The Financial Industry Regulatory Authority has proposed a pilot program for the margining of credit default swaps (CDS) by registered brokerage firms, the regulator said Wednesday.
FINRA explains that historically CDS trades have not been transacted by broker-dealers themselves, but, rather, in affiliated entities. It is expected that with the creation of CDS central counterparties, an increasing volume of CDS transactions may be handled through broker-dealers.
FINRA says its proposal recognizes this possible development and seeks comment on whether the potential risk to the broker-dealer channel makes sense as part of an endeavor to create greater systemic stability. The rule proposal also requires that a firm notify FINRA of participation in the CDS central counterparty trading prior to undertaking such activity.
The proposal has been filed with the U.S. Securities and Exchange Commission, with a request for accelerated approval. It would expire on Sept. 25 — the same day that the SEC’s temporary rules providing for the establishment of central counterparties for CDS transactions expire.
IE
FINRA proposes pilot program for margining credit default swaps
Program would apply to proposed central counterparty for CDS trades
- By: James Langton
- March 18, 2009 March 18, 2009
- 10:46