Portfolio margining of cleared credit default swaps

Michael M. Philipp (Partner at Morgan, Lewis & Bockius LLP, Chicago, Illinois, USA)
Ignacio A. Sandoval (Associate at Morgan, Lewis & Bockius LLP, Washington, District of Columbia, USA)

Journal of Investment Compliance

ISSN: 1528-5812

Publication date: 28 June 2013



The purpose of this paper is to describe the separate but related relief issued by the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) that permits the commingling and portfolio margining of centrally cleared credit default swap (CDS) positions held in customer accounts.


The paper provides a brief overview of the bifurcated approach taken to the regulation of CDS; explains the benefits of portfolio margining and the need for portfolio margining relief; and provides an overview of the relief provided by the SEC and CFTC.


The relief provided by the SEC and CFTC may contribute to the efficient use and allocation of capital by market participants; however, the SEC's and CFTC's orders are limited in scope only to CDS products, and the viability of the relief for CDS products will depend upon SEC approval of the margin methodology used by brokers to set margin levels for their customers.


The paper provides practical insights into first of its kind regulatory relief permitting commingling and portfolio margining of centrally cleared derivatives for customer accounts and the requirements incumbent on a market intermediary when implementing a program to commingle and portfolio margin centrally cleared CDS positions.



Philipp, M. and Sandoval, I. (2013), "Portfolio margining of cleared credit default swaps", Journal of Investment Compliance, Vol. 14 No. 2, pp. 32-41. https://doi.org/10.1108/JOIC-04-2013-0012

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