The Fed’s Repo Rates Are Here

On April 3, 2018 the Federal Reserve Bank of New York (“Fed”) started publishing its three repo rates: the Secured Overnight Financing Rate (SOFR), the Broad General Collateral Rate (BGCR) and the Tri-Party General Collateral Rate (TGCR). For an overview of differences between the composition of each of the rates please refer to our prior post.

Previously, in March, the Fed released “a time series of the volume-weighted mean rate of the primary dealer’s overnight Treasury general collateral repo activity. . .” which it calculated from its surveys of the primary dealers. The Fed also released indicative historical rates for the SOFR rate going back to August 2014. It also indicated it was going to investigate providing a longer historical period for the SOFR rate. The historical data appears to be a response to comments received during the request for comment phase where three commenters requested historical data for SOFR in order to assist market participants in structuring margin requirements on derivative instruments that reference SOFR and assist in comparisons to other benchmarks. Continue Reading

SEC Requests Comment on Bitcoin Futures ETFs

On March 23, 2018, the U.S. Securities and Exchange Commission (“SEC”) issued an order instituting proceedings to determine whether it will approve or disapprove a proposal for Bitcoin futures exchange-traded funds (“ETFs”) (the “Order”).  In December 2017, NYSE Arca, Inc. filed a rule change proposal to allow for the creation of ETFs that invest in Bitcoin futures contracts and potentially other Bitcoin related investments.  In January 2018, the SEC extended its review of the proposal, and with the Order, it now has instituted formal review proceedings and is seeking public comment.  Continue Reading

Understanding Cryptocurrencies in Asset Management Forum held in New York, materials now available

On January 18th, Perkins Coie LLP held a forum entitled Understanding Cryptocurrencies in Asset Management in its New York office.  This forum covered how cryptocurrencies and blockchain technology are affecting the asset management industry with specifics on:

  • Investing in Bitcoin futures and other crypto-derivatives
  • Emerging crypto indices
  • Overview of product development including Bitcoin ETFs and cryptocurrencies as an asset class
  • The use of Distributed Ledger Technology (DLT) in processing and trading of securities and derivatives

Speakers included Andrew Cross, Partner, Perkins Coie, Todd Zerega, Partner, Perkins Coie and Dana Syracuse, Counsel, Perkins Coie.

The presentation is now available here. For further information, please contact one of the speakers.

CFTC Virtual Currency Proposed Interpretation – Part 2

By Andrew P. Cross, Laurie Rosini, and Thomas Ahmadifar

On December 15, 2017, the U.S. Commodity Futures Trading Commission (the “CFTC”) issued a proposed interpretation of the term “actual delivery” as used in the provision of the Commodity Exchange Act (the “CEA”) that grants the CFTC explicit authority to oversee the marketplace for “retail commodity transactions.”  This is the second blog posting in a multi-part series (read Part 1 here) that will explore the regulation of retail commodity transactions and the CFTC’s recent proposed interpretation (the “Proposed Interpretation”), the issuance of which we believe represents a potentially significant milestone in the regulation of virtual currency transactions.  We continue our series with an examination of the Proposed Interpretation and its examples for what may constitute “actual delivery” of virtual currency.

Retail Commodity Transactions under Section 2(c)(2)(D)

As we explain in greater detail in Part 1, the CFTC has exclusive jurisdiction over the marketplace for “retail commodity transactions,” arrangements that Section 2(c)(2)(D) of the CEA describes as an agreement, contract, or transaction that is offered or entered into by a party:

  • On a leveraged or margined basis, or financed by the offeror, the counterparty, or a person acting in concert with the offeror or counterparty on a similar basis; and
  • To or with persons who do not qualify as either an eligible contract participant (“ECP”) or an eligible commercial entity (“ECE”).

Continue Reading

Retail Commodity Transactions Involving Virtual Currencies: An Overview of the CFTC’s Proposed Interpretation (Part 1)

On December 15, 2017, the U.S. Commodity Futures Trading Commission (the “CFTC”) issued a proposed interpretation of the term “actual delivery” as used in the provision of the Commodity Exchange Act (the “CEA”) that grants the CFTC explicit authority to oversee the marketplace for “retail commodity transactions”.  This is the first blog posting in a multi-part series that will explore the regulation of retail commodity transactions and the CFTC’s recent proposed interpretation (the “Proposed Interpretation”), the issuance of which we believe has represents a potentially significant milestone in the regulation of virtual currency transactions.  We begin our series with a brief look at the history and background of the regulation of retail commodity transactions. Continue Reading

CBOE and CME Self-Certify Bitcoin Futures, Cantor Self-Certifies Bitcoin Binary Options and NFA Issues Investor Alert

It was a busy morning at the intersection of derivatives and virtual currencies.  Here is an overview of what happened and some thoughts about what it means for the world of virtual currencies. Continue Reading

CFTC Commissioner Quintenz Addresses ISDA’s Unlocking Value in Derivatives Markets Conference in London

Earlier today, CFTC Commissioner Brian Quintenz spoke at a conference hosted by ISDA in London.  His remarks focused on the central theme of  that conference – the power of technology to transform financial markets.  In this posting, we will provide highlights from Commissioner Quintenz’s speech, as we believe that this speech addresses several key concepts related to FinTech initiatives in the derivatives markets. Continue Reading

Tri-Party Repo Data: October 2017

The Federal Reserve Bank of New York (FRBNY) released the monthly statistics of the U.S. tri-party repo market for October 2017.

Tri-party repo statistics are available on a consolidated basis through the FRBNY’s tri-party repo interactive tool (available here) and master excel data file (current version here and click on Downloads).  Continue Reading

Attention Non-Swap Dealer Banks – CFTC Commissioner Quintenz Advocates for Changes to De Minimis and IDI Exception from Swap Dealer Regulation

In a speech yesterday for the Mercatus Center at George Mason University and the Institute for Financial Markets,  CFTC Commissioner Brian Quintenz advocated for: Continue Reading

Buy Side Overview of Fed Reserve Rule Restricting Certain Contractual Default Rights Under Repo, Securities Lending and Derivative Contracts

The Board of Governors of the Federal Reserve System (Fed Reserve) recently issued a final rule entitled “Restrictions on Qualified Financial Contracts of Systemically Important U.S. Banking Organizations and U.S. Operations of Systemically Important Foreign Banking Organizations; Revisions to the Definition of Qualifying Master Netting Agreement and Related Definitions” (hereafter the “Final Rule” and available here.  The Final Rule would impose restrictions on contractual certain default  (and cross default) rights contained in certain repo, derivative and securities lending agreements.  Continue Reading

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