The Dodd-Frank Act amended Section 5b of the Commodity Exchange Act by adding new Derivatives Clearing Organization (“DCO”) Core Principle R regarding Legal Risk. The CFTC has proposed to adopt new Regulation 39.27, which contains requirements to implement Core Principle R. The Regulation will require a DCO that provides clearing services outside of the U.S. to, among other things, “specify a choice of law” in its contractual agreements. At present, Exchange Rules do not include a choice-of-law provision, nor do they generally specify a venue for resolution of disputes with clearing members outside of issues governed by Chapters 4, 5 and 6 of the Rulebook.
The Clearing House Risk Committee has determined that new Rule 905 constitutes a significant rule change. As such, CME Clearing is publishing the Rule to notify interested parties prior to its effective date. Interested parties may provide comments on new Rule 905. CME Clearing will review the comments and use its judgment to determine if any modification of the Rule is necessary.
CME Group is the world's leading and most diverse derivatives marketplace. The company is comprised of four Designated Contract Markets (DCMs). Further information on each exchange's rules and product listings can be found by clicking on the links to CME, CBOT, NYMEX and COMEX.