The heads of the SEC and CFTC said Thursday they are collaborating on ways to better understand and deal with portfolio margins in the credit derivatives market.
In a joint statement, Securities and Exchange Commission Chairman Jay Clayton and Commodity Futures Trading Commission Chairman J. Christopher Giancarlo and said investors' interests may be best served by harmonizing their rules.
"The continued pursuit of various opportunistic strategies in the credit derivatives markets, including but not limited to those that have been referred to as 'manufactured credit events,' may adversely affect the integrity, confidence, and reputation of the credit derivatives markets, as well as markets more generally," the agency heads wrote. "These opportunistic strategies raise various issues under securities, derivatives, conduct and anti-fraud laws, as well as public policy concerns."
The regulators said they will explore whether portfolio margin is an area for increased harmonization and have asked their respective staffs "to work together to assess the potential for portfolio margining of uncleared swaps with security-based swaps, to consider further efficiencies in cleared swaps and security-based swaps portfolio margining, and to explore expanding portfolio margining to futures and cash equity positions."
SEC and CFTC staff members will ask for public input in the near future, they said.