US SEC refreshes derivatives analysis
03 November 2016 Washington DC
Image: Shutterstock
US Securities and Exchange Commission (SEC) has released fresh analysis on the likely effects of its proposed rule on the use of derivatives by registered funds and business development companies.
The new information offers an update to the regulation of derivatives transactions by registered investment companies, including mutual funds, exchange-traded funds and closed-end funds.
The proposed rule would limit funds’ use of derivatives and require them to put risk management measures in place, which would result in better investor protections.
In a statement on the analysis, the SEC said: “The analysis will be informative for evaluating comments on the proposed rule that suggests its portfolio limitations should be based on risk-adjusted gross notional exposure, and that its asset segregation requirement should permit certain liquid assets other than cash or cash equivalents to be segregated against a fund’s derivatives exposures, subject to appropriate haircuts.”
According to the SEC, commenters suggested using risk-adjustment and haircut schedules that were originally developed for other regulatory purposes.
The analysis evaluates the internal consistency of these schedules across asset classes and categories for purposes of risk-adjustment and risk-weighting with respect to the rule.
The new information offers an update to the regulation of derivatives transactions by registered investment companies, including mutual funds, exchange-traded funds and closed-end funds.
The proposed rule would limit funds’ use of derivatives and require them to put risk management measures in place, which would result in better investor protections.
In a statement on the analysis, the SEC said: “The analysis will be informative for evaluating comments on the proposed rule that suggests its portfolio limitations should be based on risk-adjusted gross notional exposure, and that its asset segregation requirement should permit certain liquid assets other than cash or cash equivalents to be segregated against a fund’s derivatives exposures, subject to appropriate haircuts.”
According to the SEC, commenters suggested using risk-adjustment and haircut schedules that were originally developed for other regulatory purposes.
The analysis evaluates the internal consistency of these schedules across asset classes and categories for purposes of risk-adjustment and risk-weighting with respect to the rule.
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