MFA Submits Letter to CFTC Seeking Relief from External Business Conduct Rules for Prime Brokerage

MFA submitted a letter to the Commodity Futures Trading Commission (CFTC) requesting prompt and appropriate relief from the CFTC’s final rules on “Business Conduct Standards for Swap Dealers and Major Swap Participants With Counterparties” (External Business Conduct Rules) prior to the May 1, 2013 compliance date for:

  1. all intermediated trading relationships,
  2. related to any class of products,
  3. where the swap dealer is acting in its capacity as a prime broker or intermediary, and
  4. where both the prime broker and executing dealer are swap dealers.

In the letter, MFA explained why intermediated trading is important to customers from a collateral and risk management perspective.  MFA also explained how the External Business Conduct Rules impact such trading by imposing transaction-level business conduct standards on prime brokers with which, from a practical perspective, only executing dealers are able to comply. In light of these issues, MFA requested that the CFTC provide relief in order to allow intermediated trading to continue in its current form and to prevent disruptions to market liquidity.