MFA and SIFMA AMG Raise Concerns with the CFTC Supplemental Notice on Bankruptcy Regulations

On October 26, 2020, MFA and SIFMA AMG submitted comments to the CFTC urging it withdraw its “supplemental proposal” to its proposed part 190 bankruptcy rules. The supplemental proposal introduces a conceptual “springing provision” that would include a stay period following an order for relief for a systemically important DCO. The Associations are deeply concerned that the CFTC’s proposed stay, which would freeze the transfer of initial and variation margin, could fall consecutively with a stay under Title II Resolution Authority resulting in a potential stay of 5 or 6 calendar days. Such a scenario would expose market participants to multiple days of non-payment and significantly increase systemic risk during the stay period.

The Associations believe the CFTC should withdraw its supplemental proposal to the part 190 bankruptcy regulations.