The US Commodity Futures Trading Commission's clearing staff on November 5 offered conditional enforcement relief for derivatives clearing organisations using trust companies for daily settlements, addressing a regulatory obstacle raised as Nodal Clear prepares to accept stablecoin collateral.
The Division of Clearing and Risk said it would not recommend enforcement against any clearing organisation using that route if the trust company is treated as a settlement bank for compliance with Regulation 39.14(c) and (d). The condition preserves the requirements governing settlement institutions and finality of transfers.
The staff letter, numbered 26-30, responds to an October 29 request from Nodal Clear. It concerns how clearing organisations settle with their members. Its scope does not itself approve any particular stablecoin or announce that a particular collateral service has begun operating.
Why digital collateral prompted the request
In its request filed with the regulator, Nodal said it was preparing to accept stablecoins as initial margin collateral. The company, which identifies itself as the clearing house for Nodal Exchange and Coinbase Derivatives, refers specifically to accepting USDC in a footnote. These are the applicant's plans, rather than confirmation of a launch.
The staff letter records Nodal's argument that state regulated trust companies provide digital asset custody and that using them for settlement would help integrate digital collateral into existing daily processes. The regulatory question arises because different parts of the customer protection framework use different descriptions of eligible institutions.
Customer funds provisions recognise banks and trust companies as depositories. By contrast, the settlement rule defines a settlement bank as a bank maintaining an account used for settlement by the clearing organisation or its members. The staff response addresses that gap while retaining the obligations attached to selecting and using the institution.
Risk checks and transfer finality still apply
The applicable settlement regulation, 17 CFR 39.14, requires documented criteria covering an institution's capitalisation and creditworthiness. Access to liquidity, operational reliability and regulatory supervision must also be assessed. Clearing organisations have to monitor approved institutions continuously against those criteria.
The obligations extend to the concentration of exposures. A clearing organisation must monitor its own exposures and those of its clearing members. It must assess potential losses and liquidity pressures for both if the settlement bank handling the largest share of activity fails. Where necessary, it must limit that risk, potentially through additional institutions, concentration limits or other suitable measures. The relief carries those responsibilities over to the trust company arrangement.
Finality has a separate legal requirement. Settlement agreements must make fund transfers irrevocable and unconditional no later than the point at which the clearing organisation's accounts are debited or credited. Agreements may permit correction of errors, but must specify when transfers occur. The clearing organisation must routinely confirm that transfers happen as agreed.
The rule's definition of settlement includes initial margin deposits and withdrawals, alongside variation margin payments and receipts. It also covers option premiums and payments due at final settlement. Other cash flows collected from or paid to clearing members, including swap coupon payments, are covered too. That breadth explains why an institution used to move collateral falls within a rule that goes beyond simply holding customer assets.
The daily obligation also survives. Unless a Commission order provides otherwise, clearing organisations must settle with each member at least once every business day and retain the authority and operational capacity for settlements during the day. That capacity must cover routine intraday settlement, breaches of thresholds set by the clearing organisation and periods of extreme market volatility. Records tracking the movement of settlement funds remain required.
The limits of staff relief
The letter represents the division's position and is not binding on the Commission. It concerns enforcement recommendations rather than a legal conclusion about how the law applies. Other applicable requirements remain in place, and different or omitted material facts could require another conclusion or invalidate the position.
Staff also reserve the ability to impose further conditions, modify the relief or suspend or terminate it. For clearing organisations considering this route, the immediate change is therefore a conditional enforcement position on trust company settlements. The underlying safeguards continue to govern the arrangements they put in place.
Related US regulatory coverage: Galaxy's trust bank application and TXSE crypto trust listing rules.
