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Safe Harbors and Securitizations: Loan Payments in Connection with a Commercial Mortgage-Backed Securitization Protected from Clawback under the U.S. Bankruptcy Code Safe Harbors

By Andrea Pincus, Paul Turner, and Sarah Kam You can find a detailed analysis in our client alert on the order Safe Harbors and Securitizations: Loan Payments in Connection with a Commercial Mortgage-Backed Securitization Protected from Clawback under the U.S. Bankruptcy Code Safe Harbors The Swap Report The U.S. Bankruptcy Court, Northern District of Illinois issued … Continue Reading

Breaking: ISDA Announces Credit Event for Argentina

Breaking–ISDA just announced that its Determination Committee decided that a "failure to pay" Credit Event has occurred with respect to the Argentine Republic. The date of the Credit Event is July 30, 2014. The ISDA Press Release can be found here, and the Determination Committee Decision can be found here. The Swap Report… Continue Reading

Commissioner Scott O’Malia to Become CEO of ISDA – Will ISDA Increase its Focus on the Energy Industry, Commercial Market Participants and Physical Commodity Markets?

Following the CFTC announcement that Commissioner Scott O'Malia has resigned his position effective August 8th, ISDA has now announced that O'Malia will become its CEO effective August 18th. O'Malia's leadership of ISDA could be a particularly important development for those in the energy industry and other commercial market participants, including "end-users."… Continue Reading

Seventh Circuit Court of Appeals Reverses District Court, Follows Trend of Applying Bankruptcy Code Safe Harbors Literally and Expansively

By Todd Zerega and Luke Sizemore INTRODUCTION On January 24, 2013, we reported that the United States District Court for the Northern District of Illinois (the “District Court”) declined to apply a literal interpretation of the Bankruptcy Code safe harbor provision protecting “settlement payments” and transfers “in connection with a securities contract” from avoidance and, … Continue Reading

Professor Pirrong Authors White Paper on Commodity Trading Firms

By Andrew Cross and Tom Watterson Professor Craig Pirrong authored a white paper on the Economics of Commodity Trading Firms, which is now publicly available. You can access the paper through Professor Pirrong’s blog posting here (in addition to the wealth of additional information and insight on his blog). Good day. Good weekend reading. TSR… Continue Reading

Financial Information About FCMs Available at NFA Website

The National Futures Association (NFA) has announced that it will make certain financial information about its futures commission merchant (FCM) members publicly available.  You can access this information by going to the NFA’s “BASIC” database of member information and searching for any FCM by name. Specific information that is available at BASIC consists of: FCM Capital Reports; FCM Customer Segregated Funds Reports; … Continue Reading

MtGox Seeks Protection Under Chapter 15 of the Bankruptcy Code

By Todd Zerega and Luke Sizemore In late February 2014, MtGox Co., Ltd (“MtGox”), once the largest bitcoin exchange in the world, suspended all trading on its exchange after internal investigations revealed a loss of approximately 750,000 of its customers’ bitcoins worth nearly $473 million. That loss caused MtGox to become insolvent. On February 28, … Continue Reading

Bitcoin and the CFTC: “Spot”ing the Jurisdictional Hook

By Todd Zerega and Tom Watterson In the past week, Bitcoin derivatives have been making news. A Bloomberg article highlighted Bitcoin derivatives and platforms for such products, and in an interview on February 28, the CME Group chairman and president, Terry Duffy, announced that the CME Group is beginning to take a preliminary look into … Continue Reading

FINRA Proposal to Require Margin on TBA MBS Trades…From Fin Ops Report

For those of you living the dream of MSFTA papering (not re-papering, but papering) and collateralization of TBA trades…we draw your attention to the following article from Chris Kentouris at FinOps Report FINRA: Even Tougher Margining Rules In short, the article discusses current events surrounding a January 2014 Regulatory Notice from FINRA seeking comments on … Continue Reading

Mutual Fund Corner: The Brinks Company Receives No-Action Relief Permitting It to Maintain Custody of Gold Bullion and Other Precious Metals

INTRODUCTION On February 11, 2014, the Office of the Chief Counsel ("Chief Counsel") of the SEC’s Division of Investment Management issued No-Action Relief to The Brink’s Company ("Brink’s"), a company that provides gold bullion and other precious metals ("Precious Metals") vault services to a wide range of institutional customers.  The No-Action Letter,  which is available here, is likely to be … Continue Reading

Risk Management in Changing Fixed Income Market Conditions: Guidance Issued by SEC Division of Investment Management

On January 15th, the SEC’s Division of Investment Management ("IM") issued a Guidance Update entitled, "Risk Management in Changing Fixed Income Market Conditions" (available here).  In the piece, IM raises questions as to whether volatility in the fixed income markets would be materially increased by an uptick in bond fund outflows in the face of … Continue Reading

Mutual Fund Corner: SEC Extends No-Action Relief from Section 17(f) Custody Requirements for Margin on Certain Cleared Swaps

On December 26, 2013, the Securities and Exchange Commission’s Division of Investment Management (“IM”) issued No-Action Letters to the Chicago Mercantile Exchange, ICE Clear Credit and LCH Clearnet.  The letters can be accessed by clicking here and looking for the letters under the “Chronological List of No Action Letters”. In effect, these no-action letters extended relief … Continue Reading

Regulating Bitcoins: CFTC vs. SEC?

By Todd Zerega and Tom Watterson In the past year, Bitcoin has exploded into the public limelight and in the process gained the attention of U.S. regulators. A full discussion of Bitcoin could make up an entire book (for a thorough discussion, see FT Alphaville’s BitcoinMania series here). For the purposes of this post, Bitcoin … Continue Reading

CME Group Issues Update MRAN on Prohibited Wash Trades: MRAN 1308-5

On November 19th, the CME issued its Market Regulation Advisory Notice 1308-5, relating to CME Group Rule 534 (“Wash Trades Prohibited”).  The notice itself is relatively short and sets forth the text of the rule – this posting is intended to provide our readers with a brief overview of the particular “questions and answers” (“Q & … Continue Reading

The CFTC Staff Recommends that ELX Futures (and the NFA) Take a Closer Look at EFRPs.

By Tom Watterson The CFTC Division of Market Oversight (the “Division”) released a review of the rule enforcement of ELX Futures, L.P. ELX Futures, however, contracted with the NFA to perform certain market surveillance functions and the review included recommendations for the NFA. The Division recommended that the NFA take a closer look at Exchange … Continue Reading

Second Circuit Interprets Securities Contract Safe Harbor Broadly For Second Time in Three Years

By Todd Zerega and Luke Sizemore CASE SNAPSHOT For the second time in three years, the United States Court of Appeals for the Second Circuit (the “Court”) has taken a broad view of the “safe harbor” provision found in section 546(e) of the Bankruptcy Code for certain “settlement payments” and transfers in connection with securities … Continue Reading

Attention Compliance Officers: SEC, CFTC and FINRA Issue Best Practice Statement for Business Continuity and Disaster Recovery Planning

On August 16th, the SEC, CFTC and FINRA issued a statement regarding best practices with respect to business continuity planning.  The statement resulted from a joint review of the impact that Hurricane Sandy had on the business continuity and disaster recovery planning programs of several large firms affected by the October 2012 event.  Particular attention … Continue Reading

Fourth Circuit Concludes that Certain Commissions and Margin Interest Payments are Protected from Avoidance by “Stockbroker Defense”

By Todd Zerega and Luke Sizemore CASE SNAPSHOT In a case of first impression, the Fourth Circuit determined that broker commissions shown to be reasonable and customary parts of settling stock sales constitute "settlement payments" and that the payment of margin interest constitutes "margin payments" under section 546(e) of the Bankruptcy Code such that these … Continue Reading

Mutual Fund Corner: SEC Division of Investment Management Issues Guidance on Use of Derivatives

Today, the Division of Investment Management issued guidance on the use of derivatives by registered investment companies.  It is available here and is entitled "Disclosure and Compliance Matters for Investment Company Registrants that Invest in Commodity Interests".  The guidance address the following key areas: Disclosure of Derivatives and Associated Risks; Performance Presentations; Legend Requirement; and Compliance and … Continue Reading

Tri-Party Repos: Monthly Volume Data and Estimated Intraday Credit Risk Reduction (By Todd Zerega and Tom Watterson)

This post was written by Todd Zerega and Tom Watterson. The Federal Reserve Bank of NY (FRBNY) posted on its website an estimate of future intraday credit risk for clearing banks in the tri-party repo market.  The estimate notes the various steps, along with accompanying timeframes, that the clearing banks are taking to reduce their intraday … Continue Reading

Tri-Party Repo Market Update by Todd P. Zerega, Reed Smith LLP

Thanks to Todd Zerega and Tom Watterson for this posting. On November 30, The Federal Reserve Bank of NY released their monthly statistics of the U.S. tri-party repo market. For the month ended November 9, 2012, the total collateral in the U.S. tri-party repo market increased by $94 billion, more than 5%, to $1.95 trillion. … Continue Reading
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