(2) Core principles
(A) In general
To be registered and to maintain registration as a derivatives clearing organization, an applicant shall demonstrate to the Commission that the applicant complies with the core principles specified in this paragraph. The applicant shall have reasonable discretion in establishing the manner in which it complies with the core principles.
(B) Financial resources
The applicant shall demonstrate that the applicant has adequate financial, operational, and managerial resources to discharge the responsibilities of a derivatives clearing organization.
(C) Participant and product eligibility The applicant shall establish
(i) appropriate admission and continuing eligibility standards (including appropriate minimum financial requirements) for members of and participants in the organization; and
(ii) appropriate standards for determining eligibility of agreements, contracts, or transactions submitted to the applicant.
(D) Risk management
The applicant shall have the ability to manage the risks associated with discharging the responsibilities of a derivatives clearing organization through the use of appropriate tools and procedures.
(E) Settlement procedures The applicant shall have the ability to
(i) complete settlements on a timely basis under varying circumstances;
(ii) maintain an adequate record of the flow of funds associated with each transaction that the applicant clears; and
(iii) comply with the terms and conditions of any permitted netting or offset arrangements with other clearing organizations.
(F) Treatment of funds
The applicant shall have standards and procedures designed to protect and ensure the safety of member and participant funds.
(G) Default rules and procedures
The applicant shall have rules and procedures designed to allow for efficient, fair, and safe management of events when members or participants become insolvent or otherwise default on their obligations to the derivatives clearing organization.
(H) Rule enforcement The applicant shall
(i) maintain adequate arrangements and resources for the effective monitoring and enforcement of compliance with rules of the applicant and for resolution of disputes; and
(ii) have the authority and ability to discipline, limit, suspend, or terminate a members or participants activities for violations of rules of the applicant.
(I) System safeguards The applicant shall demonstrate that the applicant
(i) has established and will maintain a program of oversight and risk analysis to ensure that the automated systems of the applicant function properly and have adequate capacity and security; and
(ii) has established and will maintain emergency procedures and a plan for disaster recovery, and will periodically test backup facilities sufficient to ensure daily processing, clearing, and settlement of transactions.
(J) Reporting
The applicant shall provide to the Commission all information necessary for the Commission to conduct the oversight function of the applicant with respect to the activities of the derivatives clearing organization.
(K) Recordkeeping
The applicant shall maintain records of all activities related to the business of the applicant as a derivatives clearing organization in a form and manner acceptable to the Commission for a period of 5 years.
(L) Public information
The applicant shall make information concerning the rules and operating procedures governing the clearing and settlement systems (including default procedures) available to market participants.
(M) Information-sharing The applicant shall
(i) enter into and abide by the terms of all appropriate and applicable domestic and international information-sharing agreements; and
(ii) use relevant information obtained from the agreements in carrying out the clearing organizations risk management program.
(N) Antitrust considerations Unless appropriate to achieve the purposes of this chapter, the derivatives clearing organization shall avoid
(i) adopting any rule or taking any action that results in any unreasonable restraint of trade; or
(ii) imposing any material anticompetitive burden on trading on the contract market.
