Bowing to growing concerns about a fast-approaching deadline, the Commodity Futures Trading Commission's Division of Clearing and Risk has announced it will extend the deadline for compliance with new pre-trade screening requirements for transactions executed on designated contract markets (DCMs) that do not have a system in place permitting futures commission merchants (FCMs) to set pre-execution limits.

The extension of time is “intended to provide sufficient time to transition to fully compliant pre-trade screening” no later than June 1, 2013.

On April 9, the Commission published clearing member risk management rules, Rule 1.73, and set an Oct. 1 compliance deadline. It required an FCM of a registered derivatives clearing organization to establish risk-based limits and to screen orders for compliance with those limits.

In a letter to the Futures Industry Association, the Commission explained that Rule 1.73 does not require full portfolio-based, pre-trade screening and clearing FCMs could choose to implement other limits, “which may be less sophisticated than full portfolio-based margining.” These alternatives could include limits based on order size, position size, price limits, volume limits, or other risk based factors.

Although “several firms are prepared to comply,” the CFTC acknowledged that “several small DCMs currently do not have systems that permit FCMs to set pre-execution limits” and the deadline extension for certain requirements was warranted.