

142

 As stated in the 2017 FSB Resolution 

 

139 See text accompanying fn. 54, supra.

140 PFMI Principle 3, Key Consideration 4, at 32. The Commission notes that resolution is distinct from orderly 

wind-down in that the latter rests within the control of the DCO.

141 17 CFR 39.39(c)(2).

142 See, e.g., 2017 FSB Resolution Guidance, at § 6.4 (noting that “[a]uthorities should ensure that CCPs have in 

place adequate processes and information management systems to provide the authorities with the necessary data 

and information required for undertaking” an assessment of the financial resources and tools that the resolution 

authority can reasonably expect to be available under the resolution regime).
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Guidance, “[a]uthorities should ensure that CCPs have in place adequate processes and 

information management systems to provide the authorities with the necessary data and 

information required for undertaking” an assessment of the financial resources and tools that the 

resolution authority can reasonably expect to be available under the resolution regime).143 In the 

United States, upon the completion of the statutory appointment process set forth in Title II of 

the Dodd-Frank Act, the FDIC would be appointed the receiver of a failing SIDCO (or other

covered financial company)144 The supervision of a DCO rests with the Commission under the 

CEA, and, in particular, the supervision of a SIDCO rests with the Commission as the 

supervisory agency under Title VIII of the Dodd-Frank Act.145 The statutory bifurcation of 

responsibilities between the FDIC and the Commission creates important challenges. Under 

Title II of the Dodd-Frank Act, it is the role of the FDIC to act as receiver for a failed covered 

financial company if the requirements of Title II have been met. The FDIC’s ability to carry out 

its responsibilities as receiver would benefit from advance preparation to ensure that, in the 

unlikely event that resolution becomes necessary, there will be an effective and efficient 

transition of the SIDCO to the FDIC receivership, thereby fostering the success of a Title II 

resolution.

146

 

143 2017 FSB Resolution Guidance, at § 6.4.

144 Section 202(a) of the Dodd-Frank Act; 12 U.S.C. 5382(a).

145 Sections 803(8)(A)(ii) and 807(a) of the Dodd-Frank Act, 12 U.S.C. 5462(8)(A)(ii) and 5466(a); see also Section 

2(12)(C) of the Dodd-Frank Act, 12 U.S.C. 5301(12)(C).

146 This involves coordinated planning and information sharing to enable a smooth transition into resolution. As the 

supervisory agency for SIDCOs, the Commission provides information for resolution planning to the FDIC under 

the auspices of a Memorandum of Understanding (MOU). The current MOU is the “Memorandum of 

Understanding Between The Federal Deposit Insurance Corporation And The Commodity Futures Trading 
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Pursuant to section 8a(5) of the CEA,147 the Commission has authority to “make and 

promulgate such rules and regulations as, in the judgment of the Commission, are reasonably 

necessary to effectuate any of the provisions or to accomplish any of the purposes” of the CEA. 

One of those purposes is “the avoidance of systemic risk.”

148 As further described in the 

following paragraphs, it would appear that a reporting requirement that would enable the 

Commission to aid the FDIC in its preparations for the resolution under Title II of a DCO –

where placing the DCO into resolution requires a finding by the Secretary of the Treasury, in 

consultation with the President, that, inter alia, “the failure of the [DCO] and its resolution under 

otherwise applicable Federal or State law would have serious adverse effects on financial 

stability in the United States”149 – is reasonably necessary to foster the avoidance of systemic 

risk.

Moreover, under Title VIII of the Dodd-Frank Act, the Commission may, in consultation 

with the FSOC and the Board of Governors of the Federal Reserve, prescribe regulations 

containing risk management standards, taking into consideration relevant international standards 

and existing prudential requirements, for SIDCOs governing: (i) the operations related to 

payment, clearing, and settlement activities of SIDCOs; and (ii) the conduct of designated 

activities by SIDCOs.

150

 Under Section 805(b) of the Dodd-Frank Act, the objectives and 

 

Commission Concerning The Sharing Of Information In Connection With Resolution Planning For Derivatives 

Clearing Organizations,” dated June 26, 2015.

147 7 U.S.C. 12a(5)

148 Section 3(b) of the CEA, 7 U.S.C. 5(b).

149 Section 203(b)(2) of the Dodd-Frank Act, 12 U.S.C. 5383(b)(2).

150 Section 805(a)(2)(A) of the Dodd-Frank Act, 12 U.S.C. 5464(a)(2)(A).
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principles for such risk management standards shall be to: (1) promote robust risk management; 

(2) promote safety and soundness; (3) reduce systemic risks, and (4) support the stability of the 

broader financial system.151 Additionally, Section 805(c) of the Dodd-Frank Act states that the 

standards prescribed may address areas such as: (1) risk management policies and procedures; 

(2) margin and collateral requirements; (3) participant or counterparty default policies and 

procedures; (4) the ability to complete timely clearing and settlement of financial transactions; 

(5) capital and financial resources requirements for the SIDCO; and (6) other areas that are 

necessary to achieve the objectives and principles in Section 805(b).152

Similar to the context of recovery and orderly wind-down planning, thorough preparation 

ex ante is crucial for successfully managing, on an inherently abbreviated timeline, matters 

relating to resolution, in aid of mitigating “serious adverse effects on financial stability in the 

United States.” This thorough preparation for resolution is also crucial for establishing market 

confidence, and the confidence of foreign counterparts to the United States agencies. While the 

Commission remains persuaded that the likelihood of a SIDCO requiring resolution under Title 

II of the Dodd-Frank Act is “extraordinarily unlikely,”

153 thorough planning for such an exigency 

is essential.154 

While less likely, it remains possible that similar information may also be required from 

Subpart C DCOs in times of extreme market stress, if it appears at the time that the failure of 

 

151 12 U.S.C. 5464(b).

152 12 U.S.C. 5464(c).

153 See Bankruptcy Regulations, 86 FR 19324, 19386 (Apr. 13, 2021).

154 Key Attributes ¶11.1, FSB CCP Resolution Planning Guidance §7.
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such a DCO might meet the requirements set forth in section 203(b) of the Dodd-Frank Act.

155

 

Thus, while the Commission anticipates that the intensity of resolution planning for Subpart C 

DCOs will be significantly less than that for SIDCOs, in order to promote the goal of assuring 

that Subpart C DCOs will, if necessary, remain capable of effectively being resolved under Title 

II, including during times of extreme stress, § 39.39(f) would apply equally to SIDCOs and 

Subpart C DCOs.156 

The Commission’s DCR staff has been working with FDIC staff on resolution planning 

for the two SIDCOs. This joint work has revealed that the Commission does not receive certain 

information from the SIDCOs that the FDIC may need to plan for resolution. The Commission 

therefore has determined to update its reporting requirements for SIDCOs and Subpart C DCOs 

to reflect additional information that may be used for resolution planning consistent with the 

international standards set forth in the PFMI and related guidance.157

 

155 12 U.S.C. 5383(b). While the determination under Title II is made at the time when the entity (here a DCO) is 

under stress (see 12 U.S.C. 5383(b)(1) (determination that “the financial company is in default or in danger of 

default,” emphasis added), the determination under Title VIII is made during business as usual, after a detailed 

process including notice to the proposed systemically important financial market utility, and the standards for the 

determination are different than those for the designation. See generally Section 804 of the Dodd-Frank Act, 12 

U.S.C. 5463; 12 CFR Part 1320 (Designation of Financial Market Utilities). Thus, an entity not designated in 

advance under Title VIII may nonetheless in particular circumstances be determined to meet the standards for 

resolution under Title II, similarly, an entity designated in advance under Title VIII may not, even in the event of its 

failure, be determined to meet the standards under Title II.

Nonetheless, it would appear that the failure of a DCO that has been determined during business as usual to have 

met the criteria for designation pursuant to 12 U.S.C. 5463 is more likely to have such adverse effects on financial 

stability than the failure of a DCO that has not been determined to have met those criteria.

156 The Commission does not at this time believe that it is likely that the failure of a U.S.-based DCO that is neither a 

SIDCO nor a Subpart C DCO would meet the requirements set forth in Section 203(b) of the Dodd-Frank Act, 12 

U.S.C. 5383(b), given the generally smaller size of such DCOs and the fact that such DCOs do not have banks as 

clearing members (see supra fn. 23). For foreign-based DCOs, the relevant resolution authority would be the 

resolution authority in the home jurisdiction. Accordingly, the Commission is not proposing to extend this 

requirement to DCOs that are neither SIDCOs nor Subpart C DCOs.

157 See Sections 805(a)(1)(A)-(B) of the Dodd-Frank Act, 12 U.S.C. 5464(a)(1)(A)-(B).
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Most of the global standards and guidance relating to planning for resolution (including 

for CCPs) apply to resolution authorities, in cooperation with supervisory authorities (where the 

resolution authority is separate from the supervisory authority).158 Because of the nature of 

principle-based regulation for DCOs, there may be information in the possession of a DCO that 

is required for resolution planning but may not ordinarily be reported to the Commission and

may not be available publicly. Moreover, while the recovery and orderly wind-down plans 

described above should be comprehensive in themselves, there may be additional information 

that the Commission may require to plan for the resolution of a SIDCO or Subpart C DCO. The 

Commission therefore proposes to specify the types of information a SIDCO or Subpart C DCO 

may be required to provide for resolution planning in light of international standards and 

guidance established since 2013. 

1. Planning for Resolution Under Title II of the Dodd-Frank Act – § 39.39(f)

Current § 39.39(c)(2) requires SIDCOs and Subpart C DCOs to have procedures in place 

to provide the Commission and the FDIC with information for purposes of resolution planning. 

This rule is consistent with the Key Attributes FMI Annex: “In order to facilitate the 

implementation of resolution measures, FMIs should be required to maintain information 

systems and controls that can promptly produce and make available, both in normal times and 

during resolution, relevant data and information needed by the authorities for purposes of timely 

resolution planning and resolution . . . .”159 The Commission is proposing in new § 39.39(f) to 

clarify that the requirement that a DCO have procedures in place to provide information directly 

 

158 E.g., FSB CCP Resolution Planning Guidance §7.

159 Key Attributes FMI Annex, at § 12.1.
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to the Commission and the FDIC for resolution planning purposes means that the DCO must 

provide such information to the Commission. The Commission would no longer be requiring 

DCOs to provide information related to resolution planning directly to the FDIC. The 

Commission provides such information related to resolution planning to the FDIC under the 

MOU. 

The Commission is also proposing, consistent with the Key Attributes FMI Annex, to 

require that SIDCOs and Subpart C DCOs “maintain information systems and controls that can 

promptly produce and make available” data and information requested by the Commission for 

purposes of resolution planning and resolution in the form and manner specified by the 

Commission. The Commission expects that the form and manner would be designed to facilitate 

the Commission’s ability to share the information with the FDIC. Such systems and controls are, 

for the most part, already in place during business as usual between each DCO and the 

Commission. The explicit requirement that a SIDCO and Subpart C DCO ensure that its systems 

will continue to be able to provide information to the Commission during resolution is sound 

public policy, as it will ensure the Commission receives critical information during this 

transitional period. The requirements of the CEA apply to any DCO as long as it is doing 

business, and the affirmation that a DCO’s systems will be designed to be able to continue to 

function should help to provide assurances to stakeholders and market participants that clearing 

services will continue through all potential exigencies. 

Accordingly, the Commission is proposing new § 39.39(f) to require that a SIDCO or 

Subpart C DCO maintain information systems and controls to provide to the Commission any 

data and information requested for purposes of resolution planning and resolution, and that each 
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must supply such information and data electronically, in the form and manner specified by the 

Commission.

2. Required Information – §§ 39.39(f)(1)-(7)

It is sound regulatory policy for the Commission to be transparent about the types of 

information that a SIDCO or Subpart C DCO might anticipate providing to the Commission, 

upon request, in order to enable the Commission to aid the FDIC in planning for resolution under 

Title II of the Dodd-Frank Act. This transparency is sound public policy because it would help 

assure stakeholders that, in the extraordinarily unlikely event that resolution of a SIDCO or 

Subpart C DCO under Title II becomes necessary, there will be an effective and efficient 

transition of the DCO to the FDIC receivership, and a successful resolution under Title II would 

be forthcoming. Thorough preparation is also helpful in supporting market confidence, and the 

confidence of foreign counterparts to the United States agencies.160

Resolution planning necessarily involves assessing a number of types of information: 

information that is publicly available, information that is otherwise reported to the Commission 

under part 39, and information that is in the possession of the DCOs but that is not otherwise 

reported to the Commission. 

Over past years, Commission staff has worked with staff from the FDIC and the SIDCOs 

to identify and obtain information for the purpose of planning for the highly unlikely event of a 

SIDCO entering into resolution. 161 Global guidance on standards for resolution planning

developed since 2013 have informed these information requests. 

 

160 To date, the Commission has requested information for resolution planning only from SIDCOs. 

161 This is consistent with § 6.4 of the 2017 FSB Resolution Guidance.
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Under Core Principle J, the Commission may request any information from a DCO that 

the Commission determines to be necessary to conduct oversight of the DCO.

162

 The 

Commission believes that certain information for resolution planning that goes beyond the 

information usually obtained during business as usual under the Core Principles and associated 

Part 39 regulations should be available when a DCO is systemically important to the financial 

system, may be approaching such systemic importance, or has opted into Subpart C.

163 As noted 

above, the FDIC must be ready to step in as receiver of a failing DCO on very short notice and 

work to achieve a resolution that mitigates risks to financial stability created by the DCO’s 

failure, including by restoring market confidence and preventing contagion. The information 

proposed to be requested will assist in planning for resolution, thereby helping the FDIC to fulfill 

its role and accomplish its objectives, which in turn helps accomplish one of the purposes of the 

CEA, the avoidance of systemic risk. 

Proposed subparts (1) through (7) describe seven types of information that are relevant to 

planning for resolution under Title II of the Dodd-Frank Act. The frequency with which 

information may be requested may vary over time, with some information requested only once, 

while other information may be requested multiple times (e.g., annually, or upon significant

changes to the structure of the DCO’s business arrangements). The Commission expects that, in 

the latter case, the frequency of the requests may change over time, as the Commission gains 

more knowledge.

 

162 Section 5b(c)(2)(J) of the CEA, 7 U.S.C. 7a-1(c)(2)(J). See also 17 CFR 39.19(c)(5)(i) (a DCO shall provide 

upon request “Any information related to its business as a clearing organization ....”)
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i. Structure and Activities – § 39.39(f)(1)

As part of planning for resolution, the FDIC develops resolution options that are 

underpinned by an understanding of the structure of the SIDCO or Subpart C DCO. Proposed § 

39.39(f)(1) would cover information related to the SIDCO’s and Subpart C DCO’s structure and 

activities and would include, among other things, documents and information about the SIDCO’s 

and Subpart C DCO’s legal structure and hierarchy. The Commission anticipates that this 

information would include current comprehensive organizational charts (including all direct and 

indirect subsidiaries where the SIDCO directly or indirectly owns more than a fifty percent 

controlling interest), governing documents and arrangements, rights and powers of shareholders,

and current organizational documents (including by-laws, articles of incorporation or 

association/organization, and committees). The Commission acknowledges that some of this

information may be publicly available on a SIDCO’s website, may be included in recovery plans, 

or may otherwise be reported to the Commission under part 39. In the event that information is 

required that is not readily available through the ordinary course of regulatory oversight, a 

SIDCO and Subpart C DCO must be prepared to provide current information under the umbrella 

of “structure and activities” upon request.

164

Proposed § 39.39(f)(1) would request information related to the SIDCO’s or Subpart C 

DCO’s organizational structure and corporate structure, activities, governing documents and 

arrangements, rights and powers of shareholders, committee members and responsibilities.

The Commission requests comment on this aspect of the proposal.

ii. Information About Clearing Members – § 39.39(f)(2)

 

164 In some cases, the response may include cross-references to specific places where the information is already 

available, or has previously been provided, and assurance that the information remains current.
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Another aspect of resolution planning is developing an understanding of the risks that 

may trigger consideration of orderly wind-down and the implications for resolution should that 

orderly wind-down fail. In order to understand these risks, certain information about a SIDCO’s 

or Subpart C DCO’s clearing members may be instructive. Generalized or anonymized 

information about clearing members such as types and amounts of collateral posted (for both 

house and customer accounts), variation margin, and contributions to default and guaranty funds 

may be instructive, both for ex ante planning and in the runway to resolution. Such information 

may provide insight into the risks that clearing members and the markets would be exposed to in 

the event of a systemic failure, and of the potential interplay between those risks.

The information requested in the category may also include general information 

regarding exposures or other measures of business risk with respect to all or a subset of clearing 

members. This type of information may assist in the planning for potential triggers for resolution

and for understanding potential challenges in executing a resolution. The Commission 

recognizes that this type of information changes over time; accordingly, the Commission 

anticipates that it may request such information on an annual basis or more frequently in the runup to resolution. Proposed § 39.39(f)(2) would permit requests for information on clearing 

members generally, including (for both house and customer accounts) information regarding 

collateral, variation margin, and contributions to default and guaranty funds. 

The Commission requests comment on this aspect of the proposal.

iii. Arrangements with Other Clearing Entities – § 39.39(f)(3)

In order to plan for continuity of operations in resolution, the Commission and FDIC

must understand how the SIDCO or Subpart C DCO interacts with the operations of other DCOs 
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and financial market infrastructures.165 In particular, the Commission and FDIC must understand 

the SIDCO’s or Subpart C DCO’s cross-margining or mutual offset arrangements. These 

agreements and arrangements may require additional handling in resolution, both because of the

exposures and obligations the SIDCO may be subject to, as well as the resources and tools they

may provide. 

The Commission proposes to require that SIDCOs and Subpart C DCOs provide to the 

Commission upon request copies of the most current versions of mutual offsetting arrangements 

or agreements for cross-margining arrangements with external entities. Additionally, for each 

such arrangement or agreement, the SIDCO or Subpart C DCO should be prepared to provide 

data concerning the recent scope of the relationship, such as information related to amounts of 

daily initial margin. The Commission proposes to require that SIDCOs and Subpart C DCOs 

update such information upon request by the Commission. 

Proposed § 39.39(f)(3) would request information on arrangements and agreements with 

other clearing entities relating to clearing operations, including offset and cross-margin 

arrangements.

The Commission requests comment on this aspect of the proposal.

iv. Financial Schedules and Supporting Details – § 39.39(f)(4)

In order to prepare for receivership operations in resolution, and to develop resolution 

strategy options, there needs to be a clear understanding of the SIDCO’s or Subpart C DCO’s 

financial position and capital structure, which may include some combination of assets, 

 

165 For example, these relationships may be between DCOs registered with the Commission, e.g., Chicago 

Mercantile Exchange (CME) and Options Clearing Corporation, or between a DCO registered with the Commission 

and another CCP supervised by an agency other than the CFTC, e.g., CME and the Fixed Income Clearing 

Corporation.
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liabilities, revenues and expenses, in advance of an extreme event. A DCO’s financial 

statements and exhibits reported to the Commission contain relevant information that will assist 

the Commission and FDIC in forming a detailed understanding of the potential resources and 

financial exposures of the SIDCO or Subpart C DCO that would be important to the success of a 

Title II receivership. To prepare for resolution, the Commission and FDIC require a detailed

understanding of the potential supports for and impediments to potential resolution strategies, 

including sources and uses of funds in resolution. 

In order to form this understanding, it would be useful for the DCO to identify potential 

creditor claims and the potential resources available to satisfy such claims. There may be 

information in possession of the DCO that may not be available in public filings, on a DCO’s

website, or in financial reports and schedules required to be filed under other provisions of part 

39, including off-balance sheet obligations or contingent liabilities. 

The type of information requested under proposed § 39.39(f)(4) would include requests 

for information on off-balance sheet obligations or contingent liabilities, and obligations to 

creditors, shareholders, or affiliates not otherwise reported under Part 39. 

The Commission requests comment on this aspect of the proposal.

v. Interconnections and Interdependencies with Internal and External Service 

Providers – § 39.39(f)(5)

The evaluation of possible obstacles to the continuation of essential services provided by 

internal and external service providers (including affiliates and other third parties), and the use of 

software, information, and other tools provided under license, is integral to resolution planning. 

While the recovery plans required under § 39.39(b) should include much of this information, 

effective planning for receivership may include the need for a more detailed understanding of the 
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requirements to continue making use of identified services (and thus understanding of the steps 

to meet such requirements). 

Each SIDCO or Subpart C DCO must provide the Commission, upon request, copies of 

external or inter-affiliate contracts or agreements that permit the SIDCO or Subpart C DCO to 

perform its critical functions (including third-party or affiliate service agreements, building or 

equipment leases, etc.). In the case of inter-affiliate arrangements, the DCO should identify 

which entity in the group is the contracting party and, where relevant, whether there are any 

inter-affiliate service agreements that address provision of services. This type of information 

should inform the resolution plan by revealing any dependencies by affiliates on essential 

support functions provided by the SIDCO or Subpart C DCO. It may also foster planning for 

alternatives where required. The Commission may also request copies of inter-affiliate contracts 

or agreements, where the SIDCO or Subpart C DCO provides essential support to other affiliates.

Additionally, where some of the contracts and agreements for services would grant the 

service provider the option to terminate the contract in the event of assignment to a bridge 

financial company (i.e., may not be “resolution resilient”), the resolution plan may need to 

identify alternatives. Thus, providing CFTC (and, ultimately, FDIC) with information that could 

help identify those contracts and agreements for services that are not resolution resilient would 

assist planning in advance of entry into resolution.

Further, because application of the FDIC’s authority under Title II with respect to 

continuation of pre-receivership contracts166 in the case of a non-U.S. contracting party may be 

less straightforward than with respect to a U.S.-based contracting party, the Commission may 

 

166 See Section 210(c)(13) of the Dodd-Frank Act (“Authority to Enforce Contracts”), 12 U.S.C. 5390(c)(13).
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request that a SIDCO or Subpart C DCO provide a list of critical interconnections or 

interdependencies that are subject to material contracts/agreements governed in whole or in part 

by non-U.S. law. 

Lastly, the resolution plan may need to maintain important tools and capabilities provided 

under license arrangements. For instance, the resolution plan may need to cover the transfer of 

licenses to the bridge financial company for products or indices underlying the contracts cleared 

by the SIDCO or Subpart C DCO. To accomplish this, the Commission may request that a 

SIDCO or Subpart C DCO provide a copy of such licenses and licensing agreements. 

The Commission anticipates that the type of information described above would be 

requested on a one-time basis, with updates to be provided upon significant changes to the 

structure of the DCO’s business arrangements (including change to the agreements), or when

new agreements are executed. Proposed § 39.39(f)(5) would require SIDCOs and Subpart C 

DCOs to provide information regarding interconnections and interdependencies with internal and 

external service providers, licensors, and licensees, including information regarding services 

provided by or to affiliates and other third parties and related agreements, upon request by the 

Commission. 

The Commission requests comment on this aspect of the proposal.

vi. Information Concerning Critical Personnel – § 39.39(f)(6)

While the recovery and orderly wind-down plans contain information related to critical 

positions and resilient staffing, in order to plan for resolution, a DCO may have to take steps to 

ensure that those positions remain filled. This includes steps to ensure that there is an adequate 

pool of financial resources readily available to ensure that during times of stress, there is staff in 

place. During times of extreme stress, people in critical positions may have terminated (or may
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terminate) their association with the DCO, or their association may have been terminated (or 

may be terminated). Proposed § 39.39(f)(6) would require a SIDCO or Subpart C DCO to 

provide information for all critical positions described in the recovery and orderly wind-down 

plans.

167

 The Commission believes that this information is essential if the FDIC is to succeed in 

a Title II receivership, as they will need qualified personnel to fill these positions in order to 

manage and operate the entity.

The Commission requests comment on this aspect of the proposal.

vii. Other Required Information – § 39.39(f)(7)

Proposed § 39.39(f)(7) would recognize that resolution planning is a complex, ongoing,

and developing process, and that information requirements may change over time as the 

Commission and the FDIC gain experience with resolution planning for DCOs, and as 

information needs and business models change. Thus, certain information requirements may not 

be covered by the specific items listed in proposed § 39.39(f)(1)-(6). In that regard, proposed § 

39.39(f)(7) would include a broad provision to encompass information which the Commission 

requires for this purpose, but not covered by the specific categories of information in proposed 

§§ 39.39(f)(1)-(6). 

The Commission requests comment on this aspect of the proposal.

3. Requested Reporting – § 39.19(c)(5)(iii)

The Commission proposes to add a new requested reporting requirement to § 39.19 to 

reflect updates to the information requested in proposed §§ 39.39(f)(1)-(7). Proposed 

§ 39.19(c)(5)(iii) would require a SIDCO or Subpart C DCO that submits information pursuant 

 

167 As in all cases, such information would be provided and obtained under security arrangements appropriate to the 

sensitivity of the information.
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to § 39.39(f) to update the information upon request by the Commission. The Commission needs 

timely and an accurate information to monitor a SIDCO or Subpart C DCO, especially during 

stressful times. Depending upon the nature of the change and the information previously 

submitted, the response may be a confirmation that the information previously submitted remains 

accurate.

The Commission requests comment on this aspect of the proposal.

D. Renaming Regulation 39.39

When codified in 2013, Regulation 39.39 covered the Commission’s expectations 

regarding a SIDCO’s or Subpart C DCO’s obligations with regard to recovery and orderly winddown plans. The Commission proposes to change the title of Regulation 39.39 to reflect that the 

proposed regulations, if adopted by the Commission, will encompass recovery and orderly winddown planning for SIDCOs and Subpart C DCOs, as well as information required to plan for 

resolution. 

The Commission requests comment on this aspect of the proposal.

III. Orderly Wind-down Plans for DCOs That Are Not SIDCOs or Subpart C DCOs

The Commission is proposing, as reasonably necessary to effectuate Core Principle 

D(i),168 to require DCOs that are neither SIDCOs nor Subpart C DCOs to maintain and submit to 

the Commission plans for orderly wind-down, with requirements that are substantially similar to 

the proposed requirements for the orderly wind-down plans to be submitted by SIDCOs and 

Subpart C DCOs.169 Given that the failure of one of these DCOs is much less likely to have 

 

168 Section 5b(c)(2)(D)(i) of the CEA, 7 U.S.C. 7a-1(c)(2)(D)(i); see Section 8a(5) of the CEA, 7 U.S.C. 12a(5).

169 For orderly wind-down planning involving insolvency or default of a DCO member or participant, the 

Commission also grounds this proposed rulemaking in Core Principle G(i), which requires that a DCO have “rules 
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“serious adverse effects on financial stability in the United States,”170 the Commission is not 

proposing to require these DCOs to maintain recovery plans.171 

A. Requirement to Maintain and Submit an Orderly Wind-down Plan – § 39.13(k)(1)(a)

The Commission is proposing to require that a DCO that is neither a SIDCO nor a 

Subpart C DCO must nevertheless maintain and submit to the Commission viable plans for 

orderly wind-down necessitated by default losses and non-default losses. The possibility that 

such losses may render the DCO unable to meet its obligations or to continue its critical 

functions to the point it must wind down is inherently one of the risks associated with the 

discharging of the DCO’s responsibilities.172 Additionally, the point at which a DCO must wind 

down may arise suddenly, in a manner that does not allow for time to plan. Wind-down plans 

are essential to help facilitate an orderly and expeditious wind-down; moreover, planning for an 

orderly wind-down—including, for example, considering the circumstances that may trigger a 

wind-down, the tools the DCO would implement to help ensure an orderly wind-down (along 

with the likely effects on clearing members and the financial markets from implementing such

tools), and the governance arrangements to guide decision-making during an orderly winddown—can strengthen the risk management practices of the DCO (including by identifying 

 

and procedures designed for the efficient, fair, and safe management of events” during such scenarios. Section 

5b(c)(2)(G)(i) of the CEA, 7 U.S.C. 7a-1(c)(2)(G)(i). 

170 Section 203(b)(2) of the Dodd-Frank Act, 12 U.S.C. 5383(b)(2).

171 For U.S.-based DCOs that are neither SIDCOs nor Subpart C DCOs, see discussion at supra fn. 156. Separately, 

foreign-based central counterparties registered with the Commission as DCOs are required to maintain recovery and 

wind-down plans by their home-country regulators. See infra fn. 207 and accompanying text. Thus, even if one of 

these were in future to be designated as systemically important under Title VIII, they would already maintain a 

recovery plan.

172 Section 5b(c)(2)(D)(i) of the CEA, 7 U.S.C. 7a-1(c)(2)(D)(i).
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vulnerabilities that can be mitigated), enhance legal certainty for the DCO, its clearing members 

and market participants, and increase market confidence, three pillars of the DCO Core 

Principles' aims. As discussed below, the subjects and analyses the Commission is proposing for 

inclusion in a DCO’s orderly wind-down plan overlap with many of the analyses DCOs must 

otherwise undertake to ensure compliance with the DCO Core Principles.

In order to facilitate accomplishment of these goals, the Commission proposes to add new

§ 39.13(k)(1)(a) to require that a DCO that is not a SIDCO or Subpart C DCO maintain and, 

consistent with the proposed revisions to § 39.19(c)(4)(xxiv), submit to the Commission, a viable 

plan for orderly wind down necessitated by default losses and non-default losses, and supporting 

information.173 In additional support of these goals, and as discussed further below, the 

Commission is proposing to add other provisions under § 39.13(k).

The Commission requests comment on the proposed changes. In particular, the 

Commission requests comment on the extent to which the proposed requirements concerning 

orderly wind-down plans for DCOs that are neither SIDCOs nor Subpart C DCOs appropriately 

balance seeking to ensure that such DCOs are prepared to wind-down in an orderly manner and 

mitigating the costs of preparing plans for such a wind-down. To the extent a better balance can 

be achieved, please discuss both the requirements that should be deleted or modified and the 

basis for the conclusion that the regulatory goal of orderly wind-down would reliably be

achieved in light of such changes.

 

173 In Section IV below, discussing the reporting requirement in § 39.19(c)(4)(xxiv), the Commission explains the 

reason for including the term “and supporting information.”
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B. Notice of the Initiation of Pending Wind-down – § 39.13(k)(1)(b)

Along the same lines—and consistent with the requirement for SIDCOs and Subpart C 

DCOs—the Commission is proposing to require that a DCO have procedures in place to notify 

the Commission and clearing members, as soon as practicable, when orderly wind-down is 

pending, and to provide such notification in such circumstances. Timely notification of events is 

essential for helping the Commission and clearing members effectively to address the issues 

raised by the DCO’s transition into wind-down and that having the proper procedures in place 

beforehand will facilitate such timely notification. 

The requirement that DCOs notify the Commission and clearing members of a pending 

orderly wind-down is reasonably necessary to effectuate Core Principle J, under which a DCO 

“shall provide to the Commission all information that the Commission determines to be 

necessary to conduct oversight of the [DCO],”

174 and Core Principle L, under which a DCO 

“shall provide to market participants sufficient information to enable the market participants to 

identify and evaluate accurately the risks and costs associated with using the services of the” 

DCO and “disclose publicly and to the Commission information concerning . . . any other matter 

relevant to participation in the settlement and clearing activities of the” DCO.175

Accordingly, the Commission proposes to add new § 39.13(k)(1)(b) to require that each 

DCO shall have procedures for informing the Commission and clearing members, as soon as 

practicable, when orderly wind-down is pending, and shall notify the Commission and clearing 

members consistent with proposed § 39.19(c)(4)(xxv). 

The Commission requests comment on these proposed changes. 

 

174 Section 5b(c)(2)(J) of the CEA, 7 U.S.C. 7a-1(c)(2)(J).

175 Section 5b(c)(2)(L) of the CEA, 7 U.S.C. 7a-1(c)(2)(L).
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C. Orderly Wind-down Plan: Required Elements – §§ 39.13(k)(2)-(6)

As is the case for SIDCOs and Subpart C DCOs, the Commission believes, as a general 

matter, that the orderly wind-down plan of a DCO that is not a SIDCO or a Subpart C DCO

should include a summary providing an overview of the plan followed by a detailed description 

of how the DCO will implement the plan. The description of how the DCO will implement its

plans shall include an identification and description of the critical operations and services the 

DCO provides to clearing members and financial market participants, the service providers upon 

which the DCO relies to provide these critical operations and services, interconnections and 

interdependencies, and staffing arrangements (including how they are resilient), obstacles to 

success of the orderly wind-down plan, aggregate cost estimates for the continuation of services 

during orderly wind-down, and how the DCO will ensure that its services continue through 

orderly wind-down. The plan shall also include a stress scenario analysis addressing the failure 

of each critical operation and service, a description of the criteria the DCO would consider in 

determining whether and when to trigger orderly wind-down and the process for monitoring for 

events that may trigger the wind-down; a description of the information-sharing and escalation 

processes within the DCO’s senior management and board of directors following an event 

triggering consideration of orderly wind-down and identification of the factors the board of 

directors would consider in exercising judgment or discretion with respect to any decisionmaking during wind down; an identification of scenarios that may trigger orderly wind-down and 

analysis of the tools the DCO would use following the occurrence of each scenario; an

identification and review of agreements to be maintained during orderly wind-down; a 

description of the DCO’s governance with respect to planning for orderly wind-down and during 

the orderly wind-down; and testing. The Commission believes these subjects and analyses are 
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the minimum elements that DCOs should incorporate in their orderly wind-down plans pursuant 

to their obligation to manage the risks associated with discharging their responsibilities under 

Core Principle D.176

Accordingly, the Commission is proposing new § 39.13(k)(2) to require a DCO to 

include in its orderly wind-down plans a summary providing an overview of the plan followed 

by a detailed description of how the DCO will implement the plan. 

The Commission requests comment on this aspect of the proposal. Each required 

element of the orderly wind-down plan is discussed in more detail below. 

1. Critical Operations and Services, Interconnections and Interdependencies, and 

Resilient Staffing – § 39.13(k)(2)(a)

In Section II, the Commission highlighted the importance of incorporating into recovery 

and orderly wind-down plans an identification and description of the critical operations and 

services that the SIDCO or Subpart C DCO provides to clearing members and financial market 

participants, the service providers upon which the DCO relies upon to provide these critical 

operations and services, financial and operational interconnections and interdependencies, and 

resilient staffing arrangements. As set forth below, the same is true for the orderly wind-down 

plans for DCOs that are not SIDCOs or Subpart C DCOs. 

i. Critical Operations and Services Provided by and to DCOs

Limiting the operational disruption and financial harm to a DCO’s clearing members and 

other financial market participants during an orderly wind-down, turns on the DCO’s 

 

176 To the extent foreign CCPs are subject to home jurisdiction regulation with different requirements for the 

subjects and analyses that must be included in their wind-down plans, the Commission welcomes comments 

describing those requirements, and including suggestions on how to achieve the goals of this regulation in a manner 

that appropriately addresses possible inefficiencies.
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understanding of the critical operations and services that the DCO performs for clearing 

members and other financial market participants, and, in turn, operations and services performed 

by others that are critical to the DCO performing those critical functions. Thus, the Commission 

is proposing to require that a DCO’s orderly wind-down plan include an identification and 

description of the critical operations and services that the DCO provides to clearing members and 

other financial market participants. For any critical (to the DCO) operations or services that the 

DCO relies upon which are performed by internal or external service providers, the plan should

identify those providers and describe the critical operations or services they perform. Likewise, 

to the extent the DCO’s ability to discharge its functions may be affected by the performance of 

ancillary service providers, the plan should identify those ancillary service providers and 

describe the operations or services they perform. By requiring the identification and description 

of the DCO’s critical operations and services, including those performed by internal or external 

service providers, and any ancillary service providers, the Commission seeks to ensure, to the 

extent practicable, that the DCO’s ability to perform the critical operations and services that 

others depend upon continues during the orderly wind-down process.

In the same vein, the Commission is proposing to require that a DCO’s orderly winddown plan identify and describe the obstacles to success of the plan, and the DCO’s plan to 

address the risks associated with the failure of each such critical operation and service. A stress 

scenario analysis (or similar undertaking) addressing the failure of each critical operation and 

service while the DCO is still a going concern should highlight whether and how the operation or 

service can continue in orderly wind-down. The Commission expects the DCO’s orderly winddown plan to address the full range of options in order to ensure that operations and services 

critical to the DCO continue in the orderly wind-down process. In considering and analyzing the 
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magnitude of the costs associated with an orderly wind-down, certain of the DCO’s expenses 

will likely increase, including, for example, legal fees, accounting fees, financial advisor fees, 

the costs associated with employee retention programs, and other incentives that may be 

necessary to maintain critical staff. Other costs, such as marketing or those for developing new 

products, may decrease as a result of wind-down. Further, a DCO shall proceed under the 

conservative assumption that any resources it may have consumed as part of its recovery efforts, 

if any, will not be available to fund critical operations and services in an orderly wind-down. 

ii. Interconnections and Interdependencies

The Commission is additionally proposing to require that the orderly wind-down plan

identify and describe the DCO’s financial and operational interconnections and 

interdependencies. Given the web of relationships that may exist among the DCO and its 

relevant affiliates, internal and external service providers, and other relevant stakeholders, 

identifying and describing the interconnections and interdependencies could provide muchneeded transparency and clarity for purposes of developing and implementing an orderly winddown plan. For instance, the financial resources available to a DCO during wind-down may be 

limited when one financial entity serves multiple roles and relationships with respect to the DCO

or when multiple affiliates of the DCO depend upon the same intercompany loan agreement or 

insurance policy with group coverage limits. Interconnections and interdependencies may also 

adversely impact the value of the DCO’s assets, which can be crucial in wind-down where a 

DCO is trying to meet costs associated with preserving critical operations and services and 

meeting liquidity needs. Accordingly, a DCO’s orderly wind-down plan should identify and 

describe any interconnections and interdependencies and address the effect such relationships 
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may have on the DCO’s ability to continue performing its functions during the wind-down 

process.

iii. Resilient Staffing and Support Services Arrangements

As noted in section II, a DCO in wind-down cannot maintain critical operations and 

services without both essential personnel and support services. Accordingly, the Commission is 

proposing to require that the orderly wind-down plan identify and describe plans for resilient 

staffing arrangements under which personnel essential for critical operations and services would 

be maintained and services supporting the DCO’s critical operations and services would

continue. To the extent the DCO relies upon contractors as personnel providing critical 

operations and services, the DCO should have staffing arrangements and agreements in place for 

such contracting work to continue in wind-down. Similarly, to the extent the DCO relies upon 

third-party service providers to provide critical operations and services, including facilities, 

utilities, and communication technologies, the DCO should have arrangements and agreements 

in place for such third-party services to continue in wind-down. Further, to promote its ability to 

ensure the success of the plan, the DCO should identify obstacles to that success. Additionally, 

as part of the DCO’s responsibility to maintain critical operations and services, the Commission 

is proposing to require that the orderly wind-down plan include aggregate cost estimates for 

essential personnel and support services, and address the manner in which the DCO will meet the 

associated costs. Just as the case may be for SIDCOs and Subpart C DCOs, other DCOs may be 

vulnerable to key person risk; accordingly, plans for resilient staffing arrangements should 

identify, to the extent applicable, key person risk within the DCO or (as relevant) affiliated legal 

entities that the DCO relies upon to provide its critical operations and services, and how the 

DCO has planned to address such risk.
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Accordingly, the Commission is proposing new § 39.13(k)(2)(a) to require that the 

DCO’s orderly wind-down plan include the identification and description of the DCO’s critical 

operations and services, interconnections and interdependencies, and resilient staffing 

arrangements, obstacles to success of the orderly wind-down plan, as well as a stress scenario 

analysis addressing the failure of each identified critical operation or service. Additionally, the 

orderly wind-down plan must include aggregate cost estimates for the continuation of critical 

operations and services and a description of how the DCO will ensure that such operations and 

services continue through orderly wind-down. 

The Commission requests comment on this aspect of the proposal. 

2. Triggers for Consideration of Orderly Wind-down and Processes for InformationSharing and Decision-Making – §§ 39.13(k)(2)(b)–(c)

The Commission is proposing to require that orderly wind-down plans for DCOs include 

a description of the criteria that would guide the DCO in considering whether and when to 

implement wind-down, and the process for monitoring for events that may trigger consideration 

of orderly wind-down. As noted in section II, any viable orderly wind-down plan must establish 

and define criteria (which may be in the alternative) that the DCO would consider in triggering 

consideration of wind-down. The criteria may be quantitative, such as the case where the DCO 

does not have the financial resources to continue as a going concern, or qualitative, such as the 

case where judgment may be needed (for instance, in circumstances involving litigation that is 

proceeding in a manner that suggests that a large, adverse finding is likely). Predefined criteria 

should help avoid undue delays in deciding whether to wind-down, which, in turn, should help 

increase the opportunity for an orderly wind-down. By monitoring for events that may trigger 

the consideration of wind-down, moreover, a DCO will be better situated to make a timely 
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decision regarding wind-down. Further, predefined criteria will provide confidence to market 

participants and the public that the DCO has proper plans in place to monitor for and manage 

situations that may require an orderly wind-down. 

Additionally, the Commission is proposing to require that the orderly wind-down plan 

include a description of the information-sharing and escalation processes within the DCO’s 

senior management and board of directors following an event triggering consideration of an 

orderly wind-down. By establishing automatic procedures under which the relevant decisionmakers may obtain the necessary information, the DCO may avoid undue delays in ultimately 

deciding whether to wind-down.

Similarly, the Commission is proposing to require that orderly wind-down plans include 

the factors that the board of directors anticipates that it would consider in any decision-making 

regarding wind-down where judgment or discretion is required. The Commission believes that 

the factors enumerated in the orderly wind-down plan should be those that the DCO considers 

most important in guiding the discretion of the board of directors. A predefined framework 

within which the board may exercise judgment and discretion should facilitate a timely decision 

regarding wind-down.

Accordingly, the Commission is proposing new §§ 39.13(k)(2)(b)–(c) to require that the 

DCO’s orderly wind-down plan include a description of the criteria that the DCO would consider 

in determining whether to implement wind-down and, relatedly, the process for monitoring for 

events that may trigger consideration of an orderly wind-down; a description of the informationsharing and escalation processes within the DCO’s senior management and board of directors 

following an event triggering consideration of an orderly wind-down; and the identification of 
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the factors that the DCO considers most important in guiding the board of directors’ judgment or 

discretion with respect to any decision-making during the wind-down.

The Commission requests comment on this aspect of the proposal.

3. Orderly Wind-down Scenarios and Tools – § 39.13(k)(3)

The Commission is proposing to require that a DCO’s orderly wind-down plan (i) 

identify the scenarios that may lead to an orderly wind-down, i.e., those scenarios that may 

prevent the DCO from meeting its obligations or providing its critical operations and services as 

a going concern, and (ii) analyze the tools the DCO would use following the occurrence of each 

scenario. Specifically, the Commission is proposing to require that the analysis describe the 

tools the DCO would expect to use in an orderly wind-down that comprehensively address how 

the derivatives clearing organization would continue to provide critical operations and services; 

describe the order in which the DCO would expect to implement any identified tools; describe 

the governance and approval processes and arrangements that will guide the exercise of any 

available discretion in the use of each tool; describe the processes to obtain any approvals 

external to derivatives clearing organization (including any regulatory approvals) that would be 

necessary to use each of the tools available, and the steps that might be taken if such approval is 

not obtained; establish the time frame within which the DCO may use each tool; set out the steps 

necessary to implement each tool; describe the roles and responsibilities of all parties in the use 

of each tool; provide an assessment of the likelihood that the tools, individually and taken 

together, would result in orderly wind-down; and provide an assessment of the associated risks to 

non-defaulting clearing members and those clearing members’ customers with respect to 

transactions cleared on the DCO, and linked financial market infrastructures. 
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As may be the case for SIDCOs and Subpart C DCOs, the scenarios that may trigger 

consideration for wind-down are typically those where recovery efforts (if any) are deemed to 

have failed. At that point, the DCO will no longer be able to meet its obligations or provide its 

critical operations and services as a going concern. For each scenario where the DCO may reach 

such a point, the Commission is proposing to require that the orderly wind-down plan analyze 

the tools available to effectuate an orderly wind-down.

The DCO’s tools—i.e., the wind-down options available to the DCO in each particular 

scenario—comprise those actions it may take to effect, in an orderly manner, the sale or transfer, 

or if necessary in extreme circumstances, permanent cessation, of its clearing and other services.

The Commission intends that the proposed analysis will require the DCO to assess the 

effectiveness of a full range of actions for orderly wind-down.

Among other things, an effective set of wind-down tools enables the DCO to manage

liquidity requirements in a manner in which critical operations and services would be maintained 

during the orderly wind-down period. Various factors may prevent an action from being 

effective, including, for instance, the number of steps required to implement the action (e.g., 

disclosure, risk reduction, trade reduction, transfer or close-out of positions, and liquidation of 

investments), the time required to complete each step (e.g., contract termination and other 

relevant requirements following disclosure), the discretion of various parties affecting the use or 

sequence of the action (including non-defaulting parties), and any legal limits regarding the 

action (e.g., the relevant DCO rules or rule amendments necessary to support the use of the 

action and the roles, obligations and responsibilities of the various parties in the use of the 

action). 
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Additionally, any action involving a proposed transfer may turn out to be difficult to 

achieve due to the financial and operational capacity that would be required of a transferee or the 

status of the DCO as a distressed seller. Further, the action may have adverse consequences on 

clearing members or other financial market participants. The Commission proposes to require 

this analysis in order to assist the DCO in determining which actions may effectuate an orderly 

wind-down where critical operations and services would be maintained throughout the orderly 

wind-down period while minimizing public harm.

Accordingly, the Commission is proposing new § 39.13(k)(3) to require that a DCO’s 

orderly wind-down plan include, following a thorough analysis, the set of scenarios that may 

trigger consideration of orderly wind-down and an analysis of the tools the DCO would use in 

each scenario. The Commission is proposing to require that the analysis describe the tools the 

DCO would expect to use in an orderly wind-down; describe the order in which the DCO would 

expect to implement any identified tools; describe the governance, approval processes and 

arrangements that will guide the exercise of any available discretion in the use of each tool; 

establish the time frame within which the DCO may use each tool; set out the steps necessary to 

implement each tool; describe the roles and responsibilities of all parties in the use of each tool; 

provide an assessment of the likelihood that the tool would result in orderly wind-down; and 

provide an assessment of the associated risks to non-defaulting clearing members and their 

customers, linked financial market infrastructures, and the financial system more broadly, from 

the use of each tool. 

The Commission requests comment on this aspect of the proposal.
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4. Agreements to be Maintained During Orderly Wind-Down – § 39.13(k)(4)

The Commission is proposing to require that a DCO’s orderly wind-down plan identify 

any agreements associated with the provision of its critical services and operations that are 

subject to alteration or termination as a result of winding down and describe the actions the DCO 

has taken to ensure such operations and services will continue during wind-down. Similar to

SIDCOs and Subpart C DCOs, the DCO may have a variety of contractual agreements with 

clearing members, affiliates, linked central counterparties, counterparties, external service 

providers, and other third parties. The contractual agreements may take the form of contracts, 

arrangements, agreements, and licenses associated with the provision of its services as a DCO, 

and may cover the DCO’s rules and procedures, agreements for the provision of operational, 

administrative and staffing services, intercompany loan agreements, mutual offset agreements or 

cross-margining agreements, and credit agreements. Under the Commission’s proposed 

requirement, the DCO’s orderly wind-down plan must review and analyze its agreements to 

determine if they contain covenants, material adverse change clauses, or other provisions that 

may render the continuation of the DCO’s critical operations and services difficult or 

impracticable upon implementation of the orderly wind-down plan. The Commission is 

proposing to require that the DCO take proactive steps to ensure that its critical operations and

services would continue in an orderly wind-down, notwithstanding any contractual provision to 

the contrary.

As is the case for SIDCOs and Subpart C DCOs, a requirement ensuring that the DCO’s 

agreements do not hinder its ability to continue critical operations and services in an orderly 

wind-down, or, if they do, that the orderly wind-down plan provides viable strategies to address 

the situation, is important to an orderly wind-down. Additionally, this requirement will aid in 
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providing a higher degree of confidence with respect to this group of DCOs in the public markets

even in extreme market conditions with the potential to trigger the consideration of

implementation of orderly wind-down plans. In addition to Core Principle D(i), this proposed 

requirement is supported by Core Principle R, requiring that the DCO have an “enforceable legal 

framework for each aspect” of its activities.

177

 To the extent any agreement prohibits the DCO 

from continuing its critical operations and services in an orderly wind-down, a DCO may not

have an enforceable legal framework within which to carry out all of its activities, specifically 

those associated with an orderly wind-down. 

Accordingly, the Commission is proposing new § 39.13(k)(4) to require that a DCO’s 

orderly wind-down plan identify any contracts, arrangements, agreements, and licenses 

associated with the provision of its critical services and operations that are subject to alteration or 

termination as a result of the implementation of the orderly wind-down plan. The orderly winddown plan shall describe the actions the DCO has taken to ensure such operations and services 

can continue during orderly wind-down, despite such potential alteration or termination.

5. Governance – § 39.13(k)(2)(5)

The Commission is proposing to require that a DCO’s orderly wind-down plan include 

predefined governance arrangements with respect to wind-down planning and orderly winddown that set forth the responsibilities of the board of directors, board members, senior 

executives and business units, describe the processes that the DCO will use to guide its 

discretionary decision-making relevant to the orderly wind-down plan, and describe the DCO’s 

process for identifying and managing the diversity of stakeholder views and any conflict of 

 

177 Section 5b(c)(2)(R) of the CEA, 7 U.S.C. 7a-1(c)(2)(R).
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interest between stakeholders and the DCO. Additionally, the Commission is proposing to 

require that the DCO’s board of directors formally approve and annually review the orderly 

wind-down plan. 

An effective governance arrangement will assist DCOs in reacting quickly to adverse 

scenarios, provide transparency to the orderly wind-down process, and help ensure that DCOs

properly vet wind-down decisions with consideration of the interests of all relevant parties. 

Further, the proposed requirements with respect to governance are supported by Core Principle

O, which requires that DCOs establish transparent governance arrangements “to fulfill public 

interest requirements” and “permit the consideration of the views of owners and participants,”178

and Core Principle P, which requires that DCOs establish both "rules to minimize conflicts of 

interest in the decision making-process" and “a process for resolving conflicts of interest.”179

Accordingly, the Commission is proposing new § 39.13(k)(5) to require that a DCO’s 

orderly wind-down plan describe an effective governance structure that clearly defines the 

responsibilities of the board of directors, board members, senior executives and business units, 

describe the processes that the DCO will use to guide its discretionary decision-making relevant 

to the orderly wind-down plan, and describe the DCO’s process for identifying and managing the 

diversity of stakeholder views and any conflict of interest between stakeholders and the DCO. 

Additionally, the Commission is proposing to require that a DCO’s board of directors formally 

approve and annually review the orderly wind-down plan.

The Commission requests comment on this aspect of the proposal.

 

178 Section 5b(c)(2)(O) of the CEA, 7 U.S.C. 7a-1(c)(2)(O).

179 Section 5b(c)(2)(P) of the CEA, 7 U.S.C. 7a-1(c)(2)(P).
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6. Testing – § 39.13(k)(2)(6)

For DCOs that are neither SIDCOs nor Subpart C DCOs, the Commission is proposing a 

testing requirement as part of the orderly wind-down plan that is similar, but not identical, to 

proposed new § 39.39(c)(8). Specifically, the Commission is proposing new § 39.13(k)(2)(6) to 

require that the orderly wind-down plan for these DCOs include procedures for testing the 

DCO’s ability to implement the tools upon which the orderly wind-down plan relies. The 

orderly wind-down plan must include the types of testing that will be performed, to whom the 

findings of such tests will be reported, and the procedures for updating the plan in light of the 

findings resulting from such tests. Such testing must occur following any material change to the 

orderly wind-down plan, but in any event not less frequently than once annually. 

The testing requirement for DCOs that are neither SIDCOs nor Subpart C DCOs should 

emphasize the reliable operability of the tools that potentially would be implemented in a winddown; as such, the Commission is not proposing to require these DCOs to conduct crisis 

management drills or similar exercises as part of the testing requirement. Moreover, because of 

the wide range of possible types of clearing members, the Commission is not proposing to 

require these DCOs to conduct testing with the participation of clearing members.180

Nonetheless, where the plan relies upon the performance of clearing members and other internal 

stakeholders, or external stakeholders such as service providers, such DCOs should consider 

whether involving such parties is practical.

As discussed above, however, testing the orderly wind-down plan—through assessing the 

operation and sufficiency of tools and resources to address losses— and updating the plan 

 

180 Such DCOs that are subject to regulation by other authorities may be subject to more stringent requirements with 

respect to testing by those authorities.
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accordingly is a critical part of a DCO’s risk management practice. Testing can reveal 

deficiencies in the effectiveness of specific tools. It can also enhance the tools and resources for 

identifying, measuring, monitoring, and managing risk in general. Periodic testing, moreover, 

may reveal any deficiencies or weaknesses in a DCO’s infrastructure which may hamper winddown efforts.

The Commission requests comment on this aspect of the proposal. The Commission 

specifically requests comment on the proposed requirement that tests be conducted not less than 

annually: would a different minimum frequency be more appropriate for DCOs other than 

SIDCOs or Subpart C DCOs?

D. Conforming Changes to Bankruptcy Provisions – Part 190.

The Commission is proposing several conforming changes to Part 190’s bankruptcy 

provisions that follow from the proposed requirement that all DCOs maintain viable plans for 

orderly wind-down. First, current § 190.12(b)(1) requires that a DCO in a Chapter 7 proceeding 

provide to the trustee copies of, among other things, the wind-down plan it must maintain 

pursuant to § 39.39(b).181 The Commission is proposing that the regulation be amended to 

include orderly wind-down plans that DCOs must maintain pursuant to proposed new § 39.13(k) 

in addition to § 39.39(b). 

Second, current § 190.15(a) requires that the trustee not avoid or prohibit certain actions 

taken by the DCO either reasonably within the scope of, or provided for in, any wind-down plan 

maintained by the DCO and filed with the Commission pursuant to § 39.39.182 The Commission 

 

181 17 CFR 190.12(b)(1).

182 17 CFR 190.15(a).
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is proposing that the regulation be amended to include orderly wind-downs plans maintained by 

DCOs and filed with the Commission pursuant to proposed new § 39.13(k) in addition to § 

39.39.

Third, current § 190.15(c) requires that the trustee act in accordance with any wind-down 

plan maintained by the debtor and filed with the Commission pursuant to § 39.39 in 

administering the bankruptcy proceeding.183 The Commission is proposing that the regulation be 

amended to include orderly wind-downs plans maintained by DCOs and filed with the 

Commission pursuant to proposed new § 39.13(k) in addition to § 39.39.

Last, current § 190.19(b)(1) requires that a shortfall in certain funds be supplemented in 

accordance with the wind-down plan maintained by the DCO pursuant to § 39.39 and submitted 

pursuant to § 39.19.184 The Commission is proposing that the paragraph be amended to include 

orderly wind-downs plans maintained by DCOs pursuant to proposed new § 39.13(k) in addition 

to § 39.39.

The Commission requests comment on this aspect of the proposal. 

IV.Establishment of Time to File Orderly Wind-down Plan – § 39.19(c)(4)(xxiv)

In light of the proposed requirement that all DCOs maintain and submit to the 

Commission viable plans for orderly wind down and supporting information, the Commission is 

proposing to establish the timing for submitting orderly wind-down plans and supporting 

information for DCOs currently registered with the Commission. As the Commission is 

proposing to amend § 39.19(c)(4)(xxiv) to establish the time for SIDCOs and Subpart C DCOs to 

 

183 17 CFR 190.15(c).

184 17 CFR 190.19(b)(1).
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file a recovery plan and an orderly wind-down plan, the Commission proposes to amend the 

same section to establish a fixed deadline for DCOs currently registered with the Commission to 

file orderly wind-down plans. Under the proposed rule, DCOs currently registered with the 

Commission must complete and submit orderly wind-down plans and supporting information 

within six months from the effective date of the rule (if it is adopted). Pursuant to Core Principle 

D(i), all DCOs must already ensure they possess the ability to manage the risks associated with 

discharging their responsibilities through the use of appropriate tools and procedures. A 

potential wind down, due either to default or non-default losses, is always a latent risk for any 

DCO engaged in clearing and settlement activities; accordingly, DCOs should already have some 

plans in place for implementing tools and procedures to manage an orderly wind-down. 

The Commission proposes to require that any DCO that submits an application for 

registration with the Commission six months or more after the effective date of this rulemaking 

(if it is adopted), must submit its orderly wind-down plans and supporting information at the time 

it submits an application for registration with the Commission under § 39.3.185 The Commission 

is also requiring that all DCOs, upon revising their plans, but in any event no less frequently than 

annually, submit the current plan(s) and supporting information to the Commission, along with a 

description of any changes and the reason(s) for such changes.

186

 

185 For any DCO that submits (or has submitted) an application for registration with the Commission before the date 

that is six months after the effective date of this rulemaking, if it is adopted, the Commission is proposing to require 

that the DCO have until the date that is six months after the effective date of this rulemaking to submit its orderly 

wind-down plan and supporting information.

186 See Section 5b(c)(2)(J) of the CEA, 7 U.S.C. 7a-1(c)(2)(J) (“Core Principle J – Reporting”) (requiring that DCOs 

“provide to the Commission all information that the Commission determines to be necessary to conduct oversight of 

the [DCO]”). 
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In § 39.19(c)(4)(xxiv), as well as in § 39.13(k) and § 39.39(b), the Commission is 

proposing to add the words “and supporting information” to references to submitting recovery 

and/or orderly wind-down plans. DCOs may, in some instances, include supporting information 

within their plans, or may organize the documentation with supporting information kept 

separately, e.g., as an appendix or annex. To avoid confusion as to whether such separately kept 

information is required to be submitted to the Commission, and to ensure that the Commission 

has timely access to such supporting information, the Commission is proposing to amend 

§§ 39.19(c)(4)(xxiv), 39.13(k) and 39.39(b) to require its submission explicitly. 

Accordingly, the Commission proposes to amend § 39.19(c)(4)(xxiv). Specifically, the 

Commission proposes to require that any DCO not currently registered with the Commission 

submit its viable plans for orderly wind-down and supporting information at the time it files its 

application for registration with the Commission under § 39.3. Because the Commission is 

proposing to require that all DCOs must maintain and submit plans for orderly-wind down and 

supporting information, the Commission proposes to remove the current language from 

§ 39.19(c)(4)(xxiv) suggesting or providing that DCOs that are not SIDCOs or Subpart C DCOs 

may maintain and submit orderly wind-down plans to the Commission. For DCOs that are 

currently registered with the Commission and are not SIDCOs or Subpart C DCOs, the 

Commission is proposing to require that they submit their viable plans for orderly wind-down 

and supporting information no later than six months after this final rulemaking is published. 

Upon revising their plans, moreover, but in any event no less frequently than annually, all DCOs 

shall submit the current plan(s) and supporting information to the Commission, along with a 

description of any changes and the reason(s) for such changes.
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The Commission requests comment on this aspect of the proposal. The Commission 

specifically requests comment concerning whether a DCO should additionally be required to 

update its recovery and orderly wind-down plans upon changes to the DCO’s business model, 

operations, or the environment in which it operates, to the extent such changes significantly 

affect the viability or execution of the recovery and orderly wind-down plans. The Commission 

also specifically requests comment concerning whether six months is sufficient time to develop 

these plans, or if a longer time (e.g., one year) would be more appropriate.

V. Amendment to Regulation 39.34(d)

As discussed in the context of recovery plans and orderly wind-down plans, the 

Commission proposes to discontinue the process by which the Commission could grant, upon 

request of a SIDCO or DCO that is electing to become subject to subpart C, up to one year to 

comply with §§ 39.39 and 39.35.187 The Commission is proposing to remove a similar provision 

in § 39.34(d) wherein a SIDCO or Subpart C DCO could request, and the Commission may 

grant, up to one year to comply with any provision of § 39.34 (System safeguards for SIDCOs 

and Subpart C DCOs) because granting such requests would be inconsistent with the system 

safeguard rules for SIDCOs and Subpart C DCOs that have been in effect for years.

188

 The 

Commission is therefore proposing to remove § 39.34(d) in its entirety.

The Commission requests comment on this aspect of the proposal.

VI.Amendments to Appendix B to Part 39 – Subpart C Election Form

 

187 See 17 CFR 39.39(f).

188 See System Safeguards Testing Requirements for Derivatives Clearing Organizations, 81 FR 64322 (Sept. 19, 

2016).
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The Commission is proposing to amend the Subpart C Election Form to reflect the above 

proposed changes to Part 39. One of these amendments will reflect the elimination of the request 

for an extension of up to one year to comply with any of the provisions of §§ 39.34, 39.35, or 

39.39. The “General Instructions” and “Elections and Certifications” portions of the Subpart C 

Election Form are proposed to be amended to delete the references to requests for relief of up to 

one year for those sections of part 39. Another amendment will modify Exhibit F-1 to include 

the DCO’s recovery plan, orderly wind-down plan, supporting information for these plans, and a 

demonstration that the plans comply with the requirements of § 39.39(c).

The Commission requests comment on this aspect of the proposal.

VII. Amendments to Appendix A to Part 39 –Form DCO

The Commission is proposing to amend Form DCO, in particular, Exhibit D – Risk 

Management to reflect the above proposed changes to Part 39. The amendment will add an 

Exhibit D-5 to include the DCO’s orderly wind-down plan, and a demonstration that the plan 

complies with the requirements of proposed § 39.13(k).

The Commission requests comment on this aspect of the proposal.

VIII. Related Matters

A. Regulatory Flexibility Act

The Regulatory Flexibility Act (RFA) requires that agencies consider whether the 

regulations they propose will have a significant economic impact on a substantial number of 

small entities and, if so, provide a regulatory flexibility analysis on the impact.189 The 

 

189 5 U.S.C. 601-612.
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regulations proposed by the Commission will affect only DCOs. The Commission has 

previously established certain definitions of “small entities” to be used by the Commission in 

evaluating the impact of its regulations on small entities in accordance with the RFA.190 The 

Commission has previously determined that DCOs are not small entities for the purposes of the 

RFA.191 Accordingly, the Chairman, on behalf of the Commission, hereby certifies pursuant to 5 

U.S.C. 605(b) that the proposed regulations will not have a significant impact on a substantial 

number of small entities. 

B. Antitrust Considerations

Section 15(b) of the CEA requires the Commission to take into consideration the public 

interest to be protected by the antitrust laws and endeavor to take the least anticompetitive means 

of achieving the purposes of the CEA, in issuing any order or adopting any Commission rule or 

regulation.192

The Commission believes that the public interest to be protected by the antitrust laws is 

generally to protect competition. The Commission requests comment on whether the proposed 

rules implicate any other specific public interest to be protected by the antitrust laws. 

The Commission has considered the proposed rulemaking to determine whether it is 

anticompetitive and has identified no anticompetitive effects. The Commission requests 

comment on whether the proposed rulemaking is anticompetitive and, if it is, what the 

anticompetitive effects are.

 

190 Policy Statement and Establishment of Definitions of “Small Entities” for Purposes of the Regulatory Flexibility 

Act, 47 FR 18618 (Apr. 30, 1982).

191 See A New Regulatory Framework for Clearing Organizations, 66 FR 45604, 45609 (Aug. 29, 2001).

192 Section 15(b) of the CEA, 7 U.S.C. 19(b).
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Because the Commission has preliminarily determined that the proposed rules are not 

anticompetitive and have no anticompetitive effects, the Commission has not identified any less 

anticompetitive means of achieving the purposes of the CEA. The Commission requests 

comment on whether there are less anticompetitive means of achieving the relevant purposes of 

the CEA that would otherwise be served by adopting the proposed rules.

C. Paperwork Reduction Act

The Paperwork Reduction Act (PRA)193 provides that Federal agencies, including the 

Commission, may not conduct or sponsor, and a person is not required to respond to, a collection 

of information unless it displays a valid control number from the Officer of Management and

Budget (OMB). The PRA is intended, in part, to minimize the paperwork burden created for 

individuals, businesses, and other persons as a result of the collection of information by federal 

agencies, and to ensure the greatest possible benefit and utility of information created, collected, 

maintained, used, shared, and disseminated by or for the Federal Government.

194

 The PRA 

applies to all information, regardless of form or format, whenever the Federal Government is 

obtaining, causing to be obtained, or soliciting information, and includes required disclosure to 

third parties or the public, of facts or opinion, when the information collection calls for answers 

to identical questions posed to, or identical reporting or recordkeeping requirements imposed on, 

ten or more persons.195 This proposed rulemaking contains reporting and recordkeeping 

requirements that are collections of information within the meaning of the PRA. This section 

 

193 44 U.S.C. 3501 et seq.

194 44 U.S.C. 3501.

195 44 U.S.C. 3502(3).
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addresses the impact of the proposal on existing information collection requirements associated 

with part 39 of the Commission’s regulations. Changes to the existing information requirements 

as a result of this proposal are set forth below. OMB has assigned Control No 3038-006,

“Requirements for Derivatives Clearing Organizations,” to the information collections associated 

with these regulations.196 The Commission is revising its total burden estimates for this 

clearance to reflect the proposed amendments. 

The Commission therefore is submitting this proposal to the OMB for its review in 

accordance with the PRA.197 Responses to this collection of information would be mandatory. 

The Commission will protect any proprietary information according to the Freedom of 

Information Act and part 145 of the Commission’s regulations.

198

 In addition, section 8(a)(1) of 

the CEA strictly prohibits the Commission, unless specifically authorized by the CEA, from 

making public any “data and information that would separately disclose the business transactions 

or market positions of any person and trade secrets or names of customers.”199 Finally, the 

Commission is also required to protect certain information contained in a government system of 

records according to the Privacy Act of 1974.200 

 

196 For the previously approved estimates, see ICR Reference No. 202303-3038-001, available at 

https://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=202303-3038-001.

197 44 U.S.C. 3507(d); 5 CFR 1320.11.

198 5 U.S.C. 552; 17 CFR part 145 (Commission Records and Information).

199 7 U.S.C. 12(a)(1).

200 5 U.S.C. 552a.
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1. Event-Specific Reporting – § 39.19(c)(4) 

Proposed § 39.39(b) would require a SIDCO or Subpart C DCO to submit written 

recovery plans and orderly wind-down plans within six months of designation as a SIDCO or 

upon a DCO’s election as a Subpart C DCO (in each case, if this happens subsequent to the 

effective date), consistent with current § 39.19(c)(4)(xxiv). This reporting requirement is already 

included in the information collection burden associated with the collection of information titled 

“Requirements for Derivatives Clearing Organizations, OMB Control No. 3038-0076.” The 

Commission has previously estimated that this requirement entails an estimated 4,320 burden 

hours for all covered DCOs along with an associated annual cost burden of $341,280.201 While 

the timing for this reporting requirement has changed, there is no change in frequency, and the 

Commission does not anticipate any other change to this reporting requirement caused by this 

change to the timing for the report to be submitted. However, because of enhancements to the 

requirements for these plans, the Commission anticipates an increase in the reporting burden 

from the proposed subjects and analyses that SIDCOs and Subpart C DCOs would be required to 

include in their recovery and orderly wind-down plans from 480 hours to 600 hours. The 

Commission will use a blended rate of 50% financial examiners ($237/hour) and 50% lawyers 

($499/hour) resulting in $368/hour.202 

 

201 This is based on the Commission’s estimate that nine covered DCOs will be required to submit one written 

recovery plan and wind-down plan annually. The Commission had estimated that covered DCOs will require 480 

hours on average to draft the required plans at a previously estimated $79 per hour.

202 According to the May 2021 National Occupational Employment and Wage Estimates Report produced by the 

U.S. Bureau of Labor Statistics, available at https://www.bls.gov/oes/current/oes_nat.htm, the mean salary 

for category 23-1011, “Lawyers,” is $198,900. This number is (a) divided by 1800 work hours in a year to account 

for sick leave and vacations, (b) multiplied by 4.0 to account for retirement, health, and other benefits, as well as 

for office space, computer equipment support, and human resources support, and (c) in light of recent high 

inflation, further multiplied by 1.1294 to account for the change in the Consumer Price Index for Urban WageEarners and Clerical Workers from 263.612 in May of 2021 to 297.730 in April of 2023, all of which yields 
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 The Commission specifically invites public comment on the accuracy of its estimates 

that the proposed regulations will not impose a new reporting burden but increase the reporting 

burden estimate to 600 hours.

The Commission’s burden estimate for § 39.19(b), including drafting or updating, 

approving, and testing the wind-plan, is as follows:

Estimated number of respondents: 6

Estimated number of reports per respondent: 1.

Average number of hours per report: 600

Estimated annual hours burden: 3,600

Estimated gross annual reporting burden: $1,324,800

Proposed § 39.13(k)(1)(a) would require a DCO that is neither a SIDCO nor a Subpart C 

DCO to submit, pursuant to § 39.19(c)(4)(xxiv), a written orderly wind-down plan. Given the 

similarities between the recovery plan and orderly wind-down plan, and the consequent 

efficiencies in preparing both plans, the Commission estimates that the orderly wind-down plan 

would require 400 hours to develop for non-SIDCO and non-Subpart C DCOs and 100 

hours/year to update. The estimated 400 hours represents a reduction of one-third the amount of 

time that the Commission estimates is required for SIDCOs and Subpart C DCOs to develop 

both the recovery plan and orderly wind-down plan. This proposed amendment, if adopted,

would increase the existing annual burden for this clearance by 3,600 hours.203 The Commission 

 

an hourly rate of $499. Using a similar analysis, category 13-2061, “Financial Examiners,” under business and 

financial services occupations, has a mean annual salary of $94,270, yielding an hourly rate of $237.

203 In an effort to adequately estimate the potential burden, the Commission will ignore the fact that, as discussed 

elsewhere in this NPRM, some DCOs have developed, and regularly update, their orderly wind-down plans pursuant 

to regulations imposed by non-U.S. regulators. 
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will use the same blended rate of $368/hour. The Commission specifically invites public 

comment on the accuracy of its estimates.

The Commission’s burden estimate for § 39.19(c)(4)(xxiv), including drafting or 

updating, approving, and testing the wind-plan, is as follows:

Estimated number of respondents: 9

Estimated number of reports per respondent: 1.

Average number of hours per report: 400

Estimated annual hours burden: 3,600

Estimated gross annual reporting burden: $1,324,800

The Commission is proposing to add new § 39.19(c)(4)(xxv) to require that each SIDCO 

or Subpart C DCO that is required to have a procedure for informing the Commission when the 

recovery plan is initiated or that orderly wind-down is pending pursuant to either § 39.39(b)(2) or 

§ 39.13(k)(1) shall notify the Commission and clearing members as soon as practicable when the 

DCO has initiated its recovery plan or that orderly wind-down is pending. SIDCOs and Subpart 

C DCOs are currently required under § 39.39(c)(1) to have procedures in place to notify the 

Commission when a recovery plan or orderly wind-down was initiated and the Commission is 

now proposing to codify this as a formal notification requirement, thus, the Commission does not 

view this aspect of the proposed regulation as a new reporting requirement under OMB Control 

No. 3038-0076. However, the requirement to notify clearing members was set out in CFTC 

Letter No. 16-61 but was not codified, and may therefore be considered a new event-specific 

reporting requirement. The Commission anticipates that, if adopted, the notification to the 

Commission and to clearing members will be drafted by a lawyer (and thus involve a cost/hour 

of $308) and will be an electronic notification. The current regulation requires procedures be in 
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place to notify the Commission, and the proposed regulation requires that the notification be sent 

to the Commission and to clearing members. The Commission anticipates that proposed §§ 

39.39(b)(2), 39.39(k)(1), and 39.19(c)(4)(xxv) would increase the event-specific reporting 

burden estimate marginally. 

Since notifications of this type are accomplished by electronic means, the existing 

procedure will have to be updated to include notice to the DCO’s clearing members. Since this 

can be accomplished using methods and tools that the DCO currently uses to provide notices to 

members of, e.g., changes in DCO rules or procedures, it is unlikely that the DCO will need to 

design and implement new tools. 

While no DCO (and no CFTC-regulated clearinghouse prior to the amendments to the 

CEA that provided for regulation of DCOs) has ever initiated recovery, several have (due to a 

paucity of business) made the decision to wind-down operations. The Commission 

conservatively estimates that one notification (total) under § 39.19(c)(4)(xxv) would occur every 

four years.

The Commission’s burden estimate for § 39.19(c)(4)(xxv) is as follows:

Estimated number of respondents: 1.

Estimated number of reports per respondent: 0.25.

Average number of hours per report: 1.

Estimated annual hours burden: 0.25

Estimated gross annual reporting burden: $125.

2. Requested Reporting—§ 39.19(c)(5)

The Commission is proposing to add a new requested reporting requirement for SIDCOs 

and Subpart C DCOs that submit information to the Commission pursuant to § 39.39(f)(2). 
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Proposed § 39.19(c)(5)(iii) would require a SIDCO or Subpart C DCO that submits information 

for resolution planning purposes to update the information upon request of the Commission. The 

Commission believes this is a new requested reporting requirement, which will be performed by 

lawyers at a cost of $499/hour. This proposed amendment, if adopted, would increase the 

existing annual burden for this clearance by an estimated 600 hours. The Commission’s burden 

estimate for this new reporting requirement under § 39.39(c)(5) is as follows:

Estimated number of respondents: 6.

Estimated number of reports per respondent: 1

Average number of hours per report: 100

Estimated annual hours burden: 600.

Estimated gross annual reporting burden: $299,400.

These proposed information collection requirements would result in an incremental 

increase in the annual hours burden associated with OMB Clearance No. 3038-0076. The 

Commission estimates the proposed amendments, if adopted, would yield the following 

incremental totals:

Estimated number of annual responses for all respondents: 15.25.

Estimated total annual burden hours for all respondents: 4,920.25

Estimated gross annual reporting burden: $1,889,285. 

Request for comment

The Commission invites the public and other Federal agencies to comment on any aspect 

of the proposed information collection requirements discussion above. Pursuant to 44 U.S.C. 

3506(c)(2)(B), the Commission will consider public comments on this proposed collection of 

information in:
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(1) Evaluating whether the proposed collection of information is necessary for the 

proper performance of the functions of the Commission, including whether the information will 

have a practical use;

(2) Evaluating the accuracy of the estimated burden of the proposed collection of 

information, including the degree to which the methodology and the assumptions that the 

Commission employed were valid; 

(3) Enhancing the quality, utility, and clarity of the information proposed to be 

collected; and

(4) Minimizing the burden of the proposed information collection requirements on 

registered entities, including through the use of appropriate automated, electronic, mechanical, or 

other technological information collection techniques, e.g., permitting electronic submission of 

responses.

Organizations and individuals desiring to submit comments on the proposed information 

collection requirements should send those comments to:

• The Office of Information and Regulatory Affairs, Office of Management and 

Budget, Room 10235, New Executive Office Building, Washington, DC 20503, Attn: Desk 

Officer of the Commodity Futures Trading Commission;

• (202)395-6566 (fax); or

• OIRAsubmissions@omb.eop.gov (email).

Please provide the Commission with a copy of submitted comments so that, if the 

Commission determined to promulgate a final rule, all comments can be summarized and 

addressed in the final rule preamble. Please refer to the ADDRESSES section of this 

rulemaking for instructions on submitting comments to the Commission. A copy of the 
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supporting statements for the collections of information discussed above may be obtained by 

vising RegInfo.gov. OMB is required to make a decision concerning the proposed information 

collection requirements between thirty (30) and sixty (60) days after the publication of the Notice 

of Proposed Rulemaking in the Federal Register. Therefore, a comment to OMB is best assured 

of receiving full consideration if OMB receives it within 30 calendar days of publication of this 

NPRM. Nothing in the foregoing affects the deadline enumerated above for public comments to 

the Commission on the proposed rules.

D. Cost-Benefit Considerations

1. Introduction

Section 15(a) of the CEA requires the Commission to consider the costs and benefits of 

its actions before promulgating a regulation under the CEA or issuing certain orders.204 Section 

15(a) further specifies that the costs and benefits shall be evaluated in light of five specific 

considerations identified in section 15(a) of the CEA (collectively referred to as section 15(a) 

factors) addressed below. 

The Commission recognizes that the proposed amendments may impose costs. The 

Commission has endeavored to assess the expected costs and benefits of the proposed 

amendments in quantitative terms, including PRA-related costs, where possible. In situations 

where the Commission is unable to quantify the costs and benefits, the Commission identifies 

and considers the costs and benefits of the applicable proposed amendments in qualitative terms. 

The lack of data and information to estimate those costs is attributable in part to the nature of the 

proposed amendments, in that they will require DCOs to undertake analyses that are specific to 

 

204 Section 15(a) of the CEA, 7 U.S.C. 19(a).
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the characteristics of each DCO, including the specifics of the DCO’s business model, services 

and operations provided by the DCO to clearing members and other financial market 

participants, products cleared (and the DCO’s role in the financial sector), services and 

operations provided by others that the DCO relies upon to provide its services and operations to 

others, infrastructure, and governance arrangements. Both the initial costs, and any initial and 

recurring compliance costs, will also depend on the size, existing infrastructure, practices, and 

cost structure of each DCO.

The Commission generally requests comment on all aspects of its cost-benefit 

considerations, including the identification and assessment of any costs and benefits not 

discussed herein; data and any other information to assist or otherwise inform the Commission’s

ability to quantify or qualitatively describe the costs and benefits of the proposed amendments; 

and substantiating data, statistics, and any other information to support positions posited by 

commenters with respect to the Commission’s discussion. The Commission welcomes comment 

on such costs, particularly from existing SIDCOs and Subpart C DCOs that can provide 

quantitative cost data based on their respective experiences. Commenters may also suggest other 

alternatives to the proposed approach.

2. Baseline

The baseline for the Commission’s consideration of the costs and benefits of this 

proposed rulemaking are: (1) the DCO Core Principles set forth in section 5b(c)(2) of the CEA; 

(2) the Commission’s regulations in Subpart C of part 39, which establish additional standards 

for compliance with the core principles for those DCOs that are designated as SIDCOs or have 

elected to opt-in to the Subpart C requirements in order to achieve status as a QCCP; and (3) 

subpart C Election Form in appendix B to part 39. 
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Some of the proposed revisions and amendments to § 39.39 would codify staff guidance 

and international standards. To the extent that market participants have relied upon the staff 

guidance that is proposed to be codified, the actual costs and benefits of the proposed rules, as 

discussed in this section of the proposal, may not be as significant. Additionally, the proposed 

changes to § 39.39 would not apply to all fifteen DCOs currently registered with the 

Commission. Rather, the proposed amendments to § 39.39 apply to SIDCOs and Subpart C 

DCOs. There are currently two SIDCOs,205 and four Subpart C DCOs.206 All SIDCOs and 

Subpart C DCOs have recovery plans and orderly wind-down plans on file with the Commission 

which may generally be consistent with the staff guidance issued in CFTC Letter No. 16-61 and 

current § 39.39(b). Additionally, the SIDCOs have already provided information related to 

resolution planning which may fulfill requests for information under current § 39.39(c)(2), which 

is proposed to be revised as § 39.39(f). 

As discussed further below, the Commission is proposing to require that DCOs that are 

neither SIDCOs nor electors into Subpart C to develop and maintain plans for orderly winddown. This would be a new requirement. However, of the nine such DCOs that are currently 

registered, five are based in jurisdictions that implement regulatory requirements that are 

consistent with the PFMI.207 These include standards that require both recovery and orderly 

wind-down plans. Accordingly, to the extent that these five DCOs have already designed and 

 

205 CME and ICC.

206 ICE Clear US, Inc.; Minneapolis Grain Exchange, LLC; Nodal Clear, LLC; and OCC.

207 These are ICE NGX Canada, Inc. (Canada), LCH SA (France), Eurex Clearing AG (Germany), as well as ICE 

Clear Europe and LCH Ltd (United Kingdom). Each of these jurisdictions has reported that they have fully 

implemented the standards in the PFMI. See https://www.bis.org/cpmi/level1_status_report.htm.
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maintain plans for orderly wind-down that are consistent with the proposed rules, the actual costs 

and benefits of the proposed rules, as discussed in this section of the proposal, may be 

reduced.208 These standards will be new, however, for the remaining four non-Subpart C DCOs 

(and for any new DCOs that are similarly situated).209

The Commission’s analysis below compares the proposed amendments to the regulations 

in effect today; however, it then takes into account current industry practices that may mitigate 

some of the costs and benefits set out in each section. The Commission seeks comment on all 

aspects of the baseline. 

3. Recovery plan and Orderly Wind-down Plan – § 39.39(b)

 The Commission is clarifying that each SIDCO and Subpart C DCO must submit its 

recovery plan and orderly wind-down plan to the Commission consistent with existing 

§ 39.19(c)(4)(xxiv). The Commission is further proposing in § 39.39(b)(2) to require that a 

SIDCO or Subpart C DCO notify the Commission and clearing members when the recovery plan 

is initiated or orderly wind-down is pending, and to add a corresponding event-specific reporting 

requirement in § 39.19(c)(4)(xxv). Proposed § 39.39(b)(3) would also establish that a SIDCO 

must file its recovery plan and (to the extent it has not already filed one) orderly wind-down plan 

within six months of designation as a SIDCO, and a DCO electing to be subject to Subpart C of 

the Commission’s regulations must file its recovery plan and (to the extent it has not already 

filed one) orderly wind-down plan on the effective date of its election. 

 

208 To the extent foreign CCPs are subject to home jurisdiction regulation with different requirements for the 

subjects and analyses that must be included in their orderly wind-down plans, the Commission welcomes comments 

describing those requirements, and including suggestions on how to achieve the goals of this regulation in a manner 

that appropriately addresses possible inefficiencies.

209 CBOE Clear Digital, LLC, CX Clearinghouse, L.P., LedgerX LLC, and North American Derivatives Exchange, 

Inc.
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i. Benefits

Proposed § 39.39(b)(1) explicitly requires that a SIDCO and a Subpart C DCO must have 

plans for recovery and orderly wind-down, and that these plans must each cover both default 

losses and non-default losses. This has the benefit of enhancing the resilience of these DCOs, 

and reducing the risk that they pose to clearing members and other financial market participants 

(and, in some cases, to the financial system), by requiring these plans to cover the full range of 

risks. 

Proposed § 39.39(b)(2) requires that SIDCOs and Subpart C DCOs have procedures to 

notify the Commission and clearing members that recovery is initiated or orderly wind-down is 

pending as soon as practicable, and that such notice is provided to the Commission and clearing 

members. The requirement to notify the Commission is not a new requirement, and the 

requirement to notify clearing members, which was explicit in the staff guidance, will aid 

clearing members in protecting their interests.

Finally, establishing a date for the filing of recovery plans and orderly wind-down plans

in proposed § 39.39(b)(3),

210 is responsive to commenters’ requests made over time for date 

certainty, and that choosing six months as that certain date takes into account both resilience and 

practicality. Requiring that a newly-designated SIDCO submit its plans no later than six months 

after designation and that a DCO submit its plans at the time of making the election to become 

subject to Subpart C (if it has not already done so) fosters the objectives of promoting resiliency 

and prepares SIDCOs and Subpart C DCOs to meet the challenges of recovery or orderly winddown in the event that they are necessary. Further, allowing newly designated SIDCOs six 

 

210 With respect to orderly wind-down plans, the Commission notes that this requirement would be applicable only 

to the extent the DCO does not have an orderly wind-down plan on file at the Commission.
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months to submit their plans should provide enough time to develop the plans. The Commission 

believes that these regulations will benefit registrants and market participants.

ii. Costs

The current regulations require a SIDCO or Subpart C DCO to maintain viable plans for 

recovery and orderly wind-down, and to submit such plans to the Commission. DCOs already 

have systems in place to notify clearing members when specific actions are taken, and the 

Commission believes that these existing systems can be used to notify clearing members when 

the recovery plan is initiated or orderly wind-down is pending. Thus, the costs involved would 

be the effort involved in preparing to use these existing systems to notify clearing members when 

the recovery plan is initiated or orderly wind-down is pending (including testing), and, if and 

when necessary, using them to make such notifications. Moreover, it does not appear that 

establishing the specified periods for filing the will cause additional costs above those involved 

in developing the recovery and orderly wind-down plans. 

iii. Section 15(a) Factors

In addition to the discussion above, the Commission has evaluated the costs and benefits 

in light of the specific considerations identified in section 15(a) of the CEA. In consideration of 

sections 15(a)(2)(A), (B), (D), and (E) of the CEA, the proposed amendments will protect market 

participants, enhance the financial integrity of futures markets, reflect sound risk management 

practices, and enhance the public interest, by ensuring that the Commission and clearing 

members are notified when the recovery plan is initiated or orderly wind-down is pending, 

thereby aiding the Commission in taking action to protect markets and the broader financial 

system, and enabling clearing members to protect their own interests. 

Section 15(a)(2)(C), price discovery, is not implicated by the proposed amendments.
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4. Recovery Plan and Orderly Wind-down Plan: Required Elements – § 39.39(c)

Proposed § 39.39(c) would establish the required content of a SIDCO’s or Subpart C 

DCO’s recovery plan and orderly wind-down plan consistent with the guidance set forth in 

CFTC Letter No. 16-61. Proposed §§ 39.39(c)(1)-(8) would require that each plan’s description 

include the identification and description of the critical operations and services the DCO

provides to clearing members and other financial market participants, the service providers the 

DCO relies upon to provide these critical operations and services, interconnections and 

interdependencies, resilient staffing arrangements, obstacles to success of the plan, stress 

scenario analyses, potential triggers for recovery and orderly wind-down, available recovery and 

orderly wind-down tools, analyses of the effect of the tools on each scenario, lists of agreements 

to be maintained during recovery and orderly wind-down, and governance arrangements. 

i. Benefits

Current § 39.39 does not provide explicit regulations governing the required elements of 

a SIDCO’s or Subpart C DCO’s recovery plan and orderly wind-down plan. At the time the 

2013 rule was promulgated, the international standards and guidance covering such elements 

(with which a SIDCO and Subpart C DCO must comply) were consultative and not finalized. 

CFTC Letter No. 16-61 provided SIDCOs and Subpart C DCOs with comprehensive guidance 

related to the elements of acceptable recovery plans and orderly wind-down plans. Proposed § 

39.39(c) would codify elements for a recovery plan and orderly wind-down plan that are, in 

general, drawn from the guidance on international standards related to recovery plans and orderly 

wind-down plans adopted by international standards-setting bodies since 2013, and described in 

detail in CFTC Letter No. 16-61. 
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Codifying the guidance set out in CFTC Letter No. 16-61, and enhancing the set of 

elements discussed in that guidance through proposed §§ 39.39(c)(1)-(8) should benefit market 

participants, including both DCOs and their members, by establishing specific regulatory 

requirements for well-designed and effective recovery and orderly wind-down plans. The 

requirements of proposed §§ 39.39(c)(1)-(8) should contribute to DCOs achieving a better ex 

ante understanding of, the critical services and operations that it provides clearing members and 

other financial market participants, the services and operations provided by others (including 

internal staff) upon which it depends to provide those services and operations (and contractual 

arrangements with such others that might be altered or terminated as a result of the 

circumstances that lead to the need for recovery or orderly wind-down), the scenarios that might 

lead to recovery or orderly wind-down, of the challenges a DCO would face in a recovery or 

wind-down scenario, the tools that the DCO would rely upon to meet those challenges, and the 

challenges and complexities in using those tools, and the DCO’s governance arrangements for 

recovery and orderly wind-down. This understanding will be significantly enhanced if the DCO 

engages in annual testing of its plans, and modifies those plans in light of the results of such 

testing.

Thus, the DCOs, clearing members, and other financial market participants will benefit 

through the DCO being better prepared to meet those challenges successfully (and thus being 

more likely to continue to provide those critical services and operations upon which clearing 

members and other financial market participants depend, and to avoid the potential harms to 

clearing members, other financial market participants, and the financial system more broadly, 

from a disorderly cessation of those services and operations). 
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Including these explicit and specific requirements for recovery plans and orderly winddown plans should significantly enhance the DCO’s ability to implement its recovery plan (or, if 

necessary, orderly wind-down plan) promptly and effectively. Additionally, the information will 

better enable a newly designated SIDCO, or a DCO that is electing subpart C status, to 

understand the requirements for well-developed and effective plans, and to consider relevant 

issues including the tools it intends to activate, its process for monitoring for triggers, the 

sequencing of tools, impediments to the timely or successful use of its tools, its governance 

arrangements, internal and external approval processes, and whether contractual agreements will 

continue during recovery and orderly wind-down; moreover, it will have a plan in place to 

handle exigencies in a manner that mitigates the risk of financial instability or contagion. 

ii. Costs

The specific requirements for a recovery plan’s and orderly wind-down plan’s 

description, analysis, and testing set forth in this regulation will require substantial time to be 

spent on analytical effort by DCO staff, including attorneys, compliance staff, and other subject 

matter experts. DCO staff will spend time to review existing plans and supporting arrangements,

compare them to the proposed rules (to the extent that they are ultimately adopted), and make 

modifications or additions to those plans, in light of, inter alia, the specifics of each DCO’s 

business model, services and operations provided by the DCO to clearing members and other 

financial market participants, products cleared (and the DCO’s role in the financial sector), 

services and operations provided by others that the DCO relies upon to provide its services and 

operations to others, infrastructure, and governance arrangements. The revised plans will then 

need to be reviewed, first by senior management and then by the board of directors, at the cost of 
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the time of those persons, and potentially further amended in light of the results of such reviews

(resulting in the further expenditure of time). 

All of these DCOs will need to incur the cost of staff time to undertake additional 

analysis to (a) ensure that their recovery and orderly wind-down plans meet those portions of the 

proposed requirements that represent codification of staff guidance, and (b) meet those portions 

of the proposed requirements that represent enhancements to the staff guidance (this includes 

enhancements resulting from changes to definitions, e.g., calling for considerations of nondefault losses due to the actions of malicious actors, including internal, external, and nationstates). 

This additional analysis includes developing an overview of each plan and describing 

how the plan will be implemented, ensuring that each plan identifies and describes (i) the critical 

operations and services that the DCO provides to clearing members and other financial market 

participants, (ii) the service providers upon which the DCO relies to provide these operations and 

services, (iii) plans for resilient staffing arrangements for continuity of operations, (iv) obstacles 

to success of the plans, (v) plans to address the risks associated with the failure of each critical 

operation and service, (vi) how the DCO will ensure that the identified operations and services 

continue thorough recovery and orderly wind-down. 

Further, the DCO will need to ensure that the analysis of scenarios for its recovery plan 

includes each of the scenarios specified in § 39.39(c)(2)(ii)(A-K), or that the analysis documents 

why such scenario is not possible in light of the DCO’s structure and activities, and that, for each 

possible scenario, the analysis includes the elements specified in § 39.39(c)(2)(i)(A-F). The 

DCO will need to ensure that the analysis establishes triggers for recovery or consideration of 

orderly wind-down, and the information-sharing and governance process within senior 
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management and board of directors. The DCO will also need to ensure that the plans describe 

the tools that it would use to meet the full scope of financial deficits that the DCO might need to 

remediate, and, for each set of tools, provides the additional analysis described in §

39.39(c)(4)(ii-ix) (for the recovery plan) and § 39.39(c)(5)(iii-x) (for the orderly wind-down 

plan).

Additionally, the DCO will need to ensure that its plans include determinations of which 

of the contracts, etc. associated with the provision of its services as a DCO are subject to 

alteration or termination as a result of the implementation of recovery or orderly wind-down, and 

the actions that the DCO has taken to ensure that its critical operations and services will continue 

during recovery and orderly wind-down despite such alteration or termination. The DCO will 

also need to ensure that the plans are formally approved, and annually reviewed, by the board of 

directors, describe effective governance structures and processes to guide discretionary decisionmaking relevant to each plan, and describe the DCO’s process for identifying and managing the 

diversity of stakeholder views and any conflict of interest between stakeholders and the DCO.

Moreover, the DCO will need to ensure that its plans include procedures for testing their 

viability, including the DCO’s ability to implement the tools that each plan relies upon. This also 

includes the types of testing to be performed, to whom the results are reported, and procedures 

for updating the plans in light of the findings resulting from such tests. The tests need to include 

the participation of clearing members, where the plans rely upon their participation. The tests 

must be repeated following any material change to the recovery plan or orderly wind-down plan, 

but in any event not less than once annually.

If the foregoing recovery or orderly wind-down planning identifies vulnerabilities that 

need to be improved upon, the DCO will incur the cost of remediating such vulnerabilities.
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As noted earlier in this section, plans revised in light of the foregoing analysis will then 

need to be reviewed, first by senior management and then by the board of directors, at the cost of 

the time of those persons, and potentially further amended in light of the results of such reviews

(resulting in the further expenditure of time). 

It is impracticable to quantify these costs, because they depend on the specific design and 

other circumstances of each DCO. including the specific services and operations that the DCO 

provides to clearing members and other financial participants, the services and operations 

provided by others that the DCO relies upon to provide those services, the contractual 

arrangements between and those service providers, and the DCO’s current recovery and orderly 

wind-down plans., It seems likely that these requirements will require hundreds of hours of the 

effort of skilled professionals, at a cost of tens of (perhaps more than a hundred) thousands of 

dollars. 

For DCOs that are currently SIDCOs or Subpart C DCOs, or other DCOs that may 

currently maintain recovery and orderly wind-down plans, the amount of time required for each 

DCO to initially amend its recovery plan and orderly wind-down plan may vary depending on 

the extent to which the DCO already addressed the foregoing requirements in its existing plans.

The analysis and plan preparation that a SIDCO or Subpart C DCO will undertake to comply 

with this regulation, including designing and implementing changes to existing plans, was, to a 

significant extent, established in the 2016 staff guidance, and, based on staff’s experience, 

SIDCOs and Subpart C DCOs generally already follow those standards. To that extent, for these 

DCOs, those costs may be reduced. 

The Commission requests comment from existing SIDCOs and Subpart C DCOs 

concerning their estimates of the time, and corresponding costs, they would expect to incur in 
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ensuring that their existing plans meet the requirements of the proposed rule, along with 

supporting data concerning the amount of effort expended on preparing existing plans, and the 

extent to which additional time may need to be spent to conform such plans to the proposed 

rules. The Commission also seeks comment from the public more generally as to estimates, 

along with supporting data, of the time, and corresponding costs that might be incurred in 

developing recovery and orderly wind-down plans that meet those requirements. 

Additionally, to what extent are existing SIDCOs and Subpart C DCOs following the 

staff guidance in CFTC Letter No. 16-61? What is the impact of current practice among existing 

SIDCOs and Subpart C DCOs with respect to that staff guidance on the costs and benefits that 

would result from implementation of the proposed rules?

iii. Section 15(a) Factors

In addition to the discussion above, the Commission has evaluated the costs and benefits 

in light of the section 15(a) factors. In consideration of sections 15(a)(2)(A), (B), (D), and (E) of 

the CEA, the Commission believes the proposed amendments to §§ 39.39(c)(1)-(8) would 

enhance existing protection of market participants and the public and the financial integrity of 

futures markets, and the regulations should aid in sound risk management practices by ensuring 

that the DCO considers in advance the impact that recovery and orderly wind-down would have 

on its operations and customers. Moreover, specifying the contents of the plans in the regulation 

should increase the possibility that a DCO could continue to provide the critical services and 

operations upon which its clearing members and other financial market participants depend, and 

reduce the possibility that a DCO would fail in a disorganized fashion. The proposed rule should 

reduce the likelihood of a DCO’s failure to meet its obligations to its members, thereby 

enhancing protection for a DCO’s members and their customers, and should help to avoid the 
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systemic effects of a DCO failure. Having the requisite plans in place, moreover, should allow 

DCOs to handle exigencies in a manner that mitigates the risk of financial instability or 

contagion. These benefits favor the public interest. Section 15(a)(2)(C), price discovery, does 

not appear to be implicated by the proposed amendments.

5. Information for Resolution Planning – § 39.39(f)

The Commission is proposing in § 39.39(f) to require that a SIDCO and Subpart C DCO 

maintain information systems and controls to provide data and information necessary for the 

purposes of resolution planning to the Commission, and upon request provide such data and 

information to the Commission, electronically, in the form and manner specified by the 

Commission. Proposed §§ 39.39(f)(1)-(7) describes the types of information deemed pertinent to 

planning for resolution of a SIDCO or Subpart C DCO under Title II of the Dodd-Frank Act. 

Much of this information may already be provided to the Commission, and thus may not be 

requested. The proposed regulation expands on current § 39.39(c)(2) and lists explicitly the 

types of information that SIDCOs and Subpart C DCOs may be required to provide upon request 

because they are relevant to resolution planning, but which may not ordinarily be required to be 

provided under other sections of part 39. 

i. Benefits

Proposed §§ 39.39(f)(1)-(7) describes the types of information that the Commission 

proposes to require for resolution planning under Title II of the Dodd-Frank Act. Thorough 

preparation ex ante is crucial for successfully managing matters relating to the resolution of a 

SIDCO or Subpart C DCO, as well as for establishing market confidence and the confidence of 

foreign counterparts to the Commission and to the United States agencies responsible for 

resolution of a SIDCO or Subpart C DCO. Because of the nature of principles-based regulation, 
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there is some information in the possession of the DCO that, while important for resolution 

planning purposes, may not ordinarily be reported to the Commission and may not be publicly 

available. Thus, the primary benefit from this regulation is that the type of information to be 

requested will be available to the DCO, and upon request, the Commission may obtain the 

information in order to assist the Commission in planning and preparing for the resolution of a 

distressed DCO. There is also considerable public benefit in enhancing preparedness for 

resolution by making available to FDIC, as the resolution authority, information relevant to 

planning for the resolution of a SIDCO or Subpart C DCO. 

ii. Costs

The proposal assumes that there is information relevant to resolution planning that is not 

ordinarily reported to the Commission under § 39.19, but which is in the possession of the DCO. 

As such, SIDCOs and Subpart C DCOs will face certain incremental costs (from gathering the 

information, reviewing it for accuracy, and transmitting it to the Commission) to produce this 

information upon request as required by proposed §§ 39.39(f)(1)-(7). Gathering the information 

and transmitting it would likely be accomplished by paraprofessionals, while review may require 

the work of paraprofessionals or professionals. The time that would be required to accomplish 

these tasks would depend on the information requested and the DCO’s information system 

architecture. A crude estimate of the time required might be 10-20 hours, at a cost of $1,000-

$3,000, once or twice a year for a SIDCO, and once every five years for a Subpart C DCO. 

To the extent that some of this information requires analyses by the DCO that are not 

currently conducted, such incremental costs may be more significant. Here, the DCO would 

need to develop tools to analyze its information (which may involve new uses for existing tools, 

or may in some cases require the development of new tools), gather the underlying data, use the 
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tools, review the results, and then transmit those results to the Commission. This may also 

involve effort in working with Commission staff to clarify and/or to sharpen the request. While 

some of this effort might be accomplished by paraprofessionals, the proportion that would need 

the effort of professionals would likely be greater than in the previous paragraph. A crude

estimate of the time required might be 30-60 hours, at a cost of $5,000-$10,000, once a year for a 

SIDCO, and once every ten years for a Subpart C DCO. 

It should be noted that the Commission does not anticipate asking Subpart C DCOs for 

information for resolution planning in the near term. This is because, even in the highly unlikely 

event that a Subpart C DCO would enter recovery, and that such recovery would fail, the 

likelihood of such a DCO qualifying for resolution under Title II is fairly low.

The Commission seeks comments, in particular from SIDCOs and Subpart C DCOs, on 

the accuracy of these estimates (with respect to both time required and cost), and on how they 

may be improved. In particular, SIDCOs that have responded to similar requests in the past are 

invited to discuss the costs that they incurred in doing so (both in building tools where necessary 

and in gathering and reviewing the information), and to provide insight into expected costs to do 

so in the future 

iii. Section 15(a) Factors

In addition to the discussion above, the Commission has evaluated the costs and benefits 

in light of the specified considerations identified in section 15(a) of the CEA. In consideration of 

sections 15(a)(2)(A), (B), (D), and (E) of the CEA, the Commission preliminarily believes that 

proposed §§ 39.39(f)(1)-(7) would protect market participants and the public, and support the 

financial integrity of futures markets, by enhancing preparation for resolution of DCO in advance 

of systemic failure, and thus increasing the likelihood that resolution would be successful. 
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Furthermore, advance planning may identify issues that should and can be corrected in advance 

of market failure, thereby providing an opportunity to improve DCO risk management practices 

and further enhance the protection of market participants and the public, and the financial 

integrity of the derivatives markets. Finally, there is a strong public interest in holding CFTCregistered SIDCOs and Subpart C DCOs to regulations that incorporate international standards 

and guidance. Section 15(a)(2)(C), price discovery, does not appear to be implicated by this 

proposal.

6. Requested reporting – § 39.19(c)(5)(iii)

Proposed §§ 39.39(f)(1)-(7) requires a corresponding amendment to § 39.19(c)(5)

regarding requested reporting. Proposed § 39.19(c)(5)(iii) would require that a SIDCO or 

Subpart C DCO that submits information related to resolution planning to the Commission

pursuant to §§ 39.39(f)(1)-(7), shall update the information upon request. 

i. Benefits

The Commission is proposing an additional requirement to clarify that the information 

for resolution planning requested under proposed § 39.39(f) would be updated upon request. By 

requesting (and then providing to the FDIC) current, accurate, and pertinent information for 

resolution planning, the Commission may be able to assist in resolution planning more 

effectively. The financial system benefits as a whole when the FDIC can obtain, with the aid of 

the Commission, current, accurate, and pertinent information for resolution planning related to a 

SIDCO’s or Subpart C DCO’s structure and activities (§ 39.39(f)(1)), clearing members (§ 

39.39(f)(2)), arrangements with other DCOs (§ 39.39(f)(3)), financial schedules and supporting 

details (§ 39.39(f)(4)), interconnections and interdependencies with internal and external service 
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providers (§ 39.39(f)(5)), information concerning critical personnel (§ 39.39(f)(6)), and other 

necessary information (§ 39.39(f)(7)).

ii. Costs

The Commission anticipates that proposed § 39.19(c)(5) would add incremental costs to 

the business-as-usual activities of the DCOs. For information that is regularly maintained by the 

DCO, this would involve repeating the efforts described above in Section VIII.D.5(ii) of 

gathering, reviewing, and transmitting the information. For information that requires analyses 

that are not currently conducted by the DCO, the corresponding efforts described above in 

Section VIII.D.5(ii) would be called for, but some may be reduced or eliminated: the DCO 

would once again need to gather the information, but would presumably be able to use the tools 

that it repurposed (or newly developed) when it responded to the information request for the first 

time. Moreover, there may not be a need to clarify or sharpen the request, to the extent that the 

request is identical (except for time-period) to the first request. The DCO would still need to 

review the results, and transmit them to the Commission.

iii. Section 15(a) factors

In addition to the discussion above, the Commission has evaluated the costs and benefits 

in light of the specified considerations identified in section 15(a) of the CEA. In consideration of 

sections 15(a)(2)(A), (B), (D), and (E) of the CEA, the Commission believes that §§ 39.39(f)(1)-

(7) protects market participants and the public, and promotes the financial integrity of futures 

markets, by ensuring that resolution plans are based on current, accurate, and pertinent 

information. Further, planning for resolution is a pillar of sound risk management principles, 

and supports the public interest. Section 15(a)(2)(C), price discovery, does not appear to be 

implicated by this proposal.
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7. Viable Plans for Orderly Wind-Down for DCOs that are Neither SIDCOs Nor

Subpart C DCOs – § 39.13(k)

Proposed § 39.19(k)(1)(a) would require that DCOs that are neither SIDCOs nor Subpart 

C DCOs maintain and submit to the Commission viable plans for orderly wind down 

necessitated by default losses and non-default losses. As discussed above, proposed 

§§ 39.19(k)(2)-(6) would enumerate the information required to be incorporated in an orderly 

wind-down plan.

i. Benefits

Requiring DCOs that are neither SIDCOs nor Subpart C DCOs to maintain viable plans 

for orderly wind-down should contribute to a better ex ante understanding by such DCOs of the 

critical services and operations that clearing members and other financial market participants 

depend upon them to provide, and of the challenges the DCO would face in doing so. DCOs will 

benefit through better preparation to meet those challenges; moreover, by enumerating certain 

subjects, analyses, and testing that all DCOs must include in their orderly wind-down plans, a 

DCO’s ability to wind-down promptly and in an orderly manner during any exigency should be 

significantly enhanced. To the extent that this analysis identifies vulnerabilities, the DCO will 

have the opportunity to remediate them.211

Importantly, an orderly and expeditious wind-down will help mitigate the damage to the 

DCO’s participants (and their customers, if any) by facilitating either the continuation of the 

DCO’s services (potentially through another DCO) or the prompt return of their participants’ 

collateral. 

 

211 To the extent that a foreign-based DCO already maintains an orderly wind-down plan, pursuant to the regulations 

of its home-country regulator, that meets the standards set in the proposed regulation, these benefits would be 

reduced or eliminated.
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 ii. Costs

The Commission anticipates that some DCOs may bear a significant cost burden, as 

described further below, due to the proposed regulation, because of the various analyses and 

testing these DCOs would be required to conduct.

The specific requirements for an orderly wind-down plan’s description, analysis, and 

testing set forth in this regulation will require substantial time to be spent on analytical effort by 

DCO staff, including attorneys, compliance staff, and other subject matter experts. DCO staff 

will need to draft plans and supporting arrangements that meet the standards set in the proposed 

rules (to the extent that they are ultimately adopted) in light of, inter alia, the specifics of each 

DCO’s business model, services and operations provided by the DCO to clearing members and 

other financial market participants, products cleared (and the DCO’s role in the financial sector), 

services and operations provided by others that the DCO relies upon to provide its services and 

operations to others, infrastructure, and governance arrangements. The plans will then need to 

be reviewed, first by senior management and then by the board of directors, at the cost of the 

time of those persons, and potentially further amended in light of the results of such reviews

(resulting in the further expenditure of time). 

These analyses include developing an overview of the orderly wind-down plan and 

describing how the plan will be implemented, ensuring that the orderly wind-down plan 

identifies and describes (i) the critical operations and services that the DCO provides to clearing 

members and other financial market participants, (ii) the service providers upon which the DCO 

relies to provide these operations and services, (iii) plans for resilient staffing arrangements for 

continuity of operation, (iv) obstacles to success of the plan, (v) plans to address the risks 
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associated with the failure of each critical operation and service, (vi) how the DCO will ensure 

that the identified operations and services continue thorough orderly wind-down. 

Further, the DCO will need to ensure that the analysis of scenarios for its orderly winddown plan identifies scenarios that may prevent the DCO from meeting its obligations or 

providing critical operations and services as a going concern. The DCO will need to ensure that 

the analysis establishes triggers for consideration of orderly wind-down, and the informationsharing and governance process within senior management and board of directors. The DCO 

will also need to ensure that the plan describes the tools that it would use in an orderly winddown that comprehensively address how the DCO would continue to provide critical services, 

the governance and approval processes and arrangements that will guide the exercise of any 

available discretion, the steps necessary to implement each tool, the roles and responsibilities of 

all parties in the use of each tool, an assessment of the likelihood that the tools, individually and 

taken together, would result in an orderly wind-down, and an assessment of the risks to nondefaulting clearing members and their customers, and linked financial market infrastructures.

Additionally, the DCO will need to ensure that its plan includes determinations of which 

of the contracts, etc. associated with the provision of its services as a DCO are subject to 

alteration or termination as a result of the implementation of the orderly wind-down plan, and the 

actions that the DCO has taken to ensure that its critical operations and services will continue 

during orderly wind-down despite such alteration or termination. The DCO will also need to 

ensure that the plans are formally approved, and annually reviewed, by the board of directors, 

describe effective governance structures and processes to guide discretionary decision-making

relevant to the plan, and describe the DCO’s process for identifying and managing the diversity 

of stakeholder views and any conflict of interest between stakeholders and the DCO.
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Moreover, the DCO will need to ensure that its plan includes procedures for testing the 

DCO’s ability to implement the tools that the orderly wind-down plan relies upon. This also 

includes describing the types of testing to be performed, to whom the results are reported, and 

procedures for updating the plans in light of the findings resulting from such tests. The tests must 

be repeated following any material change to the orderly wind-down plan, but in any event not 

less than once annually.

If the foregoing wind-down planning identifies vulnerabilities that need to be improved 

upon, the DCO will incur the cost of remediating such vulnerabilities.

As noted earlier in this section, plans revised in light of the foregoing analysis will then 

need to be reviewed, first by senior management and then by the board of directors, at the cost of 

the time of those persons, and potentially further amended in light of the results of such reviews 

While it is impracticable to quantify these costs, because they depend on the specific 

design and other circumstances of each DCO. it seems likely that these requirements will require

less effort than the corresponding requirements for both recovery plans and orderly wind-down 

plans for SIDCOs and Subpart C DCOs, because these DCOs are required only to prepare, and 

meet the standards for, an orderly wind-down plan. Moreover, in many cases, the business 

structure and operations of these DCOs may be less complex than those of SIDCOs or Subpart C 

DCOs. Nonetheless, the Commission estimates that an orderly wind-down plan will require 

hundreds of hours of the effort of skilled professionals, at a cost of tens of thousands of dollars.

For those DCOs that are based in jurisdictions that, pursuant to a legal framework that is 

consistent with the PFMI, already require them to maintain orderly wind-down plans, the cost 

should be substantially less, as the requirements for orderly wind-down plans are likely to be 

comparable to the requirements applicable in those other jurisdictions (and thus these DCOs 
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would, for the most part, be able to rely upon their existing plans).

212

 For other DCOs that are 

not required to have orderly wind-down plans pursuant to regulations of either the CFTC or other 

regulators, these costs would be larger while the orderly wind-down plans are first being 

developed, although there will be additional (albeit reduced ) costs in reviewing, testing, and 

updating these plans on an ongoing basis. The initial costs may be mitigated to the extent that 

such DCOs may already have some form of a wind-down plan in place as part of their general 

risk management strategy. Additionally, DCOs may already have performed some of the 

proposed analyses as part of their existing regulatory compliance programs. 

iii. Section 15(a) Factors

In addition to the discussion above, the Commission has evaluated the costs and benefits 

in light of the specific considerations identified in section 15(a) of the CEA. In consideration of 

section 15(a)(2)(A) of the CEA, the Commission believes that the proposed regulations should 

protect market participants and the public. At the outset, a viable plan for orderly wind down 

reduces uncertainty in times of market stress, since its existence enhances legal certainty for the 

DCO’s clearing members and market participants, and increases the likelihood of an orderly and 

expeditious wind-down that will mitigate the harm to their interests from the closing of the DCO. 

Further, a viable plan for orderly wind-down should increase market confidence, because

clearing members and their customers would know beforehand that the DCO is well prepared to 

undertake an orderly wind-down, if necessary. Importantly, the proposed regulations should 

enhance protection for a DCO’s members and their customers by reducing the likelihood that a 

 

212 To the extent that this assumption is incorrect, and the proposal would require foreign-based DCOs to comply 

with overly burdensome additional requirements, the Commission seeks comments that set forth inconsistencies

between the proposed requirements and the requirements in the relevant foreign jurisdictions, and recommendations 

as to how those inconsistencies can and should be mitigated through amendments to the proposed requirements.
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DCO would fail to meet certain obligations to its members and other market participants in 

orderly wind-down. 

In consideration of section 15(a)(2)(B) of the CEA, with respect to the efficiency, 

competitiveness, and financial integrity of markets, plans for orderly wind-down (and for 

determining when orderly wind-down might be necessary) would enhance financial integrity of 

markets, by enhancing the likelihood that any wind-down would be orderly, and the existence of 

these standards might enhance market participants confidence in (and thus the competitiveness 

of) DCOs.

In consideration of section 15(a)(2)(D) of the CEA, the proposed regulations would aid in 

sound risk management practices. The requirement to maintain and submit to the Commission 

viable plans for orderly wind-down provides greater clarity and transparency before wind-down 

and facilitates timely decision-making and the continuation of critical operations and services 

during orderly wind-down. Wind-down planning—including, for example, considering the 

circumstances that may trigger an orderly wind-down, the tools the DCO would implement to 

help ensure an orderly wind-down (along with the likely effects on clearing members and the 

financial markets from implementing such tools), and the governance arrangements to guide 

decision-making during a wind-down—also would strengthen the risk management practices of 

the DCO by, among other things, identifying vulnerabilities that can be mitigated and preparing 

for multiple exigencies. Having an orderly wind-down plan in place, moreover, should allow the 

DCO to handle exigencies in a manner that mitigates the risk of financial instability or contagion. 

Moreover, in consideration of section 15(a)(2)(E), having an orderly wind-down plan in place 

would promote the public interest. However, section 15(a)(2)(C), price discovery, is not 

implicated by the proposed amendments.
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8. Notification Requirement for DCOs that are Neither SIDCOs Nor Subpart C DCOs of 

Pending Orderly Wind-down – §§ 39.19(k)(1)(b) and 39.19(c)(4)(xxv)

The Commission is proposing in new § 39.19(k)(1)(b) that DCOs that are neither 

SIDCOs nor Subpart C DCOs have procedures in place for informing the Commission and 

clearing members, as soon as practicable, when orderly wind-down is pending, consistent with 

the requirements of proposed new paragraph § 39.19(c)(4)(xxv).213 

i. Benefit

A DCO should notify the Commission as soon as practicable of a pending orderly winddown so that the Commission may promptly take appropriate steps to monitor the wind-down 

process, and to protect the interests of clearing members and other market participants. 

Likewise, a DCO should notify its clearing members as soon as practicable as well, so that they 

may promptly take steps to protect themselves (including, e.g., by seeking to replace hedge 

positions). Such information-sharing fosters market transparency, which can serve to increase 

confidence and enhance market participants’ abilities to protect their own interests.

ii. Costs

DCOs should already have tools and procedures in place for notifying the Commission and 

clearing members of other circumstances or events triggering notification; Thus, the only costs 

involved would be the effort involved in preparing to use these existing tools and procedures to 

notify the Commission and clearing members when orderly wind-down is pending (including 

testing), and, if and when necessary, using them to make such notifications.

 

213 Proposed new § 39.19(c)(4)(xxv) would provide that each DCO shall notify the Commission and clearing 

members as soon as practicable when, among other things, orderly wind-down is pending.
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iii. Section 15(a) Factors

The proposed regulations should protect market participants and the public under section 

15(a)(2)(A) of the CEA, enhance efficiency, competitiveness, and financial integrity of futures 

markets under section 15(a)(2)(B) of the CEA, aid in sound risk management practices under 

section 15(a)(2)(D) of the CEA, and promote the public interest under section 15(a)(2)(E) of the 

CEA. Clearing members and their customers cannot accurately evaluate the risks and costs 

associated with using a DCO’s services if they do not have sufficient information, including 

when the DCO is no longer a going concern. A requirement that clearing members be notified as 

soon as practicable of a pending winding-down also allows market participants time to take 

action to protect their own interests. Likewise, market participants can use a DCO’s services 

with the confidence that the DCO will not delay in notifying them of a pending orderly winddown, which should enhance competitiveness. The requirement also reduces risk by providing 

DCO’s stakeholders sufficient notice to help ensure an orderly wind-down. However, section 

15(a)(2)(C), price discovery, is not implicated by the proposed amendments.

9. Timing for DCOs’ Submission of Recovery and Orderly Wind-Down Plans –

§ 39.19(c)(4)(xxiv)

Proposed § 39.19(c)(4)(xxiv) would continue to require that a DCO that is required to 

maintain recovery and orderly wind-down plans pursuant to § 39.39(b) shall submit its plans to 

the Commission no later than the date the DCO is required to have the plans. It would add an 

explicit requirement that those plans be accompanied by supporting information, and would 

newly require that a DCO that is required to maintain orderly wind-down plans pursuant to § 

39.13(k) shall submit its plans and supporting information at the time it files its application for 
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registration under § 39.3.214 The Commission is proposing a deadline of six months from the 

effective date of the rule (if adopted) for those DCOs currently registered with the Commission 

to complete and submit the orderly wind-down plans and supporting information. Moreover, this 

proposed rule would continue to require that a SIDCO or Subpart C DCO, upon revising the 

plan(s), submit the current (formerly, “revised”) plan(s) to the Commission, along with a 

description of any changes and the reason(s) for such changes. This requirement would be new 

for other DCOs. The proposal would add requirements that the plans, including any supporting 

information, must be submitted at least annually.

i. Benefits

DCOs seeking registration with the Commission will promptly have orderly wind-down 

plans and supporting information available upon registration. Clearing members and potential 

customers, moreover, will immediately benefit from orderly wind-down planning that has 

already taken place. For those DCOs currently registered with the Commission, the Commission 

believes six months is sufficient with respect to both the time and resources necessary for orderly 

wind-down planning, and takes into account the need to prepare promptly viable plans for 

orderly wind-down, given that a disorderly wind-down poses risks to clearing members and other 

financial market participants, and potentially, in some cases, risk to the financial system, 

especially in turbulent and uncertain market environments

Requiring that current plans be submitted at least annually would help to ensure that the 

plans available to the Commission for review remain reasonably current (given the possibility 

 

214 As previously noted, for any DCO that submits (or has submitted) an application for registration with the 

Commission before the date that is six months after the effective date of this rulemaking, if it is adopted, the 

Commission is proposing to require that the DCO have until the date that is six months after the effective date of this 

rulemaking to submit its orderly wind-down plans.
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that some minor changes or updates to the plans may be considered as not meeting the threshold 

of “revisions”), thereby aiding the Commission’s exercise of its supervisory responsibilities both 

in its ongoing risk-based examination program and in case of financial distress at the DCO.

As discussed above in Section IV, DCOs may, in some instances, include supporting 

information within their plans, or may organize the documentation with supporting information 

kept separately, e.g., as an appendix or annex. Adding the term “and supporting information” 

would have the benefit of ensuring that the Commission has timely access to such supporting 

information. 

ii. Costs

The Commission anticipates that the costs for DCOs to submit the viable plans for 

orderly wind-down that they are otherwise required to maintain would be limited to the cost of 

transmission using DCOs’ already established systems and procedures to submit documents to 

the Commission. Similarly, re-submitting current plans with supporting information should 

involve only the costs of gathering that information together and transmitting it, as the 

information must be at hand in order to plan adequately. As discussed above, some DCOs will

already have orderly wind-down plans in place; others may already have considered at least 

some of the subjects and analyses as part of their efforts to comply with the DCO Core 

Principles. 

iii. Section 15(a) Factors 

For the same reasons as previously noted above, the Commission believes the proposed 

regulations would protect market participants and the public under section 15(a)(2)(A) of the 

CEA, enhance competitiveness of futures markets under section 15(a)(2)(B) of the CEA, and aid 

in sound risk management practices under section 15(a)(2)(D) of the CEA. Ensuring the prompt 
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availability of viable plans for orderly wind down would reduce uncertainty in times of market 

stress, increase market confidence, and provide assurance to market participants and the public 

that DCOs are meeting minimum risk standards. Likewise, orderly wind-down plans enhance 

protection for a DCO’s members and their customers. Having viable plans for orderly winddown already in place additionally provides greater clarity and transparency before wind-down, 

assists the DCO in identifying vulnerabilities and preparing for multiple exigencies, and 

facilitates timely decision-making and the continuation of critical operations and services during 

orderly wind-down. Given its benefits, the Commission believes that new DCOs should have 

viable plans for orderly wind-down in place at the time they seek registration and before market 

participants come to rely upon them. The Commission has considered the other section 15(a) 

factors and believes they are not implicated by the proposed amendments.

10. Conforming Changes to Bankruptcy Provisions – Part 190.

Based upon the proposed requirement that all DCOs maintain viable plans for orderly 

wind-down, the Commission is proposing several conforming changes to Part 190’s bankruptcy 

provisions. Specifically, current § 190.12(b)(1) would be amended so that a DCO in a Chapter 7 

proceeding provide to the trustee copies of, among other things, orderly wind-down plans it must 

maintain pursuant to new § 39.13(k) in addition to § 39.39(b). Current § 190.15(a) would be 

amended so that the trustee not avoid or prohibit certain actions taken by the DCO either 

reasonably within the scope of, or provided for in, any orderly wind-down plains maintained by 

the DCO and filed with the Commission pursuant to new § 39.13(k) in addition to § 39.39. 

Current § 190.15(c) would be amended so that the trustee act in accordance with any orderly 

wind-down plans maintained by the debtor and filed with the Commission pursuant to new 

§ 39.13(k) in addition to § 39.39 in administering the bankruptcy proceeding. Current 
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§ 190.19(b)(1) would be amended so that a shortfall in certain funds be supplemented in 

accordance with orderly wind-down plans maintained by the DCO pursuant to new § 39.19(k) in 

addition to § 39.39.

i. Benefits

In promulgating the current Part 190 bankruptcy rules for DCOs in 2021, the 

Commission found that “directing a trustee to implement the DCO’s own default rules and 

procedures, and recovery and orderly wind-down plans, would benefit the estate by providing the 

trustee with a menu of purpose-built rules, procedures and plans to liquidate a DCO, which rules, 

procedures and plans the DCO has developed subject to the requirements of the Commission’s 

regulations and supervision of the Commission. Adding concepts of reasonability and 

practicability will give the trustee the discretion to modify those rules, procedures, and plans 

where and to the extent appropriate.”215 Adding the orderly wind-down plans required under 

proposed § 39.39(k) for DCOs other than SIDCOs and Subpart C DCOs should further achieve 

these benefits, by providing such a menu in an additional context, namely the bankruptcy of 

these DCOs.

ii. Costs

The Commission does not anticipate additional costs from the proposed regulations. The 

amendments are conforming changes so that the orderly wind-down plan of a DCO that is 

neither a SIDCO nor a Subpart C DCO is given the same weight as a SIDCO’s or Subpart C 

DCO’s orderly wind-down plan would be given in bankruptcy. 

 

215 Bankruptcy Regulations, 86 Fed. Reg. 19324, 19412 (Apr. 13, 2021).
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iii. Section 15(a) Factors

The proposed regulations should enhance protection for market participants and the 

public under section 15(a)(2)(A) of the CEA, enhance the competitiveness and financial integrity 

of futures markets under section 15(a)(2)(B) of the CEA, aid in sound risk management practices 

under section 15(a)(2)(D) of the CEA, and promote the public interest under section 15(a)(2)(E) 

of the CEA. The assurance that the orderly wind-down plan, to the extent reasonable and 

practicable, and consistent with the protection of customers, will be followed in a bankruptcy 

proceeding should instill confidence in a DCO’s clearing members and customers, who can make 

certain decisions without fear that a trustee will inappropriately diverge from the orderly winddown plan in bankruptcy. Moreover, market participants in general can be assured that the 

DCO’s pre-bankruptcy actions will not be voided by the trustee; likewise, the DCO’s clearing 

members and customers can anticipate that a shortfall will be supplemented in the manner 

provided for in the orderly wind-down plan. The Commission also believes that a viable plan for 

orderly wind-down should also reduce the risk of disorderly events in bankruptcy. All of these 

factors would also promote the public interest. However, section 15(a)(2)(C), price discovery, is 

not implicated by the proposed amendments

11. Requests for Up to One Year to Comply with §§ 39.34(d), 39.35, and 39.39(f)

Conforming to the approach of setting a six-month deadline discussed in section 

VIII(D)(4) above, the Commission is proposing to discontinue the process currently provided in

subpart C pursuant to which the Commission may grant, upon request of a SIDCO or DCO that 

is electing to become subject to Subpart C, up to one year to comply with §§ 39.34, 39.35, and 

39.39. The costs and benefits, and the application of the CEA Section 15(a) factors, for this 

approach were discussed there.
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12. Amendments to Appendix A and Appendix B to Part 39

The Commission is proposing to amend Exhibit D to Form DCO. The proposal would 

add a requirement to provide as Exhibit D-5, the DCO’s orderly wind-down plan, and a 

demonstration that the plan complies with the requirements of § 39.13(k). 

This proposed change would implement the proposal to require the submission of the 

orderly wind-down plan. The Commission has considered the section 15(a) of the CEA factors 

and believes that they are not implicated by the proposed change to Form DCO. 

The Commission is also proposing to amend the “General Instructions” and “Elections 

and Certifications” portions of the Subpart C Election Form. The proposal would remove the 

sections of the forms that reference requests for an extension of time to comply with any of the 

provisions of §§ 39.34, 39.35, and 39.39. Similarly, the Commission is proposing to amend the 

requirements for Exhibit F-1 to call for the attachment of the applicant’s recovery plan and 

orderly wind-down plan, supporting information for these plans, and a demonstration that the 

plans comply with § 39.39(c).

These proposed changes would implement the proposal to delete the provision for 

making such requests for an extension of time, and the proposal to require the submission of the 

plans. The Commission does not anticipate that these proposed changes would impose any costs 

on SIDCOs or Subpart C DCOs. The Commission has considered the factors called for in 

section 15(a) of the CEA and believes that they are not implicated by the proposed changes to 

the Subpart C Election Form. 
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List of Subjects

17 CFR Part 39

Default rules and procedures, Definitions, Reporting requirements, Risk management, Recovery 

and Orderly wind-down, System safeguards. 

17 CFR Part 190

Bankruptcy, Brokers, Reporting and recordkeeping requirements.

For the reasons stated in the preamble the Commodity Futures Trading Commission 

proposes to amend 17 CFR Chapter I as follows:

PART 39—DERIVATIVES CLEARING ORGANIZATIONS

1. The authority citation for part 39 continues to read as follows:

Authority: 7 U.S.C. 2, 7a-1, and 12a; 12 U.S.C. 5464; 15 U.S.C. 8325.

2. In § 39.2, add the following definitions in alphabetical order:

Default losses means credit losses or liquidity shortfalls created by the default of a clearing 

member in respect of its obligations with respect to cleared transactions.

Non-default losses means losses from any cause, other than default losses, that may threaten the 

derivative clearing organization’s viability as a going concern. These include, but are not limited 

to, (i) any potential impairment of a derivatives clearing organization's financial position, as a 

business concern, as a consequence of a decline in its revenues or an increase in its expenses, 

such that expenses exceed revenues and result in a loss that the derivatives clearing organization 

must charge against capital, (ii) losses incurred by the derivatives clearing organization on assets 

held in custody in the event of a custodian’s (or subcustodian’s) insolvency, negligence, fraud, 

poor administration or inadequate record-keeping, (iii) losses incurred by the derivatives clearing 

organization from diminution of the value of investments of its own or its participants’ resources, 
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including cash or other collateral, (iv) losses from adverse judgments, or other losses, arising 

from legal, regulatory, or contractual obligations, including damages or penalties, and the 

possibility that contracts that the derivatives clearing organization relies upon are wholly or 

partly unenforceable, and (v) losses occasioned by deficiencies in information systems or 

internal processes, human errors, management failures, malicious actions (whether by internal or 

external threat actors), disruptions to services provided by third parties, or disruptions from 

internal or external events that result in the reduction, deterioration, or breakdown of services 

provided by the derivatives clearing organization.

Orderly wind-down or wind-down means the actions of a derivatives clearing organization to 

effect the permanent cessation, sale, or transfer, of one or more of its critical operations or 

services, in a manner that would not increase the risk of significant liquidity, credit, or 

operational problems spreading among financial institutions or markets and thereby threaten the 

stability of the U.S. financial system.

Recovery means the actions of a derivatives clearing organization, consistent with its rules, 

procedures, and other ex-ante contractual arrangements, to address any uncovered credit loss, 

liquidity shortfall, inadequacy of financial resources, or business, operational or other structural 

weakness, including the replenishment of any depleted pre-funded financial resources and 

liquidity arrangements, as necessary to maintain the derivatives clearing organization's viability 

as a going concern.

* * * * *

3. In 39.13, add paragraphs (j) and (k) to read as follows:

(j) Reserved.
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(k)

(1) Each derivative clearing organization that is not a systemically important derivatives 

clearing organization or a subpart C derivatives clearing organization shall:

(a) Maintain and, consistent with paragraph 39.19(c)(4)(xxiv) of this chapter, submit to the 

Commission, a viable plan for orderly wind-down that may be necessitated by default losses and

by non-default losses, including supporting information for that plan. 

(b) Have procedures for informing the Commission and clearing members, as soon as 

practicable, when orderly wind-down is pending, and shall notify the Commission and clearing 

members consistent with § 39.19(c)(4)(xxv) of this chapter.

(2) The orderly wind-down plan required by paragraph (k)(1) of this section shall include an 

overview of the plan and a description of how the plan will be implemented. The description of 

the plan shall include the identification and description of the derivatives clearing organization’s 

critical operations and services, interconnections and interdependencies, resilient staffing 

arrangements, stress scenario analyses, potential triggers for consideration of implementing the 

orderly wind-down plan, available wind-down tools, analyses of the effect of the tools on each 

scenario, lists of agreements to be maintained during orderly wind-down, and governance 

arrangements. 

(a) Critical operations and services, interconnections and interdependencies, and resilient 

staffing arrangements. The orderly wind-down plan shall identify and describe the critical 

operations and services the derivatives clearing organization provides to clearing members and 

other financial market participants, the service providers upon which the derivatives clearing 

organization relies to provide these critical operations and services, including internal and 

external service providers and ancillary services providers, financial and operational 
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interconnections and interdependencies, aggregate cost estimates for the continuation of services

during orderly wind-down, plans for resilient staffing arrangements for continuity of operations,

obstacles to success of the orderly wind-down plan, plans to address the risks associated with the 

failure of each critical operation and service, and how the derivatives clearing organization will 

ensure that each identified operation and service continues through orderly wind-down. 

(b) Orderly wind-down triggers. The orderly wind-down plan shall establish the criteria that 

may trigger consideration of implementation of that plan, and the process the derivatives clearing 

organization has in place for monitoring for events that may trigger implementation of the plan.

(c) The orderly wind-down plan shall include a description of the pre-determined 

information-sharing and escalation process within the derivatives clearing organization’s senior 

management and the board of directors. The derivatives clearing organization must have a 

defined process that will be used that will include the factors the derivatives clearing 

organization considers most important in guiding the board of directors’ exercise of judgment 

and discretion with respect to its orderly wind-down plan in light of those triggers and that 

process.

(3) Orderly wind-down scenarios and tools. The orderly wind-down plan shall: 

(a) identify scenarios that may prevent the derivatives clearing organization from meeting its 

obligations or providing critical operations and services as a going concern; 

(b) describe the tools that the derivatives clearing organization would expect to use in an 

orderly wind-down that comprehensively address how the derivatives clearing organization 

would continue to provide critical operations and services; 

(c) describe the order in which each such tool would be expected to be used; 
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(d) describe the governance and approval processes and arrangements within the derivatives 

clearing organization for the use of each of the tools available, including the exercise of any 

available discretion; 

(e) describe the processes to obtain any approvals external to derivatives clearing 

organization (including any regulatory approvals) that would be necessary to use each of the 

tools available, and the steps that might be taken if such approval is not obtained;

(f) establish the time frame within which each such tool could be used; 

(g) set out the steps necessary to implement each such tool; 

(h) describe the roles and responsibilities of all parties in the use of each such tool; 

(i) provide an assessment of the likelihood that the tools, individually and taken together,

would result in orderly wind-down; and 

(j) provide an assessment of the associated risks from the use of each such tool to nondefaulting clearing members and those clearing members’ customers with respect to transactions 

cleared on the derivatives clearing organization, and linked financial market infrastructures.

(4) Agreements to be maintained during orderly wind-down. The derivatives clearing 

organization shall determine which of its contracts, arrangements, agreements, and licenses 

associated with the provision of its critical operations and services as a derivatives clearing 

organization are subject to alteration or termination as a result of implementation of the orderly 

wind-down plan. The orderly wind-down plan shall describe the actions that the derivatives 

clearing organization has taken to ensure that its critical operations and services will continue 

during orderly wind-down, despite such potential alteration or termination. 

(5) Governance. The derivatives clearing organization’s orderly wind-down plan shall:

(a) Be formally approved, and annually reviewed, by the board of directors;
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(b) Describe an effective governance structure that clearly defines the responsibilities of the 

board of directors, board members, senior executives and business units; 

(c) Describe the processes that the derivatives clearing organization will use to guide its 

discretionary decision-making relevant to the orderly wind-down plan; and

(d) Describe the derivatives clearing organization’s process for identifying and managing the 

diversity of stakeholder views and any conflict of interest between stakeholders and the 

derivatives clearing organization. 

(6) Testing. Each derivatives clearing organization’s orderly wind-down plan shall include

procedures for testing the derivatives clearing organization’s ability to implement the tools that 

the orderly wind-down plan relies upon. The orderly wind-down plan shall include the types of 

testing that will be performed, to whom the findings of such tests are reported, and the 

procedures for updating the orderly wind-down plan in light of the findings resulting from such 

tests. Such testing shall occur following any material change to the orderly wind-down plan, but 

in any event not less than once annually, and the plan shall be promptly updated in light of the 

findings resulting from such testing.

4. In 39.19, revise paragraph (c)(4)(xxiv) and add new paragraphs (c)(4)(xxv) and (c)(5)(iii) 

to read as follows:

(c)(4)(xxiv) A derivatives clearing organization that is required to maintain recovery and 

orderly wind-down plans pursuant to § 39.39(b) shall submit its plans and supporting 

information to the Commission no later than the date on which the derivatives clearing 

organization is required to have the plans. A derivatives clearing organization that is required to 

maintain an orderly wind-down plan pursuant to § 39.13(k) shall submit its plan and supporting 

information to the Commission at the time it files its application for registration under § 39.3. A
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derivatives clearing organization shall, upon revising its recovery plan or orderly wind-down 

plan, but in any event no less frequently than annually, submit the current plan(s) and supporting 

information to the Commission, along with a description of any changes and the reason(s) for 

such changes.

(c)(4)(xxv) Each derivatives clearing organization shall notify the Commission and 

clearing members as soon as practicable when the derivatives clearing organization has initiated 

its recovery or when orderly wind-down is pending.

****

(c)(5)(iii) Information for resolution planning. A systemically important derivatives 

clearing organization or subpart C derivatives clearing organization that submits information to 

the Commission pursuant to § 39.39(f)(2) shall update such information upon request. 

5. In § 39.34 delete paragraph (d) in its entirety and reserve.

6. Amend § 39.39 by revising the section heading to read as follows:

§ 39.39 Recovery and orderly wind-down for systemically important derivatives clearing 

organizations and subpart C derivatives clearing organizations; Information for resolution 

planning. 

7. In § 39.39(a), remove (1)-(4) and renumber (a)(5) to 39.39(a) as follows:

(a) Definitions. For the purposes of this section: Unencumbered liquid financial assets

include cash and highly liquid securities.

8. In § 39.39 revise paragraphs (b)(1) and (2), and add new paragraph (3) to read as follows:

(b) Recovery plan and orderly wind-down plan. (1) Each systemically important 

derivatives clearing organization and subpart C derivatives clearing organization shall maintain 
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and, consistent with § 39.19(c)(4)(xxiv) of this chapter, submit to the Commission, viable plans 

for recovery and orderly wind-down that may be necessitated, in each case, by default losses and

by non-default losses, including supporting information for such plans.

(2) Each systemically important derivatives clearing organization and subpart C 

derivatives clearing organization shall have procedures for informing the Commission and 

clearing members, as soon as practicable, when the recovery plan is initiated or orderly winddown is pending, and shall notify the Commission and clearing members consistent with 

§ 39.19(c)(4)(xxv) of this chapter. 

(3) Each systemically important derivatives clearing organization shall file a recovery 

plan and (to the extent it has not already done so) an orderly wind-down plan, and supporting 

information for these plans, within 6 months of designation as systemically important by the 

Financial Stability Oversight Council. Each derivatives clearing organization electing to become 

subject to the provisions of Subpart C of this chapter shall file a recovery plan and (to the extent 

it has not already done so) an orderly wind-down plan, and supporting information for these 

plans, as part of its election. Each recovery plan and orderly wind-down plan shall be updated 

annually. 

9. In § 39.39 replace paragraph (c) in its entirety and add new paragraph (c) to read as 

follows:

(c) The recovery plan and orderly wind-down plan required by paragraph (b) of this section 

shall include an overview of each plan and a description of how each plan will be implemented. 

The description of each plan shall include the identification and description of the derivatives 

clearing organization’s critical operations and services, interconnections and interdependencies, 

resilient staffing arrangements, stress scenario analyses, potential triggers for recovery and 
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orderly wind-down, available recovery and wind-down tools, analyses of the effect of the tools 

on each scenario, lists of agreements to be maintained during recovery and orderly wind-down, 

and governance arrangements. 

(1) Critical operations and services, interconnections and interdependencies, and resilient 

staffing arrangements. The recovery plan and orderly wind-down plan shall identify and 

describe the critical operations and services the derivatives clearing organization provides to 

clearing members and other financial market participants, the service providers upon which the 

derivatives clearing organization relies to provide these critical operations and services, 

including internal and external service providers and ancillary services providers, financial and 

operational interconnections and interdependencies, aggregate cost estimates for the continuation 

of services during recovery and orderly wind-down, plans for resilient staffing arrangements for 

continuity of operations, obstacles to success of the recovery plan and orderly wind-down plan, 

plans to address the risks associated with the failure of each critical operation or service, and 

how the derivatives clearing organization will ensure that each identified operation or service 

continues through recovery and orderly wind-down. 

(2) Recovery scenarios and analysis. Each systemically important derivatives clearing 

organization and subpart C derivatives clearing organization shall identify scenarios that may 

prevent it from meeting its obligations or providing its critical services as a going concern. 

(i) For each scenario, the recovery plan shall provide an analysis that includes: (A) a 

description of the scenario; (B) the events that are likely to trigger the scenario; (C) the 

derivatives clearing organization’s process for monitoring for such events; (D) the market 

conditions and other relevant circumstances that are likely to result from the scenario; (E) the 

potential financial and operational impact of the scenario on the derivatives clearing organization 
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and on its clearing members, internal and external service providers and relevant affiliated 

companies, both in an orderly market and in a disorderly market; and (F) the specific steps the 

derivatives clearing organization would expect to take when the scenario occurs, or appears 

likely to occur, including, without limitation, any governance or other procedures that may be 

necessary to implement the relevant recovery tools and to ensure that such implementation 

occurs in sufficient time for the recovery tools to achieve their intended effect. 

(ii) The derivatives clearing organization’s recovery plan scenarios should also address the 

default risks and non-default risks to which the derivatives clearing organization is exposed, and 

shall include at least the following scenarios, to the extent such a scenario is possible in light of 

the derivatives clearing organization’s structure and activities: (A) credit losses or liquidity 

shortfalls created by single and multiple clearing member defaults; (B) liquidity shortfall created 

by a combination of clearing member default and a failure of a liquidity provider to perform; (C) 

settlement bank failure; (D) custodian or depository bank failure; (E) losses resulting from 

investment risk; (F) losses from poor business results; (G) financial effects from cybersecurity 

events; (H) fraud (internal, external, and/or actions of criminals or of public enemies); (I) legal 

liabilities, including liabilities related to the derivatives clearing organization’s obligations with 

respect to cleared transactions and those not specific to the derivatives clearing organization’s 

business as a derivatives clearing organization; (J) losses resulting from interconnections and 

interdependencies among the derivatives clearing organization and its parent, affiliates, and/or 

internal or third-party service providers; and (K) losses resulting from interconnections and 

interdependencies with other derivatives clearing organizations. The recovery plan shall also 

consider any combination of at least two scenarios involving multiple failures (e.g., a member 

default occurring simultaneously, or nearly so, with a failure of a service provider) that, in the 
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judgment of the derivatives clearing organization, are particularly relevant to the derivatives 

clearing organization’s business. The derivatives clearing organization shall document the 

reasons why the selected scenarios are particularly relevant. For any scenario enumerated in this 

subparagraph that the derivatives clearing organization determines is not possible in light of its 

structure and activities, the derivatives clearing organization should document its reasoning. 

(3) Recovery and orderly wind-down triggers. (i) A systemically important derivatives 

clearing organization’s or subpart C derivatives clearing organization’s: (A) recovery plan shall 

establish the criteria that may trigger implementation or consideration of implementation of that 

plan, and the process the derivatives clearing organization has in place for monitoring for events 

that are likely to trigger the scenarios identified in subparagraph (2); and (B) orderly wind-down 

plan shall establish the criteria that may trigger consideration of implementation of that plan, and 

the process the derivatives clearing organization has in place for monitoring for events that may

trigger implementation of the plan.

(ii) The recovery plan and orderly wind-down plan shall include a description of the predetermined information-sharing and escalation process within the derivatives clearing 

organization’s senior management and the board of directors. The derivatives clearing 

organization must have a defined governance process that will be used that will include the 

factors the derivatives clearing organization considers most important in guiding the board of 

directors’ exercise of judgment and discretion with respect to recovery and orderly wind-down 

plans in light of those triggers and that process.

(4) Recovery tools. A derivatives clearing organization or subpart C derivatives clearing 

organization shall have a recovery plan that includes the following: (i) a description of the tools 

that the derivatives clearing organization would expect to use in each scenario required by 
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paragraph (b) of this section that meet the full scope of financial deficits the derivatives clearing 

organization may need to remediate and comprehensively address how the derivatives clearing 

organization would continue to provide critical operations and services; (ii) the order in which 

each such tool would be expected to be used; (iii) the time frame within which each such tool 

would be expected to used; (iv) a description of the governance and approval processes and 

arrangements within the derivatives clearing organization for the use of each of the tools 

available, including the exercise of any available discretion; (v) the processes to obtain any 

approvals external to the derivatives clearing organization (including any regulatory approvals) 

that would be necessary to use each of the tools available, and the steps that might be taken if 

such approval is not obtained; (vi) the steps necessary to implement each such tool; (vii) a 

description of the roles and responsibilities of all parties, including non-defaulting clearing 

members, in the use of each such tool; (viii) whether the tool is mandatory or voluntary; (ix) an 

assessment of the likelihood that the tools, individually and taken together, would result in 

recovery; and (x) an assessment of the associated risks from the use of each such tool to nondefaulting clearing members and those clearing members’ customers with respect to transactions 

cleared on the derivatives clearing organization, linked financial market infrastructures, and the 

financial system more broadly.

(5) Orderly wind-down scenarios and tools. Each systemically important derivatives clearing 

organization and Subpart C derivatives clearing organization shall: (i) identify scenarios that may 

prevent it from meeting its obligations or providing critical operations and services as a going 

concern; (ii) describe the tools that it would expect to use in an orderly wind-down that 

comprehensively address how the derivatives clearing organization would continue to provide 

critical operations and services; (iii) describe the order in which each such tool would be 
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expected to be used; (iv) establish the time frame within which each such tool would be expected 

to be used; (v) describe the governance and approval processes and arrangements within the 

derivatives clearing organization for the use of each of the tools available, including the exercise 

of any available discretion; (vi) describe the processes to obtain any approvals external to the 

derivatives clearing organization (including any regulatory approvals) that would be necessary to 

use each of the tools available, and the steps that might be taken if such approval is not obtained; 

(vii) set out the steps necessary to implement each such tool; (viii) describe the roles and 

responsibilities of all parties, including non-defaulting clearing members, in the use of each such 

tool; (ix) provide an assessment of the likelihood that the tools, individually and taken together,

would result in orderly wind-down; and (x) provide an assessment of the associated risks from 

the use of each such tool to non-defaulting clearing members and those clearing members’

customers with respect to transactions cleared on the derivatives clearing organization, linked 

financial market infrastructures, and the financial system more broadly.

(6) Agreements to be maintained during recovery and orderly wind-down. A systemically 

important derivatives clearing organization and subpart C derivatives clearing organization shall 

determine which of its contracts, arrangements, agreements, and licenses associated with the 

provision of its critical operations and services as a derivatives clearing organization are subject 

to alteration or termination as a result of implementation of the recovery plan or orderly winddown plan. The recovery plan and orderly wind-down plan shall describe the actions that the 

derivatives clearing organization has taken to ensure that its critical operations and services will 

continue during recovery and orderly wind-down despite such alteration or termination. 
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(7) Governance. Each systemically important derivatives clearing organization and Subpart 

C derivatives clearing organization’s recovery plan and orderly wind-down plan shall, in each 

case,

(i) Be formally approved, and annually reviewed, by the board of directors;

(ii) Describe an effective governance structure that clearly defines the responsibilities of the 

board of directors, board members, senior executives, and business units; 

(iii) Describe the processes that the derivatives clearing organization will use to guide its 

discretionary decision-making relevant to each plan; and 

(iv) Describe the derivatives clearing organization’s process for identifying and managing the 

diversity of stakeholder views and any conflict of interest between stakeholders and the 

derivatives clearing organization. 

(8) Testing. The recovery plan and orderly wind-down plan of each systemically important 

derivatives clearing organization and Subpart C derivatives clearing organization shall include 

procedures for testing the viability of the recovery plan and orderly wind-down plan, including 

testing of the derivatives clearing organization’s ability to implement the tools that each plan 

relies upon. The recovery plan and the orderly wind-down plan shall include the types of testing 

that will be performed, to whom the findings of such tests are reported, and the procedures for 

updating the recovery plan and orderly wind-down plan in light of the findings resulting from 

such tests. A systemically important derivatives clearing organization and Subpart C derivatives 

clearing organization shall conduct the testing described in this subparagraph with the 

participation of their clearing members, where the plan depends on their participation, and the 

derivatives clearing organization shall consider including external stakeholders that the plan 

relies upon, such as service providers, to the extent practicable and appropriate. Such testing 
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shall occur following any material change to the recovery plan or orderly wind-down plan, but in 

any event not less than once annually, and the plan shall be promptly updated in light of the 

findings resulting from such testing.

10. In 39.39, replace paragraph (f) in its entirety and add new paragraph (f) to read as 

follows: 

(f) To the extent not already provided pursuant to paragraph (b) above, or required by 

§ 39.19, a systemically important derivatives clearing organization or subpart C derivatives 

clearing organization shall maintain information systems and controls that are designed to enable 

the derivatives clearing organization to provide data and information electronically, as requested 

by the Commission for purposes of resolution planning and during resolution under Title II of 

the Dodd-Frank Act, and shall provide such information and data in the form and manner 

specified by the Commission. This includes the following:

(1) Information regarding the derivatives clearing organization’s organizational structure and 

corporate structure, activities, governing documents and arrangements, rights and powers of 

shareholders, and committee members and their responsibilities.

(2) Information concerning clearing members, including (for both house and customer 

accounts) information regarding collateral, variation margin, and contributions to default and 

guaranty funds.

(3) Arrangements and agreements with other derivatives clearing organizations, including 

offset and cross-margin arrangements.

(4) Off-balance sheet obligations or contingent liabilities, and obligations to creditors, 

shareholders, or affiliates not otherwise reported under part 39.
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(5) Information regarding interconnections and interdependencies with internal and external 

service providers, licensors, and licensees, including information regarding services provided by 

or to affiliates and other third parties and related agreements. 

(6) Information concerning critical personnel.

(7) Any other information deemed appropriate to plan for resolution under Title II of the 

Dodd-Frank Act.

11. Revise appendix A to part 39 – Form DCO to read as follows:

COMMODITY FUTURES TRADING COMMISSION

FORM DCO

DERIVATIVES CLEARING ORGANIZATION

APPLICATION FOR REGISTRATION

GENERAL INSTRUCTIONS: Intentional misstatements or omissions of fact may constitute

federal criminal violations (7 U.S.C. 13 and 18 U.S.C. 1001).

 

EXHIBIT D – RISK MANAGEMENT

** **

e. Orderly wind-down plan – Provide as Exhibit D-5, the derivatives clearing 

organization’s orderly wind-down plan, and a demonstration that the plan complies with 

the requirements of §39.13(k).

***

 

12. Revise appendix B to part 39 – Subpart C Election Form, General Instructions and Elections 

and Certifications to read as follows:
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COMMODITY FUTURES TRADING COMMISSION 

SUBPART C ELECTION FORM

GENERAL INSTRUCTIONS: Intentional misstatements or omissions of fact may constitute

federal criminal violations (7 U.S.C. 13 and 18 U.S.C. 1001).

DEFINITIONS

Unless the context requires otherwise, all terms used in this Subpart C Election Form have the same meaning

as in the Commodity Exchange Act ("Act"), and in the General Rules and Regulations of the Commodity

Futures Trading Commission ("Commission") thereunder. All references to Commission regulations are found

at 17 CFR Ch. I.

For purposes of this Subpart C Election Form, the term "Applicant" shall mean a derivatives clearing

organization that is filing this Subpart C Election Form with a Form DCO as part of an application for registration

as a derivatives clearing organization pursuant to section 5b of the Act and 17 CFR 39.3(a).

GENERAL INSTRUCTIONS

1. Any derivatives clearing organization requesting an election to become subject to subpart C of part 39 of the 

Commission's regulations must file this Subpart C Election Form. The Subpart C Election Form includes the

election to be subject to the provisions of subpart C of part 39 of the Commission's regulations, certain

required certifications, disclosures, and exhibits, and any supplements or amendments thereto filed

pursuant to 17 CFR 39.3l(b) or (c) (collectively, the "Subpart C Election Form").

2. Individuals' names, except the executing signature, shall be given in full (Last Name, First Name, Middle 

Name).

3 . The signatures required in this Subpart C Election Form shall be the manual signatures of a duly authorized

representative of the derivatives clearing organization as follows: If the Subpart C Election Form is filed by a

corporation, it must be signed in the name of the corporation by a principal officer duly authorized; if filed

by a limited liability company, it must be signed in the name of the limited liability company by a manager

or member duly authorized to sign on the limited liability company's behalf; if filed by a partnership, it must

be signed in the name of the partnership by a general partner duly authorized; if filed by an unincorporated

organization or association which is not a partnership, it must be signed in the name of such organization or

association by the managing agent, i.e., a duly authorized person who directs or manages or who participates

in the directing or managing of its affairs.

4. All applicable items must be answered in full.

5. Under section 5b of the Act and the Commission's regulations thereunder, the Commission is authorized

to solicit the information required to be supplied by this Subpart C Election Form from any Applicant seeking

registration as a derivatives clearing organization and from any registered derivatives clearing

organization.

6. Disclosure of the information specified in this Subpart C Election Form is mandatory prior to the

processing of the election to become a derivatives clearing organization subject to the provisions of subpart 

C of part 39 of the Commission's regulations. The Commission may determine that additional information is 

required in order to process such election.

7. A Subpart C Election Form that is not prepared and executed in compliance with applicable requirements and 

instructions may be returned as not acceptable for filing. Acceptance of this Subpart C Election Form, however, 

shall not constitute a finding that the Subpart C Election Form is acceptable as filed or that the information is 

true, current or complete.
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8. As provided in 17 CFR 39.3l(d), except in cases where a derivatives clearing organization submits a request for 

confidential treatment with the Secretary of the Commission pursuant to the Freedom of Information Act and 

17 CFR 145.9, information supplied in this Subpart C Election Form will be included routinely in the public 

files of the Commission and will be made available for inspection by any interested person.

APPLICATION AMENDMENTS

1. 17 CFR 39.3l(b)(3) and (c)(4) require a derivatives clearing organization that has submitted a Subpart C Election 

Form to promptly amend its Subpart C Election Form if it discovers a material omission or error in, or if there 

is a material change in, the information provided to the Commission in the Subpart C Election Form or other 

information provided in connection with the Subpart C Election Form.

2. When amending a Subpart C Election Form, a derivatives clearing organization must re-file the Election and 

Certifications page, amended if necessary, and including all required executing signatures, and attach thereto 

revised exhibits or other materials marked to show changes, as applicable.

WHERE TO FILE

1. This Subpart C Election Form must be filed electronically with the Secretary of the Commission in the format 

and manner specified by the Commission.

2. Any supplemental information must be filed electronically with the Division of Clearing and Risk, or any 

successor division, in the format and manner specified by the Commission.
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COMMODITY FUTURES TRADING COMMISSION 

SUBPART C ELECTION FORM

ELECTION AND CERTIFICATIONS

Exact Name of the Derivatives Clearing Organization 

(as set forth in its charter, if an Applicant,

or as set forth in its most recent order of registration, if registered with the Commission)

Check here and complete sections 1 and 3 below, if the organization is an Applicant.

Check here and complete sections 2 and 3 below, if the organization currently is registered with the 

Commission as a derivatives clearing organization.

1. The derivatives clearing organization named above hereby elects to become subject to the provisions of subpart 

C of part 39 of the Commission's regulations in the event that the Commission approves its application for

registration as a derivatives clearing organization.

The derivatives clearing organization and the undersigned each certify that, in the event that the Commission 

approves the derivatives clearing organization's application for registration and permits its election to

become subject to subpart C of part 39 of the Commission's regulations, the derivatives clearing organization

will remain in compliance with the provisions contained in subpart C of part 39 of the Commission's regulations 

until this election is rescinded pursuant to 17 CFR 39.3l(e).

Name of Derivatives Clearing Organization

By:

Manual Signature of Duly Authorized Person

Print Name and Title of Signatory

2. The derivatives clearing organization named above hereby elects to become subject to the provisions of subpart C of 

part 39 of the Commission's regulations as of:

 ____________________________ ("Effective Date")

[insert date, which must be at least 10 business days after the date this Subpart C Election Form is

filed with the Commission].

The derivatives clearing organization and the undersigned each certify that the derivatives clearing organization will 

remain in compliance with provisions contained in subpart C of part 39 of the Commission's regulations until this election 

is rescinded pursuant to 17 CFR 39.31(e).
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Name of Derivatives Clearing Organization

By:______________________________________________________________________________ 

Manual Signature of Duly Authorized Person

Print Name and Title of Signatory

3. The derivatives clearing organization named above has duly caused this Subpart C Election Form (which includes, 

as an integral part thereof, the Election and Certifications and all Disclosures and Exhibits) to be signed on its 

behalf by its duly authorized representative as of the _______ day of ______________ , 20__. The derivatives 

clearing organization and the undersigned each represent hereby that, to the best of their knowledge, all 

information contained in this Subpart C Election Form is true, current and complete in all material respects. It is 

understood that all required items including, without limitation, the Election and Certifications and Disclosures 

and Exhibits, are considered integral parts of this Subpart C Election Form.

Name of Derivatives Clearing Organization

By: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 

Manual Signature of Duly Authorized Person

Print Name and Title of Signatory

13. Revise appendix B to part 39 – Subpart C Election Form, Disclosures and Exhibits to read as 

follows:

COMMODITY FUTURES TRADING COMMISSION

PART 39, SUBPART C ELECTION FORM

DISCLOSURES AND EXHIBITS

** **
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EXHIBIT F – RECOVERY AND ORDERLY WIND-DOWN

Attach, as Exhibit F, information and documents that demonstrate compliance with the 

recovery and orderly wind-down requirements set forth in § 39.39 of the Commission’s 

regulations, including but not limited to:

a. Recovery and orderly wind-down plans – Attach as Exhibit F-1 the derivatives 

clearing organization’s recovery plan, orderly wind-down plan, supporting 

information for these plans, and a demonstration that the plans comply with the 

requirements of § 39.39(c).

***

****

PART 190—BANKRUPTCY RULES

14. The authority citation for part 190 continues to read as follows:

 Authority: 7 U.S.C. 1a, 2, 6c, 6d, 6g, 7a-1, 12, 12a, 19 and 24; 11 U.S.C. 362, 546, 548, 556, 

and 761-767, unless otherwise noted.

15. In §190.12, replace paragraph (b)(1) in its entirety to read as follows:

 (b)(1) As soon as practicable following the commencement of a proceeding that is subject to 

this subpart and in any event no later than three hours following the later of the commencement 

of such proceeding or the appointment of the trustee, the debtor shall provide to the trustee 

copies of each of the most recent reports that the debtor was required to file with the 

Commission under § 39.19(c) of this chapter, including copies of any reports required under 

§ 39.19(c)(2), (3), and (4) of this chapter (including the most up-to-date version of any recovery 
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and orderly wind-down plans of the debtor maintained pursuant to § 39.13(k) or § 39.39(b) of 

this chapter) that the debtor filed with the Commission during the preceding 12 months.

16. In §190.15 replace paragraph (a) in its entirety to read as follows:

(a) Prohibition on avoidance of actions taken pursuant to recovery and orderly wind-down 

plans. Subject to the provisions of section 766 of the Bankruptcy Code and §§ 190.13 and 

190.18, the trustee shall not avoid or prohibit any action taken by a debtor subject to this subpart 

that was reasonably within the scope of, and was provided for, in any recovery and orderly winddown plans maintained by the debtor pursuant to § 39.13(k) or § 39.39(b) of this chapter and 

filed with the Commission pursuant to § 39.19 of this chapter.

17. In § 190.15, replace paragraph (c) in its entirety to read as follows:

(c) Implementation of recovery and orderly wind-down plans. In administering a 

proceeding under this subpart, the trustee shall, in consultation with the Commission, take 

actions in accordance with any recovery and orderly wind-down plans maintained by the debtor 

pursuant to § 39.13(k) or § 39.39(b) of this chapter and filed with the Commission pursuant to 

§ 39.19 of this chapter, to the extent reasonable and practicable, and consistent with the 

protection of customers.

18. In § 190.19 replace paragraph (b)(1) in its entirety to read as follows:

(1) Such funds shall be supplemented with the property described in paragraphs (b)(1)(i) through 

(iv) of this section, as applicable, to the extent necessary to meet the shortfall, in accordance with 

the derivatives clearing organization's default rules and procedures adopted pursuant to § 39.16

and, as applicable, § 39.35 of this chapter, and (with respect to paragraph (b)(1)(ii) of this 

section) any recovery and orderly wind-down plans maintained pursuant to § 39.13(k) or
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§ 39.39(b) of this chapter and submitted pursuant to § 39.19 of this chapter. Such funds shall be 

included as member property and customer property other than member property in the 

proportion described in paragraph (a) of this section, and shall be distributed promptly to 

members' house accounts and members' customer accounts which accounts are entitled to 

payment of such funds as part of that daily settlement.

* * * * *

Issued in Washington, DC, on June _____, 2023 by the Commission.

Christopher J. Kirkpatrick,

Secretary of the Commission