October 30, 2013
Protection of Collateral of Counterparties to Uncleared Swaps; Treatment of Securities in a Portfolio Margining Account in a Commodity Broker Bankruptcy
I support the final rule enhancing the protection of customer funds when entering into uncleared swap transactions. Today’s final rule fulfills Congress’ mandate that counterparties of swap dealers be given a choice regarding whether or not they get the protections that come from segregation of monies and collateral they post as initial margin. These are important customer protections for counterparties as they enter into customized swaps with swap dealers.
Swap dealers will be required to give each of their counterparties the choice with regard to segregation. The dealers also will have to provide the prices for the various segregation choices. Further, the dealers must give the customers at least one custodial arrangement choice not affiliated with the swap dealer’s bank.
In addition, this rule provides clarifying changes to ensure that if a counterparty chooses segregation for its funds, those funds will not be tied up in the bankruptcy of its swap dealer.
These rules are critical to protecting insurance companies, pension funds, community banks and municipal governments wishing to hedge a risk in using the customized swaps market.
Last Updated: November 4, 2013