Proposals Relating to the Protection of Cleared Swaps Customer Contracts & Collateral

The Asset Management Group (AMG) of SIFMA provides comments to the Commodity Futures Trading Commission (CFTC) on proposals related to the protection of cleared swaps customer contracts and collateral; and conforming amendments to the commodity broker bankruptcy provisions, RIN 3038–AC99.

SIFMA AMG advocates that the CFTC should not use the treatment of customer collateral in the cleared futures contracts context as a benchmark for collateral treatment of cleared swaps.  These two markets are substantially different and should be treated as such.  In light of these differences, SIFMA AMG feels that the CFTC should adopt the Complete Legal Segregation Model which solves several problems associated with other collateral segregation methodologies; namely, minimizing fellow customer risks, portability of positions from an insolvent Futures Commission Merchant (FCM) to a solvent FCM in an FCM default, and lower costs.  SIFMA AMG also recommends that the CFTC enforce measures to ensure Derivative Clearing Organizations (DCOs) maintain proper and timely records to protect the interests of cleared swaps customers.