On May 30, 2023, the Division of Clearing and Risk
("DCR") of the Commodity Futures Trading Commission
("CFTC") issued an advisory ("05/30/23 DCO Advisory")
relating to registered, or those seeking to register as,
derivatives clearing organizations ("DCOs") that offer
clearing services involving contracts for digital assets. This
advisory follows DCR's May 17, 2023 advisory to DCOs in connection with prime
brokerage ("PB") arrangements and trading on swap
execution facilities ("SEFs") (covered previously here).
Both advisories are short one-page documents that remind DCOs
and entities that have not been registered as DCOs to focus on
risks associated with novel business arrangements (i.e.,
PBs on SEFs and clearing for digital assets) and note that the DCR
will be "placing emphasis on potential risks ... related to
system safeguards, physical settlement procedures, and conflicts of
interest." More specifically, the 05/30/23 DCO Advisory
addresses potential conflicts
