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    Ucs Factsheet

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    Douglas Ashburn
    The Commodity Futures Trading Commission is proposing new rules regarding the protection of collateral for counterparties engaging in uncleared swaps. The rules would require swap dealers and major swap participants to notify counterparties that they have a right to require initial swap margins be held at an independent custodian. The rules establish standards for segregated custodial accounts and only allow segregated margins to be invested according to Commission rules for investing customer property. The Commission is also proposing changes to its bankruptcy regulations to clarify treatment of securities in portfolio margin accounts and conform timing to recent statutory amendments.

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    Ucs Factsheet

    Uploaded by

    Douglas Ashburn
    44 views1 page
    The Commodity Futures Trading Commission is proposing new rules regarding the protection of collateral for counterparties engaging in uncleared swaps. The rules would require swap dealers and major swap participants to notify counterparties that they have a right to require initial swap margins be held at an independent custodian. The rules establish standards for segregated custodial accounts and only allow segregated margins to be invested according to Commission rules for investing customer property. The Commission is also proposing changes to its bankruptcy regulations to clarify treatment of securities in portfolio margin accounts and conform timing to recent statutory amendments.

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    The Commodity Futures Trading Commission is proposing new rules regarding the protection of collateral for counterparties engaging in uncleared swaps. The rules would require swap dealers and major swap participants to notify counterparties that they have a right to require initial swap margins be held at an independent custodian. The rules establish standards for segregated custodial accounts and only allow segregated margins to be invested according to Commission rules for investing customer property. The Commission is also proposing changes to its bankruptcy regulations to clarify treatment of securities in portfolio margin accounts and conform timing to recent statutory amendments.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    44 views1 page

    Ucs Factsheet

    Uploaded by

    Douglas Ashburn
    The Commodity Futures Trading Commission is proposing new rules regarding the protection of collateral for counterparties engaging in uncleared swaps. The rules would require swap dealers and major swap participants to notify counterparties that they have a right to require initial swap margins be held at an independent custodian. The rules establish standards for segregated custodial accounts and only allow segregated margins to be invested according to Commission rules for investing customer property. The Commission is also proposing changes to its bankruptcy regulations to clarify treatment of securities in portfolio margin accounts and conform timing to recent statutory amendments.

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    Download as PDF, TXT or read online from Scribd
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    of 1

    Commodity Futures Trading Commission

    Office of Public Affairs


    Three Lafayette Centre
    1155 21st Street, NW
    Washington, DC 20581
    www.cftc.gov

    Proposed Rule on Protection of Collateral


    of Counterparties to Uncleared Swaps
    The Commodity Futures Trading Commission (Commission) is proposing rules establishing regulations concerning
    protection of collateral of counterparties to uncleared swaps, and other matters.

    Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act)

    Section 724(c) of the Dodd-Frank Act amends the Commodity Exchange Act (CEA) by inserting a new section
    4s(1), which requires that swap dealers (SDs) and major swap participants (MSPs) notify their counterparties
    that such counterparties have a right to require that any initial margin which they post to guarantee uncleared
    swaps be segregated at an independent custodian.

    Requirements for a Segregated Account

    If a counterparty elects segregation for its initial margin, the account must be held at a custodian that is
    independent of both the counterparty and the SD or MSP. There must be a written custody agreement
    between the counterparty posting the initial margin, the SD or MSP, and the custodian, which meets certain
    minimum standards of clarity.

    Investment of Segregated Margin

    The proposed regulations provide that segregated margin may only be invested pursuant to the Commission’s
    Rule 1.25, which governs investment of customer property of futures customers. The proposed regulations do
    not, however, limit the types of margin collateral that a customer may post. Nor do they limit any commercial
    arrangements between the parties concerning allocation of gains and losses resulting from such investments.

    Other Matters

    Section 713(c) of the Dodd-Frank Act added Section 20(c) of the CEA, which specifies that the Commission
    “shall exercise its authority to ensure that securities held in a portfolio margining account carried as a futures
    account are customer property and the owners of those accounts are customers for the purposes of” the
    commodity broker provisions of the Bankruptcy Code. The Commission proposes amendments to its Part 190
    Regulations (concerning commodity broker bankruptcies) that clarify those points.

    Public Law 111-16, the Statutory Time-Periods Technical Amendments Act of 2009, changed (among other
    things) the time period in the commodity broker provisions of the Bankruptcy Code during which the
    Commission could approve a transfer of customer funds in a commodity broker bankruptcy from five business
    days to seven calendar days. The Commission is proposing amendments to its Part 190 Regulations to
    conform to that statutory change.

    Commodity Futures Trading Commission ♦ Office of Public Affairs ♦ 202-418-5080

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