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May 19, 2013

CFTC Issues Interpretive Letter Regarding Cleared Swaps Customer Collateral

Katten Muchin Rosenman LLP
Kevin M. Foley
James M. Brady
Katten Muchin Rosenman LLP
Thursday, November 15, 2012
Administrative & Regulatory / Corporate & Business Organizations / Securities & SEC
All Federal
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The Division of Clearing and Risk (DCR) of the Commodity Futures Trading Commission issued an interpretive letter regarding cleared swaps customer collateral requirements under Part 22 of the CFTC’s rules. The DCR interpretation addresses a number of issues with respect to which derivatives clearing organizations (DCOs) and clearing member futures commission merchants (FCMs) requested clarification, including: (1) limitations on the use of cleared swaps customer collateral; (2) the use of variation margin, in particular if a DCO elects to net variation margin across an FCM’s cleared swaps customers; (3) comingling of cleared swaps customer collateral; (4) the processes by which an FCM may report to a DCO its customers’ portfolio of rights and obligations; (5) the circumstances in which a DCO may accept cleared swaps customer collateral in excess of the DCO’s initial margin requirements; and (vi) the determination of the value of cleared swaps customer collateral in the event of an FCM default. 

The DCR interpretive letter is available here.

©2013 Katten Muchin Rosenman LLP

About the Author

Kevin M. Foley
Partner

Kevin M. Foley has extensive experience in commodities law and advises a wide range of clients, both in the U.S. and abroad, on regulatory compliance regarding traditional exchange-traded products, as well as the over-the-counter markets involving swaps and other derivative instruments. His clients include futures commission merchants, broker-dealers, investment advisers, commodity pool operators, commodity trading advisors and an industry trade association.

kevin.foley@kattenlaw.com
312-902-5372
www.kattenlaw.com

About the Author

James M. Brady
Associate

 

James Brady concentrates his practice in financial services matters.

james.brady@kattenlaw.com
312-902-5362
www.kattenlaw.com

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