SIFMA AMG Submits Comments to the SEC on Capital, Margin and Segregation Requirements for SBS Dealers and MSBSPs

SIFMA's Asset Management Group ("SIFMA AMG") published the comments submitted to the SEC on proposed capital, margin and segregation requirements for security-based swap dealers ("SBS Dealers") and major security-based swap participants ("MSBSPs").

SIFMA AMG's recommendations include:

1. "SBS collateral requirements should be bilateral at the election of the non-SBS Entity counterparty. To the extent that the SEC requires SBS Dealers to collect collateral, the SEC should also require SBS Dealers to post collateral to a counterparty upon the election of such counterparty.
2. The amount of collateral that an SBS Dealer is required to collect from financial end user counterparties to protect against potential future exposure should vary based on the potential future exposure risk posed by the financial end user and the type of end user.
3. The margin amount calculation methodology in the Proposal should be substantially revised.
4. The SEC should permit the use of margin models to the greatest extent possible, including allowing all SBS counterparties to use models and permitting the use of models for both debt and equity SBS.
5. Models used to calculate margin requirements should be required to include liquidation time horizons for non-cleared SBS at a 99% confidence interval over a horizon of less than ten days.
6. The SEC should require that financial end users be able to independently verify the calculation of margin amounts.
7. A counterparty's decision to exercise its right to third-party segregation should not result in an increased capital charge to the SBS Dealer.
8. The SEC should ensure that all counterparty collateral held by an SBS dealer through the proposed "omnibus segregation" model be protected from the risk of default of other counterparties of the SBS dealer."

Click here to view letter in full (links externally to SIFMA website).Related News and Commentary: SIFMA Letter to SEC on Proposed Capital, Margin, and Segregation Rules (with Lofchie Comment) (February 22, 2013) and MFA Letter to SEC on Proposed Capital, Margin, and Segregation Rules (with Lofchie Comment) (February 22, 2013).