MFA Submits Comments to SEC on Portfolio Margining Exemptive Order

MFA submitted a comment letter to the Securities and Exchange Commission (SEC) in response to its “Order Granting Conditional Exemptions Under the Securities and Exchange Act of 1934 in Connection With Portfolio Margining of Swaps and Security-Based Swaps.”  In the letter, MFA applauds the SEC’s timing in issuing the Order, given that broad-based index credit default swaps are required to be cleared imminently by the first category of market participants under the clearing mandate of the Commodity Futures Trading Commission (CFTC).  However,  MFA is very concerned with the unnecessary timing uncertainties and unintended market consequences that would result from the implementation of one of the conditions in the SEC’s Order that requires the SEC and the Financial Industry Regulatory Authority (FINRA) to review and approve each individual margin methodology of each petitioning registered broker-dealer and futures commission merchant (BD/FCM).  To address these concerns, MFA recommends that the SEC should provide expedited, temporary approval under its Order of all BD/FCMs’ margin methodology submissions prior to the first CFTC clearing compliance date of March 11, 2013 that demonstrate compliance with regulator-approved margin methodologies of registered clearing agencies and derivatives clearing organizations.