September 1, 2015

August 31, 2015

CFTC Issues Exemptive Order to ICE Clear Credit Permitting Commingling and Portfolio Margining of Cleared Credit Default Swaps and Security-Based Swaps

The Commodity Futures Exchange Commission has issued an exemptive order (Order) that permits the commingling and portfolio margining of cleared credit default swaps (CDS) and security-based swaps (SB CDS). The Order was issued in response to a request submitted by ICE Clear Credit LLC (ICC) in late 2011, and follows a complementary exemptive order issued by the Securities and Exchange Commission on December 19, 2012 (as reported in the December 21, 2012, edition of Corporate and Financial Weekly Digest), in which the SEC exempted dually registered broker dealers (BDs) and futures commission merchants (FCMs) from provisions of the Securities Exchange Act of 1934 and SEC regulations that would otherwise prohibit the commingling and/or portfolio margining of customer positions in cleared CDS and SB CDS that are held in customer accounts maintained in accordance with Section 4d(f) of the Commodity Exchange Act.

Subject to the conditions outlined in the Order, ICC and its clearing members that are dually registered as BDs and FCMs may hold in the same Section 4d(f) cleared swaps account customer collateral securing positions in cleared CDS and SB CDS. The Order further allows for the portfolio margining of such cleared CDS and SB CDS.

The Order can be found here.

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About this Author

Kenneth M. Rosenzweig, Katten Muchin Law Firm, Financial services matters
Partner

Kenneth M. Rosenzweig focuses his practice on financial services matters, with an emphasis on the trading and clearing of financial instruments. Ken represents derivatives clearing organizations, designated contract markets and swap execution facilities, in addition to futures commission merchants, banks and other commercial participants in the exchange-traded and over-the-counter derivatives markets.

Formerly Assistant Chief Counsel and Associate Director in the Division of Trading and Markets of the Commodity Futures Trading Commission (CFTC)...

312-902-5381
Kevin M. Foley, Finance Lawyer, 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.

Kevin has served as counsel to the Futures Industry Association (FIA) for more than 20 years. In 2012 he was recognized for his exemplary efforts on behalf of the association and the industry, in particular for his guidance in navigating the challenges confronting FIA member firms in complying with the Dodd-Frank Wall Street Reform and Consumer Protection Act.

312-902-5372