In March 2023, Commodity Futures Trading Commission (“CFTC”) Chairman Rostin Behnam laid out his regulatory agenda. Among the topics Chair Behnam addressed, several of the thematic areas directly impact the expectations for and operations of an effective compliance program for designated contract markets (“DCMs”).
As recent months have demonstrated, market volatility, global events, and economic uncertainty can impact both trade volumes and potential conflicts of interest in decision-making of a DCM. In order to ensure independence in the operation of the DCM, address potential conflicts of interest, and the assess functioning of the DCM compliance function, the CFTC has published guidance that a DCM should establish a Regulatory Oversight Committee (“ROC”) as a standing committee, consisting of only public directors to assist the DCM in minimizing actual and potential conflicts of interest. Pursuant to the CFTC Guidance, the ROC should oversee the contract market's regulatory program on behalf of the board.
In this publication, Partner Matthew Kulkin and Associate Ayana Dow set forth the framework for a successful ROC and offer some industry best practices to ensure that the ROC is meeting its regulatory obligations and best supporting the DCM’s board and the exchange.
