June 30, 2009
Questionnaire for CDS CCPs on Protection of Customer Initial Margin
This questionnaire has been prepared by an ad hoc group (comprising both buy-side and sell-side constituents)1 to more fully understand the rights of “customers” – i.e., buy-side and other market participants proposing to clear CDS transactions through clearing members (“CM”) of a central CDS counterparty (“CCP”) – to initial margin (“IM”) posted in connection with the central clearing of certain CDS transactions.
The questions are divided into two sections. The first part solicits responses to several factual matters regarding the clearing structure of the CCP, the precise means by which IM is held by the CCP and CMs (and their custodians, if applicable), and the CCP’s proposals as to segregation and portability of customer positions and initial and variation margin (and any associated contractual relationships).2 The second part solicits responses as to the legal treatment of the CCP’s proposed clearing structure. As the latter inquiry is largely dependent on the legal and contractual framework governing the CCP, the CMs and the customers (and the relationships between them), the questions in the second part should be considered under the laws of all jurisdictions relevant to the CCP (and its custodian, if applicable), the CMs (and their custodians, if applicable) and the customers. We note that although similar or identical questions are posed throughout certain portions of the questionnaire, this repetition arises from the need to consider the questions for each level at which IM is held: (i) IM held at the CCP (or the CCP’s custodian) – referred to in this questionnaire as “CCP Margin”, and (ii) IM held at a CM (or the CM’s custodian) – referred to in this questionnaire as “Dealer Margin”.
Composition and Structure of the CCP, CMs, Custodians and Customers
Structure of the CCP
1. Please describe the legal structure (e.g., entity type, jurisdiction, governing structure, etc.) of the CCP. Include references to any required licenses or registration orders obtained in connection with the establishment of the CCP.
1 This group was formed at the behest of the Federal Reserve Bank of New York, and consists of buy-side members Alliance Bernstein, Barclays Global Investors, Blue Mountain, Brevan Howard, D.E. Shaw, Goldman Sachs Asset Management, King Street and PIMCO, and sell-side members Barclays Capital, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan Chase, Morgan Stanley and UBS. ISDA, the Asset Managers Group of SIFMA, and Managed Funds Association are facilitating and observing the group’s activities.
2 If the CCP is envisioning a multi-step approach to implementation, please detail both the interim and final phases, and an approximate time frame for achievement of the latter. If customers or CMs may elect one of multiple options with respect to any aspect of the clearing structure, please describe all such options.