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7.9 Segregation of Client Funds

<< Title VII Overview

7.9 Segregation of Client Funds

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            7.9.       Segregation of Client Funds.

                        7.9.1.    What Segregation Protections must Swap Dealers Provide for Cleared Swaps?  All monies, securities or property from, for, or on behalf of a swap customer to margin, guarantee or secure a swap cleared by or through a DCO or a clearing agency (for security-based swaps) must be held with a futures commission merchant ("FCM"), or a broker, dealer, or security-based swap dealer (for security-based swaps) .  The FCM, broker, dealer, or security-based swap dealer must separately account for and must not commingle customer property with its own funds.  However, notwithstanding the foregoing, any such customer property may be commingled and deposited in the same account with any bank, trust company or DCO/clearing agency.[§724]

                        7.9.2.    What are the Segregation Requirements for Uncleared Swaps?  A swap dealer or major swap participant must notify a counterparty at the beginning of a swap transaction that the counterparty has the right to require segregation of the funds or other property supplied to margin, guarantee, or secure the obligations of the counterparty.  

            At the request of the counterparty, the swap dealer or major swap participant must segregate the funds of other property and maintain such funds or other property in a segregated account separate from the assets of the swap dealer or major swap participant.  Such segregated account must be carried by an independent third-party custodian and designated as a segregated account for and on behalf of the counterparty.  The foregoing segregation requirements, however, do not apply to variation margin payments.