MFA submitted a letter to the Securities and Exchange Commission (SEC) on the request for inter-affiliate exception to the Treasury clearing mandate for eligible secondary market transactions.
MFA requests the Commission consider the following suggestions:
- The direct participant’s affiliated counterparty must submit all of its “other” U.S. Treasury security repo transactions for clearance and settlement (“outward-facing trade clearing condition”).
- The direct participant’s affiliated counterparty must hold, directly or indirectly, a majority ownership interest in the direct participant, or the direct participant, directly or indirectly, must hold a majority ownership interest in the counterparty, or a third party, directly or indirectly, must hold a majority ownership interest in both the direct participant and the counterparty (“common majority ownership condition”).
- The counterparty, direct participant, or their common majority owner must report its financial statements on a consolidated basis under U.S. GAAP or IFRS, and such consolidated financial statements must include the financial results of the majority-owned party or of both majority-owned parties (“accounting consolidation condition”).
- The direct participant’s affiliated counterparty must be either a bank, broker-dealer (“BD”), futures commission merchant (“FCM”), or an entity regulated as bank, BD, or FCM in its home jurisdiction (“bank/BD/FCM condition”).
