Comment Letter Responding to CFTC Proposed Rules on Protection of Collateral of Counterparties to Uncleared Swaps; Treatment of Securities in a Portfolio Margining Account in a Commodity Broker Bankruptcy

MFA submitted a comment letter to the CFTC in response to its proposed rules on Protection of Collateral of Counterparties to Uncleared Swaps; Treatment of Securities in a Portfolio Margining Account in a Commodity Broker Bankruptcy. In our letter, MFA requests that the CFTC clarify that the proposed rule explicitly requires that the custody of initial margin be pursuant to a tri-party agreement. In addition, we recommend that to ensure that segregation of collateral for uncleared swap is available on commercially reasonable terms, the CFTC should: (i) provide counterparties the right to choose a qualified custodian that is unaffiliated with, and independent of, their swap dealer or major swap participant counterparty; and (ii) require that a swap dealer or major swap participant disclose to its counterparties all costs, if any, that it will charge to the counterparty for electing the use of a segregated account in advance of the decision to segregate and the selection of a custodian.

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