In other FinTech news, CFTC offers swaps data reporting relief, and ISDA and IHS Markit launch a new protocol.
JPMorgan Provides Trade Processing, Settlement and Recs Services
Investment banking giant JPMorgan is supporting Fannie Mae’s mortgage-backed securities (MBS) holdings via the firm’s custody and fund services platform, bank officials say.
JPMorgan officials say the bank has “successfully transitioned” for safe-keeping and settlement services for collateral backing Fannie Mae-issued MBS held in their Collateral Trust Portfolios.
“This was a true collaboration between our business and the Fannie Mae team,” says Teresa Heitsenrether, global head of custody and fund services at JPMorgan, in a statement.
“The transition of Fannie Mae’s MBS securities holdings to JPMorgan’s technology and operational infrastructure is one of the largest ever in size and scope — measured by the 500,000 securities positions that the firm now services,” according to the bank. The securities servicing relationship spans trade processing and settlement, asset servicing, reconciliation and reporting.
Using JPMorgan “allows us to streamline operations, retire legacy technology, and move the support for these securities to a firm that is well suited to handle large volumes of transactions,” says Kevin Autrey, vice president for capital markets operations at Fannie Mae, in a statement.
CFTC Issues Swap Data Reporting Relief for Australia, Canada, the EU, Japan & Switzerland
The CFTC Division of Market Oversight (Division) has just issued a time-limited no-action letter “that extends relief provided to certain CFTC-registered swap dealers (SD) and major swap participants (MSP) in CFTC Letter No. 15-61,” according to the regulator.
The no-action letter means that the division and the regulator will not take an enforcement action “against a non-U.S. SD or a non-U.S. MSP established in Australia, Canada, the European Union, Japan or Switzerland … for failure to comply with the swap data reporting requirements of Part 45 and Part 46 of the CFTC’s regulations (SDR Reporting Rules), with respect to its swaps with non-U.S. counterparties that are not guaranteed affiliates, or conduit affiliates, of a U.S. person,” according to the regulator.
The firms covered by the no-action letter stipulates that the SDs and MSPs “must not be part of an affiliated group in which the ultimate parent entity is a U.S. SD, U.S. MSP, U.S. bank, U.S. financial holding company, or U.S. bank holding company,” officials say.
The relief expires on the earlier of “(a) 30 days following the issuance of a comparability determination by the CFTC with respect to the SDR Reporting Rules for the jurisdiction in which the non-U.S. SD or non-U.S. MSP is established or (b) December 1, 2017,” CFTC officials say.
ISDA & IHS Markit Launch Variation Margin Protocol
The International Swaps and Derivatives Association (ISDA) and vendor IHS Markit have launched the ISDA 2016 Variation Margin Protocol on ISDA Amend “to automate the process for amending existing collateral documents or setting up new agreements in order to comply with new variation margin requirements,” officials say. The protocol will take effect on March 1, 2017
“The ISDA Amend platform enables counterparties to electronically share specially designed questionnaires through a centralized online platform, removing the need for bilateral negotiations,” according to ISDA officials. “Counterparties can make elections under the protocol, including which regulatory regimes apply and which method they will use to make the required changes to their documentation. ISDA Amend also automates the reconciliation of those questionnaires between counterparties.”
The protocol addresses “the multijurisdictional compliance challenges of the non-cleared margin rules,” says Darren Thomas, managing director and head of counterparty manager at IHS Markit, in a statement. “We have closely partnered with ISDA and its working groups to develop a rules-based, electronic solution that supports the major margin regulatory regimes and helps the broader industry meet margin requirements within a compressed time frame.”
The protocol covers margin rules for non-cleared derivatives issued by the U.S., the European Union, Japan and Canada, officials say. “ISDA Amend is a free service for buy-side firms and corporates. Over 8,000 buy-side firms and corporates, representing over 65,000 legal entities, are currently subscribed to the service,” officials add.
The Protocol gives participants three alternative methods for amending existing collateral documentation or setting up new agreements:
- Amend: Firms apply the necessary changes to existing credit support annexes (CSAs);
- Replicate and Amend: Users replicate existing CSAs and make the necessary changes to agreements for new trades only;
- Or New Credit Support Annex (CSA): Market participants can put in place a new CSA with limited standardized terms and, if needed, a new ISDA Master Agreement.
The new protocol, published on August 16, was “supplemented with terms to meet European Union rules on November 17,” ISDA officials say. The text of the protocol, guidance on the mechanics, and a link for adherence are available on the Protocol Management section of ISDA’s website. In addition, ISDA and IHS Markit will host “an informational webinar that will outline the new ISDA Amend functionality for the Protocol on Thursday, December 1 at 10am EST. Registration is now open.
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