January 23, 2022

Volume XII, Number 23

Advertisement
Advertisement

January 21, 2022

Subscribe to Latest Legal News and Analysis

January 20, 2022

Subscribe to Latest Legal News and Analysis

Commodity Futures Trading Commission (CFTC) CFTC Adopts Rules Regarding the Protection of Collateral and Treatment of Securities in a Portfolio Margining Account in a Bankruptcy

On October 30, the Commodity Futures Trading Commission adopted final rules regarding (i) the protection of collateral and (ii) the treatment of securities in a portfolio margining account in a commodity broker bankruptcy. The protection of collateral rules were adopted to codify Section 746(c) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which requires swaps dealers and major swap participants in connection with uncleared swaps to inform their counterparties that they have the right to require their initial margins to be held by an independent custodian. Under the final rule, if a counterparty elects segregation for its initial margin, the account must be held by an independent custodian pursuant to a written custody agreement that fulfills certain minimum criteria.  The final rule related to portfolio margining clarifies that securities held in a futures or cleared swaps customer account that is subject to portfolio margining are customer property under the Bankruptcy Code.   

The final rules will be effective 60 days after publication in the Federal Register. Swap dealers and major swap participants must comply with the notification requirements set forth in the final rules no later 180 days after publication for uncleared swap transactions with new counterparties and no later than 360 days after publication for uncleared swap transactions with existing counterparties. 

The final rules are available here.

©2022 Katten Muchin Rosenman LLPNational Law Review, Volume III, Number 306
Advertisement

About this Author

Kevin M. Foley, Finance Lawyer, Katten Llaw 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
Advertisement
Advertisement
Advertisement