• Portfolio Margining: SEC Order Grants Exemptions to Permit Portfolio Margining of CDS
  • January 10, 2013
  • Law Firm: Sullivan Cromwell LLP - New York Office
  • The SEC has adopted an exemptive order that provides relief from certain Exchange Act requirements otherwise applicable to customer accounts carrying credit default swap positions consisting of swaps and security-based swaps. The relief is available to (i) clearing organizations dually registered as clearing agencies with the SEC and derivatives clearing organizations with the CFTC, and (ii) entities dually registered as broker-dealers with the SEC and futures commission merchants with the CFTC. The relief is available only with respect to accounts of customers that qualify as eligible contract participants. The relief available to a dually registered clearing organization is conditioned on, among other things, adoption of rules by the CFTC permitting portfolio margining of CDS and the clearing organization permitting its clearing members to elect between offering customers accounts that conform to requirements related to segregation and portfolio margining under either the Exchange Act or the CEA. The relief available to a dually registered broker-dealer / futures commission merchant is conditioned on, among other things: