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Tri Party Repo Market Data (Guest Columnist Todd Zerega)

  Thanks to Todd Zerega of Reed Smith LLP for this posting. November 1, 2012 We hope everyone is safe and sound after Hurricane Sandy. Despite the storm, on October 31st, the Federal Reserve Bank of NY released their monthly statistics of the U.S. tri-party repo market. In the past month, the total collateral in … Continue Reading

CFTC Approves New NFA Rules To Protect Customer Funds Held by FCMs: Corzine Rule Approved; Alternative Method Dead for Foreign Futures Seg Account

On July 13th, the CFTC approved new financial rules submitted by the NFA in a May 29th petition (available here). These new rules are intended to strengthen the protection of customer funds held by a futures commission merchant ("FCM"). The following are key highlights of the new rules. 1) Increased Protections for Foreign Futures and Options … Continue Reading

CFTC Orders Barclays to Pay $200 Million Penalty for Attempted LIBOR / Euribor Manipulation

The CFTC has just issued a press release announcing that it has ordered Barclays to pay $200 million penalty for manipulation of LIBOR and Euribor (press release, order and statement are available here). Here is opening paragraph of CFTC press release : The U.S. Commodity Futures Trading Commission (CFTC) issued an Order today filing and settling charges against … Continue Reading

Please don’t type the word “swap” in ALL CAPS

There is absolutely no reason to ever type the word "swap" in ALL CAPS. I refuse to dignify the practice with a direct example. So, by way of analogy, just note that nobody types "OPTION" or "FUTURES" – yet, so many people feel compelled to type the word "swap" in ALL CAPS. Please – make the … Continue Reading

What happens if my broker-dealer or FCM files for insolvency/bankruptcy? (IOSCO Survey Client Protection Regimes)

Re-posting an earlier link that discusses jurisdictional considerations related to insolvency or bankruptcy of a broker-dealer or futures commission merchant. The U.K. and U.S. (SEC and CFTC) are the last three columns of the Excel Spreadsheet available at the link below.  Originally Posted 18 March 2011 The Technical Committee of the International Organization of Securities … Continue Reading

What constitutes custody of an OTC derivative under the Investment Company Act of 1940 and Investment Advisers Act of 1940?

Attached is a comment letter (available here)  that Steve Keen and I recently submitted to the SEC on the topic of the custody of OTC derivatives by registered investment companies and their advisers.  In the letter, we identify an issue – what constitutes custody of an over-the-counter derivative by a registered investment adviser (Rule 206(4)-2 of the Advisers … Continue Reading

Mutual Fund Corner: SEC’s Derivatives Concept Release – Practical Considerations for 1940 Act Counsel

OVERVIEW & THE PURPOSE OF THIS POSTING On August 31st, the Securities and Exchange Commission approved the issuance of a concept release (SEC Release No. IC-29776) entitled, the "Use of Derivatives by Investment Companies Under the Investment Company Act of 1940" (available here). According to the SEC, the release is part of a larger project … Continue Reading

Mutual Fund Corner: The SEC Concept Release On Derivatives

Can be found here. We are reading it now, so more to come soon… In the meantime, here is the SEC’s summary of what is in that release. The Securities and Exchange Commission (the "Commission") and its staff are reviewing the use of derivatives by management investment companies registered under the Investment Company Act of … Continue Reading

Mutual Fund Corner: Derivatives 1940 Act Concept Release Approved

At today’s open meeting, the SEC approved the issuance of a concept release to discuss the use of derivatives by mutual funds. Here is an outline of SEC Attorney Doug Scheidt’s summary of the contents of the release (no surprises here, but worth a look). I. Overview: Use of derivatives by funds and implications for … Continue Reading

Negative Interest Rates: What will happen to my interest rate swap?

From time to time, we get an inquiry from our friends and clients along the following lines: What will happen to payments under my fixed-for-floating interest rate swap in a negative rate environment? Well – at the risk of giving a typical "lawyerly" answer – it depends. In this posting, we will muse on this question with … Continue Reading

Mutual Fund Corner: On August 31st, SEC to Consider Whether to Issue a Concept Release On The Use of Derivatives By Mutual Funds

In an August 24th Sunshine Act Notice (available here), the SEC announced that it hold a pubic meeting on August 31st to consider, among other things,…drumroll please... whether to issue a concept release and request public comment on a wide range of issues under the Investment Company Act raised by the use of derivatives by … Continue Reading

Mutual Fund Corner: SEC Issues CME a Rule 17f-6 Letter for OTC Cleared Interest Rate Swaps

On March 24th, the SEC’s Division of Investment Management issued a no-action letter under Rule 17f-6 to the CME that will allow mutual funds to post collateral in respect of OTC centrally cleared interest rate swaps directly with their futures commission merchants. The letter provides temporary relief until July 16th, which is the date on which … Continue Reading

IOSCO Survey on Protection, Distribution and/or Transfer of Client Assets

The Technical Committee of the International Organization of Securities Commissions has absolutely outdone itself this time by publishing its Survey of Regimes for the Protection, Distribution and/or Transfer of Client Assets. In summary, this electronic treasure trove answers the basic question of – My assets are custodied in [insert jurisdiction] at [Insert type of institution: … Continue Reading

It’s FeBLAHuary

Welcome to Feblahuary. If you are reading this from a location where winter spends the summer, then you have no idea how bad it is to be this far north of the equator. If you are a Steelers fan and happen to live in Pittsburgh – aka "Ground Zero" of visibility of less than one mile … Continue Reading

An Election Reflection

In today’s New York Times, Nelson Schwartz wrote a piece entitled, "Financial Leaders Expect Shift of Power After Elections" in which he posits: A Republican victory would also shift control of the oversight and appropriations process in Congress, and lobbyists are hoping that means less money for agencies like the S.E.C. and the C.F.T.C. to … Continue Reading

Volume I, Issue I: Welcome to The Swap Report

Welcome to The Swap Report! The Swap Report was launched in September 2010 to serve the needs of the friends and clients of Reed Smith. Our goal is simple – to provide our perspective on a variety of  regulatory and transactional issues relating to derivatives. We also hope to learn from you and welcome your perspectives and … Continue Reading