Designated Contract Market

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Designated contract markets (DCMs) are boards of trade (or exchanges) that operate under the regulatory oversight of the Commodity Futures Trading Commission (CFTC).[1] The Commodity Futures Modernization Act (CFMA) establishes certain common requirements for all markets, whether principally securities or futures exchanges, trading security futures products. These requirements are made applicable as required listing standards under the 1934 Act for securities exchanges trading security futures and as conditions to designated contract market for boards of trade seeking to trade security futures under the CEA.[2]

Among the mandates of the Wall Street Reform and Consumer Protection Act of 2010 (the Dodd-Frank Act) was the establishment of a new type of entity for the trading of swaps - the swap execution facility. According to the Act, any swap eligible for clearing must be transacted on an exchange, or on a SEF. Many existing DCMs, including CME Group and Intercontinental Exchange, plan to clear swaps within their platforms, or, depending upon the final swap rules issued by the CFTC, on a separate SEF. [3]

Criteria For Designation

To be designated as a contract market, a board of trade must demonstrate to the CFTC that the board of trade meets the criteria including the capacity to prevent market manipulation and establish and enforce trading rules to ensure fair and equitable trading.

Application Process For a Designated Contract Market

CFTC Part 38 Application Procedures

Resources

References

  1. Designation as a Contract Market. CFTC.
  2. A New Era in Derivatives Regulation: The Commodity Futures Modernization Act of 2000. Dechert.
  3. Swap Execution Facility: The New Term on Wall Street. New York Times Dealbook.