On March 7, 2024, the CFTC's Global Markets Advisory Committee (GMAC) formally advanced recommendations to the CFTC regarding:

The GMAC Digital Asset Markets Subcommittee issued recommendations on digital assets that set out a taxonomy of consistent language for participants in the digital asset ecosystem designed to be used to help draft future legislation, regulations, policies, procedures, and other situations where a common approach to understanding digital assets is needed across regions and jurisdictions. The recommendations build upon the classification efforts of global prudential standard setters and regional authorities, including the Bank for International Settlements (BIS) and the Financial Stability Board (FSB).

To aid in the classification of digital assets, the recommendations provide the following categories:

The recommendations provide a set of features to aid in classification of digital assets, including:

The recommendations also include an appendix illustrating the workflow of a repo transaction in which distributed ledger technology enables the exchange of collateral and cash (see Practice Note, Repos: Overview (US)).

The GMAC Technical Issues Subcommittee issued recommendations intended to support market participants as they prepare for the transition to T+1 settlement for US securities, as well as parallel moves to T+1 in Canada and Mexico (see Legal Update, SEC Shortens Standard Settlement Cycle to T+1).

On February 15, 2023, the SEC voted to adopt Rule 15c6-1, shortening the securities settlement cycle from trade date plus two business days (T+2) to trade date plus one business day (T+1). The US will transition to T+1 on May 28, 2024. The timelines for trade affirmation, allocation, and confirmation will all be shortened in the post-T+1 environment.

Products subject to the T+1 settlement cycle in the US are securities that do not carry an exemption from SEC Rule 15c6-1(a), which extends to the purchase and sale of securities issued by investment companies including mutual funds, private-label mortgage-backed securities, and limited partnership interests that are listed on an exchange. The products not subject to the T+1 settlement cycle include:

US Treasury bills, bonds, and listed options already settle at T+1 and will not be affected.

The recommendations provide that, for market participants using securities as collateral, it will be imperative to manage inventories as efficiently as possible to mitigate operational challenges and ensure collateral optimization by using automated processing and data standards. According to the recommendation, the SEC rule does not specifically mandate all OTC derivatives settle on a T+1 basis. Further, ISDA® plans to issue members a "Preferences Grid," where firms can indicate whether they intend to amend outstanding transactions previously confirmed on a longer settlement cycle to the reduced settlement cycle.

According to the recommendations, in order to reduce potential increase in settlement fail rates and potential buy-ins resulting from sales of loaned securities, lenders of securities should adopt a best practice of issuing recalls by 11:59 pm ET on the trade date (T). Generally, the more notice borrowers have to return securities, the more likely they will be returned in time for settlement.

According to the recommendations, moving to a T+1 settlement cycle may mean cost savings, reduced market risk, and lower margin requirements for market participants and, most directly, to members of clearing utilities such as the Depository Trust & Clearing Organization (DTCC), which has released a detailed discussion of the new trade-affirmation goals and operating models. The DTCC discussion includes a recommendation that 90% of all trades should be affirmed by 9:00 pm on the trade date. In addition, shorter timeframes associated with moving to a T+1 settlement:

The recommendation provides an extensive list of resources available to help firms prepare for the T+1 transition, including resources on:

According to the recommendations, the United Kingdom and European Union are also exploring acceleration of settlement from their current T+2 cycle.

The GMAC Global Market Structure Subcommittee issued recommendations urging the CFTC to providing clarity that certain US Treasury ETFs qualify as eligible initial margin (IM) collateral under CFTC margin rules for uncleared swaps (CFTC margin rules) (see Practice Note, US Derivatives Regulation: Margin Collection and Exchange Requirements for Uncleared Swaps: Eligible Collateral Under the CFTC Margin Rules). The recommendations states that, in particular, the CFTC should specify that shares of an ETF that is an open-ended investment company registered with the SEC under the Investment Company Act of 1940, as amended, should be considered "redeemable securities" in a pooled investment fund.

This means that shares of an ETF that invests in qualifying assets and meets other relevant investment conditions, as detailed in the CFTC margin rules, would be considered eligible collateral under the CFTC margin rules.

The Global Market Structure Subcommittee is also requesting that the CFTC encourage the US prudential regulators to acknowledge and align with this clarification to the prudential margin rules for uncleared swaps, which would prevent inconsistent collateral standards among swap dealers.