The Swap Report

Regulatory and Transactional Issues Related to Derivatives

In a decision of 9 June 2016, the German Federal Court of Justice (Bundesgerichtshof, “BGH”) has ruled that the determination of the close-out amount in a netting provision based on the German Master Agreement for Financial Derivatives Transactions (Rahmenvertrag für Finanztermingeschäfte or DRV) is not legally effective in the event of insolvency to the extent that it deviates from section 104 of the German Insolvency Code. The reasoning of the decision has now been published…
By Andrea Pincus, Paul Turner, and Sarah Kam You can find a detailed analysis in our client alert on the order Safe Harbors and Securitizations: Loan Payments in Connection with a Commercial Mortgage-Backed Securitization Protected from Clawback under the U.S. Bankruptcy Code Safe Harbors The Swap Report The U.S. Bankruptcy Court, Northern District of Illinois issued a decision of particular importance to lenders and securitization servicers facing complications from the bankruptcy of a borrower…
On, January 16, the CFTC ordered Summit Energy Services, Inc. (“Summit Energy”) to pay a $140,000 civil penalty to resolve allegations that it violated the Commodity Exchange Act (“CEA”) by failing to register as a commodity trading adviser (“CTA”) with the CFTC. You can find a detailed analysis in our client alert on the order, CFTC Penalizes Energy Company for Failing to Register as a CTA. The CFTC order is available here and a…
This post was also written by Patricia Dondanville. As 2015 is now underway, we wanted to highlight some of the potential regulatory developments from the CFTC that may arise in the new year. Overall we expect 2015 to be a year of continued CFTC implementation of the Dodd-Frank rules and related “tweaks” to those rules to address the concerns of end-users and market participants. At the end of last year, the Office of Management…
The proposed margin rules from the CFTC and the prudential regulators, when considered alongside the existing CFTC collateral segregation rules, present the potential for three different collateral segregation regimes applying to initial margin posted to a swap dealer. To compare the differences, we have created a chart of the three collateral segregation regimes, available here. The Dodd-Frank Act provided the customers of swap dealers the “right” to require segregation of initial margin for uncleared swaps,…
This afternoon, CFTC Chairman Timothy Massad announced a public meeting of the CFTC to take place on November 3, 2014 at 10:30 am (Eastern). The meeting will address the “further fine-tuning of [the CFTC] rules” with respect to commercial end-users. The meeting is scheduled to consider: clarification to the rules regarding when forward contracts with volumetric optionality should be classified as “swaps”; whether the CFTC should codify in a rule prior no-action relief with respect to the CFTC Rule 1.35 recordkeeping obligations (see…
The third installment of our ongoing series on the 2014 CFTC Reauthorization Act covers a potential change to the definition of a “financial entity”, which has been a particularly troublesome and confusing definition for end-users, and the banks that enter into swaps with them. In addition, the CFTC may be able to address the confusion through its rule making and interpretations, without the need for a legislative change. We will start with an overview of…
This post was also written by Patricia Dondanville. On September 17, 2014, at the first Open Meeting of the Commodity Futures Trading Commission chaired by Timothy Massad, the CFTC approved an important amendment to its Dodd-Frank Act rules for government-owned electric and natural gas utilities (“utility special entities,” in the parlance of the Dodd-Frank world) and their swap counterparties. The rule amendment provides a permanent regulatory fix to a serious problem for utility special…
Attention hedge funds, private equity funds, venture capital funds, and other private funds (collectively, “private funds”). This evening (September 9, 2014) , the CFTC Division of Swap Dealer and Intermediary Oversight (“DSIO”) issued CFTC Letter 14-116 providing exemptive relief (for some funds) from the general solicitation restrictions in CFTC Rule 4.7 and CFTC Rule 4.13(a)(3) to harmonize the CFTC rules with the SEC rule changes arising from the Jumpstart Our Business Startups Act (the “JOBS Act”). CFTC Letter…
This afternoon, the Federal Reserve, Federal Deposit Insurance Corp, Office of the Comptroller of the Currency, Farm Credit Administration, and the Federal Housing Finance Agency (the “Prudential Regulators”) released re-proposed rules requiring swap dealers and major swap participants* to hold margin for uncleared swaps (the “Re-Proposed Margin Rules”). The Re-Proposed Margin Rules are available here. The Federal Reserve press release on the Re-Proposed Margin Rules is available here. The Re-Proposed Margin Rules, if…