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.©2014 Katten Muchin Rosenman LLP