Regulatory Notice 09-30

SEC Approves Rule Establishing an Interim Pilot Program on Margin Requirements for Transactions in Credit Default Swaps

Effective Date: June 3, 2009

The Securities and Exchange Commission (SEC) has approved new FINRA Rule 4240, which establishes an interim pilot program (the Interim Pilot Program) with respect to margin requirements for certain transactions in credit default swaps (CDS) and addresses related risk monitoring procedures and guidelines. The Interim Pilot Program's requirements extend to any transactions in CDS executed by a member (regardless of the type of account in which the transaction is booked), including those in which the offsetting matching hedging transactions are effected by the member in CDS contracts that are cleared through the central counterparty clearing services of the Chicago Mercantile Exchange (CME). The Interim Pilot Program expires on September 25, 2009.

The text of FINRA Rule 4240 is set forth in Attachment A.

Questions concerning this Notice should be directed to:

  • Rudolph Verra, Managing Director, Risk Oversight and Operational Regulation, at (646) 315-8811;
  • Glen Garofalo, Director, Credit Regulation, at (646) 315-8464;
  • Steve Yannolo, Principal Credit Specialist, Credit Regulation, at (646) 315-8621; or
  • Adam H. Arkel, Assistant General Counsel, Office of General Counsel, at (202) 728-6961.