CFTC Grants Order to ICE Clear Europe Ltd. Permitting Portfolio Margining of Futures and Foreign Futures Contracts
Commentary by Bob Zwirb
The CFTC issued an order granting a request from ICE Clear Europe Limited, permitting portfolio margining of futures and foreign futures contracts.
This Order amends an earlier Order dated October 15, 2012, setting forth terms and conditions under which ICE Clear Europe and its clearing members that are registered futures commission merchants may (1) commingle in an account (subject to CEA Section 4d(a) and (b), positions in futures and options, and foreign futures and foreign options, and related customer money, securities, and property); and (2) portfolio margin these futures and options, and foreign futures and foreign options, in the futures customer account.
See: Trading Places: "Swaps" Morph Into "Futures" Via a CFTC 4d Order.
See also:Petition for an Amendment to the Order by ICE Clear Europe; Amended Order: ICE Clear Europe Limited 4d(a) and (b).
Related news: Chairman Gensler and Commissioner Chilton Speak at the CFTC Roundtable on Futurization (with Zwirb Comment) (January 31, 2013); Streetwise Professor Craig Pirrong: "Back to Futurization - The Consequences of Swap-O-Phobia" (with Zwirb Comment) (February 6, 2013); Energy Metro Desk Article: "Exchange Rising" (with Lofchie Comment) (June 17, 2013).
Commentary
ICE Clear is seeking to extend the original Order of October 2012 issued by the CFTC, which was limited to energy foreign "futures," to cover interest rate and financial foreign "futures" traded on ICE Endex as well as on ICE Futures. The original Order wasn't about foreign futures, but rather about legally transforming OTC swaps that formerly were held in 30.7 accounts into futures. Last year when this trend developed, it appeared to be motivated by a desire to avoid becoming subject to the Dodd-Frank swap regime which took effect in October 2012. As ICE Clear candidly acknowledged at the time, this was about "transition[ing] certain of its cleared . . . OTC energy swap products to energy futures and options contracts." By contrast this amended order applies to products that appear to be true futures.