August 24, 2014

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August 22, 2014

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 Institutions
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.

312-902-5381
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