On Monday, June 24, 2019, U.S. Securities and Exchange Commission Chairman Jay Clayton, U.S. Commodity Futures Trading Commission (“CFTC”) Chairman J. Christopher Giancarlo, and U.K. Financial Conduct Authority Chief Executive Andrew Bailey issued a joint statement (“Joint Statement”) regarding collaboration to monitor the credit derivatives markets. The Joint Statement states, in part, that: The continued pursuit of various opportunistic strategies in the credit derivatives markets, including but not limited to those that have been referred…

Derivatives & Repo Report

OCIE Issues Risk Alert on Data and Cloud Storage Practices

By Thomas Ahmadifar & Todd P. Zerega on June 13, 2019

On May 23, 2019, the Office of Compliance Inspections and Examinations (“OCIE”) of the U.S. Securities and Exchange Commission (“SEC”) issued a Risk Alert to summarize frequent mistakes and effective practices by broker-dealers and investment advisers relating to the storage of clients’ data. In particular, OCIE warned that issues relating to cloud storage arose even when firms had cybersecurity measures for their data storage because firms did not utilize the available security features.…

Derivatives & Repo Report

CFTC Begins Implementing Swap Data Roadmap; Proposes Additional Reporting Requirements

By Andrew P. Cross & Shekida Anna-Marie Smith on May 20, 2019

On April 25, 2019, the U.S. Commodity Futures Trading Commission (“CFTC”) announced its approval of a proposed rule and request for comment (“Proposed Rule”) that, if finalized, would amend swap data repository (“SDR”) regulations. The Proposed Rule also proposes to amend existing SDR reporting requirements for market participants. In sum, if adopted, the Proposed Rule will require market participants who are subject to reporting obligations under Part 45 of the CFTC Rules (“reporting…

Derivatives & Repo Report

In Anticipation of LIBOR Transition, IASB Proposes Amendments To Hedge Accounting Standards

By Andrew P. Cross, Shekida Anna-Marie Smith & Todd P. Zerega on May 15, 2019

On May 3, 2019, the International Accounting Standards Board (“IASB”) proposed amendments (“Exposure Draft”) to two accounting standards in response to concerns raised by the transition away from the London Interbank Offered Rate (“LIBOR”). Specifically, the Exposure Draft addresses International Financial Reporting Standard (“IFRS”) 9 Financial Instruments and International Accounting Standard (“IAS”) 39 Financial Instruments: Recognition and Measurement. The IASB is accepting comments on the Exposure Draft until June 17, 2019 and plans to issue…

Derivatives & Repo Report

ISDA Survey Highlights Growth in Initial Margin Collection In 2018 As Final Phases Draw Near

By Shekida Anna-Marie Smith on April 30, 2019

In April 2019, the International Swaps and Derivatives Association, Inc. (“ISDA”) published the results of its latest survey of the margin amounts collected by market participants. The publication identifies key themes derived from a 2018 survey of firms that are subject to the Prudential Regulator or U.S. Commodity & Futures Trading Commission (“CFTC”) initial margin (“IM”) requirements. In this post, we summarize themes presented in the survey summary in the context of the margin requirements.…

Derivatives & Repo Report

ISDA Publishes Guidelines for Smart Derivatives Contracts

By Kari Larsen on February 14, 2019

The International Swaps and Derivatives Association (ISDA) has published the first in a series of guidelines for what it colloquially refers to as “smart derivatives contracts” (the Guidelines).* A smart derivatives contract is a derivative that incorporates software code to automate aspects of the derivative transaction and operates on a distributed ledger, such as a blockchain. This series of papers is intended to “provide high-level guidance on the legal documentation and framework that currently governs…

Derivatives & Repo Report

FINRA (Officially) Extends Effective Date for Rule 4210 Margin Requirements to March 25, 2020

By Andrew P. Cross on February 12, 2019

FINRA has made it official. Earlier today, FINRA published Regulatory Notice 19-05, delaying TBA margin requirements until March 25, 2020. FINRA explained: FINRA is issuing this Notice to announce that FINRA is extending by an additional year, until March 25, 2020, the effective date of the margin requirements that otherwise would have become effective on March 25, 2019. As we explained in a January 29th post, the purpose of this delay is to…

Derivatives & Repo Report

2019 Priorities: Reg SHO/Short Selling

By Val Dahiya on February 1, 2019

Both the SEC and FINRA recently released their 2019 Examination priorities, (available here and here) highlighting primary areas of focus for 2019. While there are no surprises, there are some items that have a unique twist that warrant attention. In this post we provide an overview of the regulators focus on Reg SHO and short selling. Both regulators will continue to focus on aspects of Reg SHO compliance. FINRA will be focused on the…

Derivatives & Repo Report

FINRA Rule 4210 Update: New Proposed Implementation Date of March 25, 2020 for TBA Margining

By Andrew P. Cross on January 29, 2019

On January 29th, FINRA released the following statement: Financial Industry Regulatory Authority, Inc. (“FINRA”) is filing with the Securities and Exchange Commission (“SEC” or “Commission”) a proposed rule change to extend, to March 25, 2020, the implementation date of the amendments to FINRA Rule 4210 (Margin Requirements) pursuant to SR-FINRA-2015-036, other than the amendments pursuant to SR-FINRA-2015-036 that were implemented on December 15, 2016. FINRA has indicated that it will file the proposed rule…

Derivatives & Repo Report

SEC Brings First Enforcement Actions against Robo-Advisers

By Thomas Ahmadifar & Todd P. Zerega on January 23, 2019

On December 21, 2018, the U.S. Securities and Exchange Commission (“SEC”) announced enforcement actions against two robo-advisers, Wealthfront Advisors LLC (“Wealthfront”) and Hedgeable Inc. (“Hedgeable”), for making false statements about investment products and publishing misleading advertising. “Robo-advisers” are investment advisers that provide automated, software-based portfolio management services. In a press release related to these actions, the Chief of the SEC Enforcement Division’s Asset Management Unit stated that “[t]echnology is rapidly changing the way investment advisers…

Derivatives & Repo Report

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

Blog Authors

U.S. and UK Regulators Make Joint Commitment to Combat “Manufactured Credit Events” in CDS Market

OCIE Issues Risk Alert on Data and Cloud Storage Practices

CFTC Begins Implementing Swap Data Roadmap; Proposes Additional Reporting Requirements

In Anticipation of LIBOR Transition, IASB Proposes Amendments To Hedge Accounting Standards

ISDA Survey Highlights Growth in Initial Margin Collection In 2018 As Final Phases Draw Near

ISDA Publishes Guidelines for Smart Derivatives Contracts

FINRA (Officially) Extends Effective Date for Rule 4210 Margin Requirements to March 25, 2020

2019 Priorities: Reg SHO/Short Selling

FINRA Rule 4210 Update: New Proposed Implementation Date of March 25, 2020 for TBA Margining

SEC Brings First Enforcement Actions against Robo-Advisers

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