MFA Submits Coalition Follow-up Letter to SEC on CDS Portfolio Margin Concerns

On December 27, MFA, the American Council of Life Insurers (ACLI), and the Alternative Investment Management Association (AIMA) (collectively, the “Associations”) submitted a joint follow-up letter to SEC Chair White to request the SEC to address buy-side concerns with the Staff’s requirements for a customer margin regime for the cleared credit default swaps (CDS) portfolio margin program that the Associations believe will increase risk and impose undue costs on the buy-side.  Upon expiry of the temporary customer initial margin regime as of January 31, 2014, the Staff will require each clearing member of ICE Clear Credit to have its own individual customer margin methodology, with exposure calculated at a rate materially higher than that applied to dealers, rather than applying on a permanent basis the clearing agency margin plus any add-on by the registered broker-dealer/futures commission merchant to address individual counterparty credit risk.  The Associations requested that the SEC facilitate voluntary clearing of single-name CDS by making permanent the initial margin regime currently in place.

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