ISDA Publishes List of Steps Required to Get Ready for the March 1, 2017 Variation Margin Deadline

The International Swaps and Derivatives Association (“ISDA”) has published a very useful 2-page checklist of steps that should be taken in order to get ready for the March 1, 2017 Variation Margin deadline.  In summary, ISDA has identified four steps: Continue Reading

Don’t Forget March 1, 2017: Amending Trading Documentation to Account for New Non-Cleared Swap Margin Requirements

Many buy-side market participants are in the process of grappling with issues related to the amendment of their derivatives trading documentation in order to account for new U.S. margin requirements that will apply to non-cleared swaps beginning on March 1, 2017 (the “Implementation Date”).  But, in our experience, a large number of market participants have not yet begun to consider how they are going to implement the required changes despite the fact that the Implementation Date is only a little over three months away.  In this posting, we offer a few thoughts on a protocol that was recently published by the International Swaps and Derivatives Association (“ISDA”) to facilitate amendments to ISDA Master Agreements and related Credit Support Annexes that account for the new non-cleared swap margin rules recently enacted by U.S. regulators. Continue Reading

Buy-Side Reminder: Electronic Filing of CFTC Form 40 Begins at Midnight on November 18th

On your list of things for which to be thankful, remember to add “the ability to electronically file a CFTC Form 40 / 40S”.

Here is a very courteous reminder from the CFTC’s Division of Market Oversight that the new era of submitting electronic Form 40 is about to begin.

In case some readers do not know, the CFTC conducts market surveillance activities under what it refers to as a “Large Trader Reporting Program“.  As part of that program, the CFTC monitors when the level of derivatives trading by an individual market participant (like an investment adviser and the funds or accounts under their control) exceeds a certain specified level.  For example, CFTC Rule 15.03 designates different reporting levels for different types of futures contracts.   Once a reporting level is crossed, the CFTC will send a notice to the “large trader” that it must complete and submit what is known as a CFTC Form 40 (for futures contracts) or a CFTC Form 40S (for swaps).

Prior to midnight Eastern on November 18, 2016, this form could be submitted in paper form – ah, the good old days.  But, in less than 6 hours, the form will need to be submitted electronically.  Many market participants have already submitted a Form 40 electronically, well in advance of this evening’s deadline.  Nevertheless, the good old days are about to come to an end and we are certain that there are some market participants who are unaware of this change.

Not to worry, as Billy Joel said, “I guess the good old days were not so good and tomorrow ain’t as bad as it seems.”

Good day. Good e-filing of Forms 40/40S. DR2


FRBNY’s Proposes Benchmark Repo Rates

On Friday, the Federal Reserve Bank of New York (FRBNY) announced that it, together with the Treasury Department’s Office of Financial Research (OFR), is considering publishing three benchmark rates for repurchase agreement (repo) transactions collateralized by Treasury securities (Benchmark Rates).  Continue Reading

Quick Guide to New Form ADV Derivative and Borrowings Disclosure

The SEC has finalized a rule requiring registered advisers to report certain information related to the use of derivatives and borrowings in separately managed accounts (“SMAs”).  The release can be found here (the “Release”).  This posts seeks to provide advisers with a quick snap shot of the information they will need to collect and disclose.  The compliance date is October 1, 2017. Continue Reading

Cryptocurrency Platform Provider Seeks No-Action Relief from CFTC: Two Observations

On October 18th, a cryptocurrency platform provider (Poloniex, Inc.) issued a press release announcing that it filed a request for no-action relief with the Commodity Futures Trading Commission (the “CFTC”) seeking request with respect to the CFTC’s laws as they relate to margin and lending transactions.  To our knowledge, this is first time that a cryptocurrency platform provider has publicized the submission of such a request and, for that reason alone, the development is noteworthy.  A detailed review of the request or underlying law is beyond the scope of this posting.  Rather, in this posting we focus on what we consider to be two practical and fundamental observations regarding the potential scope of any hypothetical relief granted in response to such request.   Continue Reading

ETF Corner: SEC Requests Comment on listing of Bitcoin ETF

On October 12, 2016 the Securities and Exchange Commission (“SEC”) issued an order instituting proceedings to determine whether or not to approve or disapprove a proposed rule change filed by Bats BZX Exchange, Inc. (“Exchange”) that would permit Winklevoss Bitcoin Shares (“Shares”) issued by the Winklevoss Bitcoin Trust (“Trust”) to be listed and traded on the Exchange.  The SEC is instituting proceedings “in the view of the legal and policy issues raised by the proposed rule change” and stated that such proceedings “does not indicate that the Commission [SEC] has reached any conclusions with respect to any of the issues involved.”  As further noted below the SEC is encouraging “interested persons to provide comments on the proposed rule change.” Continue Reading

Attention Energy Traders: CFTC Focuses on Verification of Position Limit Exemptions for Hedging and Risk Management Transactions

Compliance and trading professionals of firms that trade energy derivatives over NYMEX and COMEX should be aware of a recent development related to hedging, risk management, and arbitrage/spread position exemptions from position limits under Rule 559 (Position Limits and Exemptions). Continue Reading