MFA Submits Comments to CFTC on Proposed Clearing Requirement Determination

Today, MFA submitted a comment letter to the CFTC in response to its proposed clearing requirement determination rulemaking. In the letter, MFA strongly supported the CFTC’s decision to focus on certain classes of credit default swaps (“CDS”) and interest rate swaps in its initial clearing requirement determination.  However, MFA expressed its practical implementation concerns specific to the iTraxx® Europe CDS indices (the “iTraxx class”) given the potential timing mismatch between: (i) the effective date of the clearing requirement and (ii) the availability of a customer clearing offering.  MFA made the following recommendations to the CFTC to address our concerns: (1) the CFTC should ensure that market participants are provided with a 60- to 90-day implementation period, following the date when a derivatives clearing organization makes customer clearing of the iTraxx class available, prior to the clearing requirement for the iTraxx class becoming effective; (2) the CFTC has the statutory authority to properly sequence the effectiveness of the clearing requirement for the iTraxx class after clearing has been made available to all market participants by pursuing one of several suggested options to resolve the situation; (3) the CFTC should consider the availability of customer clearing in its future clearing requirement determinations; and (4) the CFTC should coordinate with the SEC to approve pending portfolio margining petitions to address the potential Restructuring credit event complexities with the iTraxx class.