Month: October 2009

House Financial Services Committee and House Agriculture Committee Propose Draft Derivatives Legislation

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The march towards comprehensive regulation of the over-the-counter (“OTC”) derivatives market continued over the past month with the release of discussion drafts of the Over-the-Counter Derivatives Markets Act of 2009 by each of the House Financial Services Committee on October 2nd and the House Agriculture Committee on October 9th.  The former discussion draft was approved by the House Financial Services Committee, with some amendments, on October 15, 2009 (as approved, the “Financial Services Proposal”).  An “Amendment in the nature of a substitute” to the Financial Services Proposal was then introduced and approved by the House Agriculture Committee, with some amendments, on October 21, 2009 (as approved, the “Agriculture Proposal”).[1] Although the two proposals are similar in many respects to each other and to the Obama Administration’s initially proposed legislation (the “Treasury Proposal”), which was released in August 2009, there are significant differences between them, and between each of them and the Treasury Proposal. READ MORE →

Industry Groups Announce Publication of Whitepaper on Initial Margin for Derivatives

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On October 22, 2009, the International Swaps and Derivatives Association, Inc. (“ISDA”), the Securities Industry and Financial Markets Association (“SIFMA”) and the Managed Funds Association (“MFA”) announced the publication of the “Independent Amount Whitepaper” (the “Whitepaper”).  The Whitepaper is one of the deliverables described in the derivatives industry letter to the Federal Reserve Bank of New York and certain other regulators dated June 2, 2009.  The purpose of the Whitepaper, which was produced by the ISDA Collateral Committee, is to describe the use and risks of over-collateralization and under-collateralization associated with initial margin posted by derivatives market participants, commonly referred to in ISDA-based documentation as the “Independent Amount.” READ MORE →

FASB Re-Opens for Comment Guidance on Embedded Credit Derivatives Exception

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On October 13, 2009, the Financial Accounting Standards Board (“FASB”) re-opened for comment a proposed Accounting Standards Update, Scope Exception Related to Embedded Credit Derivatives (the “Update”),[1] which is intended to clarify when companies using financial instruments with embedded credit derivatives features do not have to apply derivatives accounting rules that require separate accounting of the credit derivative from the contract in which it is embedded. READ MORE →