Fintech
At Joint Open Meeting, SEC and CFTC Approve Final Rule on Security Futures Margin and Request for Comment on Portfolio Margining
Washington D.C.–(Newsfile Corp. – October 22, 2020) – The Securities and Exchange Commission and the Commodity Futures Trading Commission, at their first joint open meeting to vote on rulemaking initiatives, today approved: (1) a joint final rule to harmonize the minimum margin level for security futures held in a futures account with the minimum margin level for security futures held in a securities portfolio margin account, and (2) the issuance of a joint request for comment on the portfolio margining of uncleared swaps and non-cleared security-based swaps.
The joint final rule and request for comment are two components of the Commissions’ ongoing efforts to further harmonize their regulatory regimes to better serve the markets and investors.
“Collaboration and coordination between the two Commissions are critical to achieving our shared regulatory objectives,” said SEC Chairman Jay Clayton. “I want to express my thanks to my colleagues at both the SEC and CFTC for their hard work, and I look forward to continuing to work together to improve our markets, including exploring potential opportunities for efficiencies in portfolio margining.”
“The markets the CFTC and SEC regulate are highly interconnected, so coordination is vital to regulatory effectiveness. The historic joint open meeting of our two agencies reflects our strong commitment to cooperation and harmonizing our efforts where appropriate,” said CFTC Chairman Heath P. Tarbert. “Today’s final rule represents an important example of our long history of cooperation regarding the joint regulation of security futures. I am pleased that the Commissions will continue this collaboration to examine potential ways to implement the portfolio margining of uncleared swaps and non-cleared security-based swaps.”
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FACT SHEET
Joint Final Rule: Customer Margin Rules Relating to Security Futures
October 22, 2020
Action
The joint final rule will harmonize the minimum margin level for security futures, whether they are held in a futures account, a securities portfolio margin account, or a securities account that is not approved for portfolio margining.
Highlights of the Action
The Commissions have joint rulemaking authority regarding margin requirements for security futures. In 2002, the Commissions adopted rules establishing margin levels for unhedged security futures at 20 percent. In light of the asymmetry in margin requirements resulting from the 15 percent margin level that has been established for security futures and comparable financial products held in a securities portfolio margin account, the Commissions are adopting the proposed margin requirement to set the required margin level for each long or short unhedged position in a security future at 15 percent of its current market value.
At this time, there are no security futures contracts listed for trading on U.S. exchanges. The final rule amendments, however, would set a 15 percent level for security futures if an existing exchange were to resume operations or another exchange were to launch security futures contracts.
What’s Next?
This final rule is effective 30 days after publication in the Federal Register.
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FACT SHEET
Joint Request for Comment: Portfolio Margining of Uncleared Swaps and Non-Cleared Security-based Swaps
October 22, 2020
Action
The joint request for comment seeks public input on potential ways to implement portfolio margining of uncleared swaps and non-cleared security-based swaps, including whether there are opportunities to enhance efficiencies, reduce complexity, increase consistency and add resiliency to our financial system through adjustments to our current margin rules.
Highlights of the Action
Portfolio Margining
Portfolio margining generally refers to the cross margining of related positions in a single account. Portfolio margining of uncleared swaps, non-cleared security-based swaps, and related positions can offer benefits to customers and the markets, including promoting greater efficiencies in margin calculations with respect to offsetting positions. At the same time, facilitating portfolio margining for uncleared swaps, non-cleared security-based swaps, and related positions requires careful consideration to ensure that any customer protection and applicable regulatory issues and potential impacts are appropriately considered and addressed.
Regulation of Non-Cleared Security-based Swaps and Uncleared Swaps
Under the Dodd-Frank Act, the CFTC has jurisdiction over uncleared swaps and the SEC has jurisdiction over non-cleared security-based swaps. The CFTC has adopted margin rules (including minimum standards for the safekeeping of collateral) for uncleared swaps applicable to nonbank swap dealers and the SEC has adopted margin and segregation rules applicable to nonbank security-based swap dealers. As discussed in the request for comment, the requirements of these rules differ in some ways that would be relevant to portfolio margining.
The following table summarizes some of the similarities and differences between the agencies’ margin rules:
|
Requirement |
SEC Margin Rule for Non-Cleared Security-based Swaps |
CFTC Margin Rule for Uncleared Swaps |
|
Dealer Must Collect/Post Variation Margin |
Required, unless exception |
Required, unless exception |
|
Dealer Must Collect Initial Margin |
Must collect from all counterparties, unless a counterparty, threshold or legacy exception applies |
Required collection from other swap dealers and financial end users with material swaps exposure, unless a counterparty threshold or legacy exception applies |
|
Dealer Must Post Initial Margin |
Permitted, but not required |
Required posting to other swap dealers and financial end users with material swaps exposure, unless a counterparty threshold or legacy exception applies |
|
Dealer Can Use An Approved Initial Margin Model (including an industry standard model) |
Permitted; provided Broker-dealer/SBSDs must use a standardized method for equity security-based swaps |
Permitted |
|
Initial Margin Posted to/by Dealer Must Be Held by Third-Party Custodian |
Permitted, but not required |
Required |
|
Waiver of Segregation Requirements for Initial Margin Collateral |
Permitted; provided that, if the SBSD is a broker-dealer, non-affiliated customers cannot waive segregation |
Prohibited |
|
Re-hypothecation of Initial Margin Collateral |
Permitted under limited circumstances |
Prohibited |
Specific Requests for Comment; Different Account Types
The request for comment solicits comment on various specific aspects of the margining of uncleared swaps, non-cleared security-based swaps, and related positions, including on the merits, benefits, and risks of portfolio margining these types of positions, and on any regulatory, legal, and operational issues associated with portfolio margining these various positions in different account types.
The following table, organized by account type and position type, summarizes the current margin and segregation requirements that apply and the types of positions subject to our requests for comment:
|
Account Type |
Types of Positions Subject to Request for Comment |
Current Margin Requirements for Account Type |
Current Segregation Requirements for Account Type |
|
Broker-Dealer/SBSD Securities Account: Portfolio Margin |
– Uncleared swaps – Non-cleared security-based swaps – Cash market securities positions – Listed securities options – OTC securities options – Futures – Options on futures – Security futures |
– Securities self-regulatory organization (“SRO”) portfolio margin rules |
– Possession or control of fully paid and excess margin securities and excess securities collateral (SEC Rule 15c3-3) – Reserve account for excess credits (SEC Rule 15c3‑3) – Affiliates of broker-dealer can waive segregation for non-cleared security-based swaps -Counterparties to non-cleared security-based swap transactions can elect to have individual segregation at a third-party custodian. |
|
Broker-Dealer/SBSD Securities Account: Non-Portfolio Margin |
– Uncleared swaps – Non-cleared security-based swaps – Cash market securities positions – Listed securities options – OTC securities options – Futures – Options on futures – Security futures |
– Federal Reserve Board’s Regulation T – SRO margin rules – SEC margin rules for security futures |
– Possession or control of fully paid and excess margin securities and excess securities collateral (SEC Rule 15c3-3) – Reserve account for excess credits (SEC Rule 15c3‑3) – Affiliates of broker-dealer can waive segregation for non-cleared security-based swaps -Counterparties to non-cleared security-based swap transactions can elect to have individual segregation at a third-party custodian. |
|
Broker-Dealer/SBSD Security-Based Swap Account |
– Uncleared swaps – Non-cleared security-based swaps – OTC securities options – Related collateral |
– SEC Rule 18a-3 (Margin requirements for SBSDs) -SRO margin rules (for OTC securities options) |
– Possession or control excess securities collateral (SEC Rule 15c3-3) – Reserve account for excess credits (SEC Rule 15c3‑3) – Affiliates of broker-dealer can waive segregation for non-cleared security-based swaps -Counterparties to non-cleared security-based swap transactions can elect to have individual segregation at a third-party custodian. |
|
SBSD (including SBSD/OTC derivatives dealer) Security-Based Swap Account |
– Uncleared swaps – Non-cleared security-based swaps – OTC securities options – Related collateral |
– SEC Rule 18a-3 (Margin requirements for SBSDs) – Federal Reserve Board’s Regulation U (for OTC securities options) |
– Possession or control excess securities collateral for security-based swaps (SEC Rule 18a-4) – Reserve account for excess credits for security-based swaps (SEC Rule 18a‑4) – All counterparties can waive segregation for non-cleared security-based swaps or elect individual segregation at a third party custodian. |
|
Swap Dealer Swap Account |
– Uncleared swaps – Non-cleared security-based swaps – Related collateral |
CFTC Rules 23.150 – 23.161 (Margin requirements for swap dealers) |
Initial margin must be held at an independent third-party custodian (CFTC Rule 23.157) |
What’s Next
The public comment period will remain open for 30 days following publication in the Federal Register. All comments will be posted on both the CFTC’s website and the SEC’s website.
As we close out 2024, the fintech industry continues to deliver headlines that underscore its dynamism and innovation. From IPO aspirations to groundbreaking regulatory milestones, today’s updates highlight the transformative power of fintech partnerships, regulatory evolution, and disruptive technologies. Here’s what you need to know.
Chime’s Quiet Step Toward Public Markets
Chime, the U.S.-based financial technology startup best known for its digital banking services, has taken a significant step by filing confidential paperwork for an initial public offering (IPO). As one of the most valuable private fintechs in the U.S., Chime’s move could potentially signal a renewed appetite for fintech IPOs in a market that has been cautious following fluctuating valuations across the tech sector.
With a valuation that reportedly exceeded $25 billion in its last funding round, Chime’s IPO could set a new benchmark for the industry. Observers note that its strong customer base and revenue growth may make it an appealing choice for investors seeking to capitalize on the digital banking boom. However, the timing and success of the IPO will depend on broader market conditions and the regulatory landscape.
Source: Bloomberg
ZBD’s Pioneering Achievement: EU MiCA License Approval
ZBD, a fintech company specializing in Bitcoin Lightning network solutions, has made history by becoming the first to secure an EU MiCA (Markets in Crypto-Assets Regulation) license. This landmark approval by the Dutch regulator positions ZBD at the forefront of compliant crypto-fintech operations in Europe.
MiCA, which aims to harmonize the regulatory framework for crypto-assets across the EU, has been a focal point for industry players aiming to establish legitimacy and expand their offerings. ZBD’s achievement not only validates its operational rigor but also sets a precedent for other fintech firms navigating the evolving regulatory landscape.
Industry insiders view this as a strategic advantage for ZBD as it broadens its footprint in Europe. By leveraging its regulatory approval, the company can accelerate its product deployment and establish trust with institutional and retail users alike.
Source: Coindesk, PR Newswire
The Fintech-Credit Union Synergy: A Blueprint for Innovation
The convergence of fintechs and credit unions continues to reshape the financial services ecosystem. Collaborative initiatives, such as the one highlighted in the recent partnership between fintech innovators and credit unions, are proving to be a potent force in delivering tailored financial solutions.
This “dream team” approach allows credit unions to leverage fintech’s technological expertise while maintaining their community-focused ethos. Key areas of collaboration include digital payments, personalized financial management tools, and enhanced loan processing capabilities. These partnerships not only enhance member engagement but also enable credit unions to remain competitive in an increasingly digital-first financial environment.
Industry analysts emphasize that such collaborations underscore a broader trend of traditional financial institutions embracing fintech-driven solutions to bridge service gaps and foster innovation.
Source: PYMNTS
Tackling Student Loan Debt: A Fintech’s Mission
Student loan debt remains a pressing issue for millions of Americans, and a Rochester-based fintech aims to offer relief through its cloud-based platform. This innovative solution is designed to simplify loan management and provide borrowers with actionable insights to reduce their debt burden.
The platform’s features include repayment optimization tools, personalized financial education, and seamless integration with loan servicers. By addressing the complexities of student loan management, this fintech is empowering borrowers to make informed decisions and achieve financial stability.
As the student loan crisis continues to evolve, solutions like this highlight the critical role fintech can play in addressing systemic financial challenges while fostering financial literacy and inclusion.
Source: RBJ
Industry Implications and Takeaways
Today’s updates underscore several key themes shaping the fintech landscape:
- Regulatory Milestones: ZBD’s MiCA license approval exemplifies the importance of regulatory compliance in unlocking growth opportunities.
- Strategic Partnerships: The collaboration between fintechs and credit unions demonstrates the value of combining technological innovation with traditional financial models to drive customer-centric solutions.
- Market Opportunities: Chime’s IPO move reflects a potential revival in fintech public offerings, signaling confidence in the sector’s long-term prospects.
- Social Impact: Fintech’s ability to tackle systemic issues, such as student loan debt, showcases its role as a force for positive change.
The post Fintech Pulse: Your Daily Industry Brief (Chime, ZBD, MiCA) appeared first on News, Events, Advertising Options.
Leading global payments platform SPAYZ.io has confirmed it will be attending iFX EXPO Dubai 2025 on 14 to 16 January. Exhibiting at Stand 64 at Trade Centre Dubai, SPAYZ.io’s team of professionals will be on hand providing live demonstrations of its renowned payment services for payment providers. Attendees will also receive exclusive insight into SPAYZ.io’s plans for 2025 alongside early early access to its upcoming plans for the new year.
SPAYZ.io delivers a host of payment solutions that leverage the latest technological innovations and open access to the fastest growing emerging markets across Africa, Europe and Asia. Over the past year, there has been huge demand for its Open Banking and local payment method services, alongside bank transfers, mass payouts, online banking and e-wallets.
Yana Thakurta, Head of Business Development at SPAYZ.io commented: “We look forward to once again participating at iFX Dubai to expand our network of partners and clients. It’s a fantastic way to kick off the year, connecting with thousands of industry leaders from FOREX platforms to trading companies, and everything in between.
“Our key goal for iFX Dubai EXPO 2025 is to expand our portfolio of solutions and geographies. We’re using this as an opportunity to partner with like-minded entities who share our ambition to provide payment solutions that are truly global.”
Come meet SPAYZ.io’s team at the Trade Centre Dubai at Stand 64. You can also book a meeting slot with a member of a team.
The post SPAYZ.io prepares for iFX EXPO Dubai 2025 appeared first on News, Events, Advertising Options.
Airtm, the most connected digital dollar account in the world, is proud to announce the addition of two distinguished industry leaders to its Board of Directors: Rafael de la Vega, Global SVP of Partnerships at Auctane, and Shivani Siroya, CEO & Founder of Tala. These appointments reflect Airtm’s commitment to innovation and financial inclusion as the company enters its next phase of growth.
“We are thrilled to welcome Rafael and Shivani to Airtm’s Board of Directors,” said Ruben Galindo Steckel, Co-founder and CEO of Airtm. “Their unique perspectives and proven track records will be invaluable as we continue scaling our platform to empower individuals and businesses in emerging markets. Together, we’ll push the boundaries of financial inclusion and innovation to create a more connected and equitable global economy. Rafael and Shivani bring a wealth of experience and strategic insight that will strengthen Airtm’s mission to connect emerging economies with the global market.”
Rafael de la Vega, a seasoned leader in fintech global partnerships and technology innovation, is currently the Global SVP of Partnerships at Auctane. With a proven track record of delivering scalable, impactful solutions at the intersection of fintech, innovation, and commerce, Rafael’s expertise will be pivotal as Airtm continues to grow. “Airtm has built a platform that breaks down barriers and opens up opportunities for people in emerging economies to connect to global markets. I am excited to contribute to its growth and help further its mission of fostering financial inclusion on a global scale,” said Rafael.
Shivani Siroya, CEO and Founder of Tala, is a pioneer in financial technology, renowned for empowering underserved communities through access to credit and essential financial tools. Her leadership in leveraging data-driven innovation aligns seamlessly with Airtm’s vision of creating more equitable financial opportunities. “Empowering underserved communities has always been at the core of my work, and Airtm’s mission resonates deeply with me. I’m thrilled to join the Board and work alongside such a dynamic team to expand access to financial tools that truly make a difference in people’s lives,” said Shivani.
The post Airtm Enhances Its Board of Directors with Two Strategic Appointments appeared first on News, Events, Advertising Options.
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