Derivatives & Repo Report

A Buy-Side Guide to Regulatory and Transactional Issues Related To Derivatives and Repurchase Agreements

On November 6, 2018, the U.S. Securities and Exchange Commission (“SEC”) brought an enforcement action against a (formerly) registered investment adviser (“Adviser”), for failing to meet its diligence and compliance responsibilities under the Investment Advisers Act (“IAA”) relating to certain repurchase agreement (“repos”) facilities it offered to its clients. The Adviser offered nine repo facilities involving loans guaranteed by various government entities.  Under an agreement with First Farmers Financial (“FFF”), FFF purportedly pledged loans guaranteed…
On October 31st, the CFTC’s Office of the Chief Economist (the “OCE”) issued a report about “Phase 5” of the uncleared margin rules (“UMR”) that are slated to go into effect on September 1, 2020.  The purpose of the report was “to guide regulators in their responses to industry requests for relief” from the scheduled application of Phase 5. This post will provide an overview of the main conclusions of the report.  Any potential implementation…
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 these comments separate from the current multi-part series on cryptocurrency derivatives, since the topic may appeal to a broader audience…
This post is the fourth in a series that outlines key considerations for investment funds and their advisers regarding the application of the U.S. commodity laws to cryptocurrency derivatives.  This post is intended to be a primer on the topic and is not legal advice.  You should consult with your counsel regarding the application of the U.S. Commodity laws to your particular facts and circumstances. In this Part 4, we discuss the commodity interests that…
This post is the third in a series that outlines key considerations for investment funds and their advisers regarding the application of the U.S. commodity laws to cryptocurrency derivatives. This post is intended to be a primer on the topic and is not legal advice. You should consult with your counsel regarding the application of the U.S. commodity laws to your particular facts and circumstances. In Part 1, we focused on the status of…
This post is the second in a series that outlines key considerations for investment funds and their advisers regarding the application of the U.S. commodity laws to cryptocurrency derivatives. This posting is intended to be a primer on the topic and is not legal advice. You should consult with your counsel regarding the application of the U.S. commodity laws to your particular facts and circumstances. In Part 1, we focused on the status of…
In this multi-part posting, we outline key considerations for investment funds and their advisers regarding the application of the U.S commodity laws to cryptocurrency derivatives.  This posting is intended to be a primer on the topic and is not legal advice.  You should consult with your counsel regarding the application of the U.S. commodity laws to your particular facts and circumstances. First, a few words about our use of the word “cryptocurrency”… In this series…
For those of you who have been following along thus far, the U.S. Securities and Exchange Commission (“SEC”) and the SEC’s Division of Trading and Markets (“SEC Staff”) have been wrestling since December 2017 with whether to approve or disapprove exchange-traded funds (“ETFs”) that invest in bitcoin futures contracts.  On August 22, 2018, the SEC Staff decided to reject three proposals that included a total of nine bitcoin futures ETFs, possibly.  Just one day later,…
Last month, on July 10, 2018, the Office of Financial Research (“OFR”), an agency of the U.S. Department of the Treasury, proposed a new rule that would require collection of data with respect to centrally cleared repurchase agreement transactions (“repos”) (the “Proposed Rule”).  The proposal stems from a multi-year effort by the Financial Stability Oversight Council (“FSOC”) to expand and make permanent the collection of repo data. The Proposed Rule seeks to enhance the ability…
On July 26, 2018, the U.S. Securities and Exchange Commission (“SEC” or “Commission”) issued an order disapproving a proposed rule change that would have allowed for a bitcoin exchange-traded product (“ETP”) (the “Order”).  However, the Order was not unanimous amongst the SEC’s Commissioners.  Commissioner Hester M. Peirce issued a stand-alone dissent against the Order, arguing that the SEC mischaracterized their worries with the ETP and that the Commission was teetering on stifling the innovation of…