CFTC Staff Addresses Use of Trust Companies for Daily Settlements
AI Analysis
On November 5, 2026, the CFTC Division of Clearing and Risk issued a no-action letter permitting derivatives clearing organizations (DCOs) to use trust companies for daily settlements with clearing members. The relief is conditional: the DCO must treat the trust company as a settlement bank under the applicable CFTC requirements, including requirements concerning eligibility, risk management, operational reliability, settlement finality, and business continuity.
Key dates
- 2026-11-05
- CFTC Division of Clearing and Risk issued the no-action letter and accompanying public release addressing trust companies used for daily settlements.
Suggested considerations
- Compliance teams may wish to identify any existing or proposed trust-company settlement arrangements and determine whether each arrangement is being governed under the DCO’s settlement-bank policies and procedures.
- DCOs should consider documenting that each trust company satisfies the applicable 17 CFR 39.14 settlement-bank criteria, including capitalization, creditworthiness, liquidity access, operational reliability, and regulatory status.
- Firms should consider reviewing account structures, settlement agreements, payment workflows, and legal opinions to confirm that transfers are irrevocable and unconditional no later than the time the relevant DCO or clearing-member account is debited or credited.
- DCOs may wish to assess credit, liquidity, concentration, and intraday settlement exposures arising from the use of each trust company and confirm that monitoring, escalation, collateral, and contingency arrangements remain adequate.
- Operations and resilience teams may wish to test the trust company’s connectivity, payment-failure procedures, recovery arrangements, and coordination with the DCO’s business-continuity and disaster-recovery plans.
- Legal and compliance teams should consider recording the no-action letter’s conditions and limits in the DCO’s regulatory inventory, noting that the relief is staff relief rather than a binding amendment to Part 39 and may not extend to materially different structures or facts.
- Clearing members may wish to confirm that their agreements with the DCO and trust company allocate settlement, segregation, insolvency, operational, and account-control risks consistently with the DCO’s approved procedures.
What changed
The letter provides staff no-action relief for a DCO that uses a trust company to conduct daily settlement, notwithstanding the distinction between a trust company and a settlement bank under the CFTC framework. It does not create a generally applicable exemption or amend 17 CFR Part 39; instead, it allows the arrangement provided the trust company is managed and controlled as a settlement bank. Relevant requirements include 17 CFR 39.14, under which DCOs must settle with each clearing member at least once each business day, maintain authority and operational capacity for intraday settlement, establish documented settlement-bank eligibility criteria, limit credit and liquidity exposure, ensure settlement finality, and maintain appropriate business-continuity arrangements. Independent marke
Compliance impact
The impact is moderate and operationally significant for DCOs and clearing members seeking alternative settlement infrastructure, but the publication does not impose a new universal obligation or compliance deadline. Noncompliance with the applicable settlement-bank requirements could expose a DCO to deficiencies in settlement procedures, liquidity and credit-risk controls, settlement finality, op
Who is affected
Related regulations
References
AI-generated analysis. May contain errors or omissions — verify with the original CFTC source before acting. Full disclaimer.
What the CFTC said
No description available.
Published by CFTC . Read the full notice at the source for the authoritative text.