August 21, 2014

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CFTC Grants No-Action Relief for Certain Cleared Repo Transactions

The Division of Clearing and Risk (DCR) of the Commodity Futures Trading Commission has adopted a no-action position authorizing registered futures commission merchants (FCMs) to enter into repurchase and reverse repurchase agreements (each, a Repo) that are cleared by a securities clearing agency.

Although a securities clearing agency is not a permitted counterparty under CFTC Regulation 1.25(d)(2), DCR determined that FCMs engaging in repurchase transactions, whereby the ultimate counterparty is a securities clearing agency, poses no additional credit risk to customer funds, and in fact may reduce the credit risk in the transaction.

The CFTC’s no-action letter is available here

©2014 Katten Muchin Rosenman LLP

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About this Author

Kevin M. Foley, Finance Attorney, Katten Muchin law Firm
Partner

Kevin M. Foley has extensive experience in commodities law and advises a wide range of clients, both in the United States and abroad, on compliance with the Commodity Exchange Act and the rules of the Commodity Futures Trading Commission (CFTC) affecting traditional exchange-traded products, as well as the over-the-counter markets involving swaps and other derivative instruments. His clients include futures commission merchants, derivatives clearing organizations, designated contract markets, foreign boards of trade and an industry trade association.

312-902-5372
Adam J. Spector, Katten Muchin Law firm, Financial Institutions Attorney
Associate

Adam J. Spector concentrates his practice in the financial services sector, representing hedge funds, commodity pools, proprietary trading firms, private equity funds and investment advisers with respect to their corporate, transactional and regulatory matters.

312-902-5275