MFA Submits Comments to SEC Staff Explaining CFTC's LSOC Model Related to SEC Proposed Segregation Rules

MFA submitted the attached letter to staff from the Division of Trading and Markets of the SEC providing detail on the legal segregation with operational commingling ("LSOC") model that the CFTC adopted as the baseline segregation model for cleared swaps.This letter is a follow-up to MFA's February 22, 2013, letter on the SEC's proposed capital, margin and segregation rules, in which the MFA recommended that the SEC adopt LSOC as the default segregation model for cleared security-based swaps. The letter touches upon the following:

1. The general requirements of LSOC,
2. The requirements for location and naming of the LSOC accounts,
3. The information flows under LSOC,
4. The mechanics of LSOC in the event of both an FCM independent default or a customer default leading to an FCM default, and
5. The operational costs of LSOC.

Click here to view MFA letter in full.