![]() |
Code of Federal Regulations (Last Updated: July 5, 2024) |
![]() |
Title 17 - Commodity and Securities Exchanges |
![]() |
Chapter I - Commodity Futures Trading Commission |
![]() |
Part 23 - Swap Dealers and Major Swap Participants |
![]() |
Subpart E - Capital and Margin Requirements for Swap Dealers and Major Swap Participants |
§ 23.157 - Custodial arrangements.
-
§ 23.157 Custodial arrangements.
(a) Initial margin posted by covered swap entities. Each covered swap entity that posts initial margin with respect to an uncleared swap shall require that all funds or other property that the covered swap entity provides as initial margin be held by one or more custodians that are not the covered swap entity, the counterparty, or margin affiliates of the covered swap entity or the counterparty.
(b) Initial margin collected by covered swap entities. Each covered swap entity that collects initial margin required by § 23.152 with respect to an uncleared swap shall require that such initial margin be held by one or more custodians that are not the covered swap entity, the counterparty, or margin affiliates of the covered swap entity or the counterparty.
(c) Custodial agreement. Each covered swap entity shall enter into an agreement with each custodian that holds funds pursuant to paragraphs (a) or (b) of this section that:
(1) Prohibits the custodian from rehypothecating, repledging, reusing, or otherwise transferring (through securities lending, securities borrowing, repurchase agreement, reverse repurchase agreement or other means) the collateral held by the custodian except that cash collateral may be held in a general deposit account with the custodian if the funds in the account are used to purchase an asset described in § 23.156(a)(1)(ivii) through (xiix), such asset is held in compliance with this section, and such purchase takes place within a time period reasonably necessary to consummate such purchase after the cash collateral is posted as initial margin; and
(2) Is a legal, valid, binding, and enforceable agreement under the laws of all relevant jurisdictions including in the event of bankruptcy, insolvency, or a similar proceeding.
(3) Notwithstanding paragraph (c)(1) of this section, a custody agreement may permit the posting party to substitute or direct any reinvestment of posted collateral held by the custodian, provided that, with respect to collateral posted or collected pursuant to § 23.152, the agreement requires the posting party, when it substitutes or directs the reinvestment of posted collateral held by the custodian.
[81 FR 695, Jan. 6, 2016, as amended at 85 FR 27678, May 11, 2020]