Tag: LEVERAGE

Swaps and Retail Commodity Transactions (Leverage, Margin or Financing: Will We Know It When We See It or Only After It Has Been Identified As Such?)

This post builds upon an idea presented in Part 4 of current series of posts on considerations for investment funds and advisers related to cryptocurrency derivatives. In particular, this post provides additional perspectives on the relationship of leverage, margin, and financing to two commodity interests: “retail commodity transactions” and a “swaps”.  We decided to present … Continue Reading

Should Asset Segregation Do Double Duty?

I’ve been discussing comments on the SEC’s proposed Rule 18f-4 in light of the SEC’s initial regulation of derivatives in Release No. IC-10666 (“Release 10666”). As explained in my first post, the objectives of the proposed rule include limiting the “speculative character” of funds that use derivatives and assuring they have sufficient assets to cover … Continue Reading

10666 and All That

[Click here for the obscure title reference.] Release No. IC-10666 (“Release 10666”), issued in 1979 under the direction of my partner Marty Lybecker, was the starting point for the SEC’s regulation of derivatives under Section 18 of the Investment Company Act. This release would provide the basis for proposed Rule 18f‑4’s regulation of “financial commitment transactions.” Many … Continue Reading

Could the Use of Derivatives Create a “Toxic Brew?”

This post continues my consideration of some conceptual questions underlying the SEC’s proposed Rule 18f-4. The following comment on the proposal caught my attention: Congress is stating [in Section 1(b) of the Investment Company Act] that there is a problem when leverage unduly increases the “speculative character” (what we now call risk) of the investments. … Continue Reading

Limitations on the Limitation of Leverage in Investment Companies

A CLE presentation gave me an excuse to read many of the comment letters regarding the SEC’s proposed Rule 18f-4, which would regulate the amount of “senior security transactions” in which an investment company could engage. I filed a personal comment letter responding to the SEC’s initial concept release in 2011. The proposed rule and … Continue Reading
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