September 13, 2019

Christopher Kirkpatrick
Secretary of the Commission
Commodity Futures Trading Commission
Three Lafayette Centre, 1155 21st Street, NW
Washington, DC 20581

Submitted via electronic filing: https://coments.cftc.gov

Re: Derivatives Clearing Organization General Provisions and Core Principles (Proposed Amendments – RIN 3038-AE66)

Dear Mr. Kirkpatrick:
The Securities Industry and Financial Markets Association’s Asset Management Group (“SIFMA AMG”, or “AMG”)1 appreciates the opportunity to provide comments to the Commodity Futures Trading Commission (“CFTC”, or the “Commission”) on the proposed amendments to the Derivatives Clearing Organization (“DCO”) General Provisions and Core Principles (the “Proposed Rules”). SIFMA AMG’s members appreciate the Commission engaging in its Project KISS initiative and for addressing certain risk management and reporting obligations for DCOs. Our members are specifically supportive of Commission action to increase customer2 participation in DCO governance, and to enhance the integrity and availability of DCO’s required public disclosures. We believe that many of the Commission’s changes in the Proposed Rules are helpful to customers of DCOs in evaluating their risks to the DCO. We believe there are additional areas where the Commission’s Proposed Rules could offer additional information and involvement of customers and request that the Commission consider further changes to Part 39 as outlined below.

I. Customer Participation in DCO Governance & DCO Consideration of Market Feedback– Proposed §39.24, §39.25 and §39.26 AMG members are supportive of the Commission’s proposed expansion of §39.32 to all DCOs by removing § 39.32 and adopting new §§ 39.24, 39.25, and 39.26 as the governance requirements of § 39.32 are appropriate for all DCOs. We also appreciate the Commission adopting a definition of “market participant” in § 39.26. We request the Commission explicitly require customer participation on the Board of Directors and Advisory Committees (“Governing Bodies”) as required by DCO Core Principle Q in the Commodity Exchange Act (the “Act”).3 Specifically, we believe that customer participation in DCO Governing Bodies is required by the Act through its use of the term “market participants” and encourage the Commission to revise Regulation §39.32 accordingly. As drafted, Regulation 39.26 could permit DCOs to choose only persons associated with clearing members within their Governing Bodies. Had Congress intended for only clearing members to be on DCO governing boards they would have stated so specifically. Rather Congress chose to use the term “market participants” which, as the Commission correctly defines, include clearing members and customers. Accordingly, we request that § 39.26 be amended to require both clearing members and customers.

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1 SIFMA AMG brings the asset management community together to provide views on U.S. and global policy and to create industry best practices. SIFMA AMG’s members represent U.S. and global asset management firms whose combined assets under management exceed $45 trillion. The customers of SIFMA AMG member firms include, among others, tens of millions of individual investors, registered investment companies, endowments, public and private pension funds, UCITS and private funds such as hedge funds and private equity funds.
2 The term “customer” is used to refer to buy-side market participants (including asset managers) that access DCOs through clearing members, and thus, are indirect participants in the DCO. Moreover, any reference throughout this letter to “market participant” or “market feedback” shall refer to the Commission’s proposed definition of “market participant” which includes “ any clearing member of the DCO or customer of such clearing member, or an employee, officer, or director of such an entity.” See the Proposal at 22244.
3 7 USC §7a-1(c)(2)(O).