BPI Comments on CFTC’s Proposed Changes to Operational Resilience framework

Dear Mr. Kirkpatrick:

The Bank Policy Institute [1] welcomes the opportunity to respond to the notice of proposed rulemaking by the Commodity Futures Trading Commission to require futures commission merchants (“FCMs”), swap dealers (“SDs”) and major swap participants (collectively with FCMs and SDs, “covered entities”) to establish, document, implement, and maintain an operational resilience framework.[2] We appreciate the Commission’s focus on this area. Appropriate management of risks relating to information and technology security, third-party relationships, and emergencies or other significant disruptions to normal business operations has likewise been a significant focus for banking organizations and their prudential regulators for many years.

We further support the Commission’s efforts to draw on the approaches adopted by the prudential regulators in this area when formulating its proposed rules[3] and its proposal that substituted compliance with comparable home country rules should broadly be available for non-U.S. SDs and major swap participants.[4] We also note the Commission’s proposal to permit covered entities, under certain conditions, to satisfy certain aspects of the proposed rules through participation in a consolidated program or plan managed and approved at the enterprise level.[5]

These measures will not be sufficient, however, to avoid regulatory conflicts and inefficiencies. Several inconsistencies remain between the proposed rules and relevant prudential regulator rules and guidance. These inconsistencies are likely to expand in practice through divergent examination and supervision processes. We believe that substituted compliance is an effective way to address these issues, and we urge the Commission to adopt a principles-based approach towards substituted compliance that focuses on holistic outcomes. But substituted compliance standing alone will not fully address these issues because it would not be available to U.S. covered entities. The proposed treatment of consolidated programs and plans also would not address these issues for U.S. covered entities because it has multiple significant flaws, which could actually increase the extent of regulatory conflicts and inefficiencies.

Below we provide additional details concerning these issues. We also make recommendations for how the Commission could tailor the proposed rules’ provisions concerning participation in consolidated programs and plans to account better for circumstances where covered entities are already subject to comprehensive regulation and supervision of their operational resilience by U.S. prudential regulators.

To read the full comment letter, please click here, or click on the download button below.


[1] The Bank Policy Institute is a nonpartisan public policy, research and advocacy group, representing the nation’s leading banks and their customers. Our members include universal banks, regional banks and the major foreign banks doing business in the United States. Collectively, they employ almost 2 million Americans, make nearly half of the nation’s small business loans, and are an engine for financial innovation and economic growth.

[2] Operational Resilience Framework for Futures Commission Merchants, Swap Dealers, and Major Swap Participants, 89 Fed. Reg. 4,706 (Jan. 24, 2024) (the “Proposing Release”).

[3] See id. at 4,710.

[4] Id. at 4,734.

[5] Id. at 4,715-16.