VOLUME 21 - BULLETIN #117
TO:
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ALL CLEARING MEMBERS
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FROM:
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BUSINESS SYSTEMS GROUP
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DATE:
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May 18, 2001
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SUBJECT:
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Amended Money Market Mutual Fund & Letter of Credit Policy
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Effective immediately, the Clearing Corporation has amended its money market mutual fund (“MMMF”) policy and its letter of credit (“LOC”) policy with respect to the acceptance and ongoing management of original margin collateral.
MMMF Policy
The MMMF policy originally included a provision that “no more than the greater of (i) 25% of a clearing members’ margin requirement, or (ii) $250,000, by origin, may be met with shares of any individual fund.” The Clearing Corporation has amended the policy by deleting that provision and substituting a new provision that states “no more than 5% of the total number of outstanding shares of a fund will be accepted from any clearing member as margin collateral”.
LOC Policy
The LOC policy has been amended to:
(1) Increase the general limit on the amount of letters of credit that a bank may issue. The amended provision states that “no bank may issue letters of credit for the benefit of the Clearing Corporation that exceed, in total, the lesser of: (a) $200 million, or (b) 10% of the bank's Tier 1 and Tier 2 capital”.
(2) Eliminate adjusted net capital limitations on a clearing member’s use of letters of credit for margin purposes; and
(3) Provide that if a bank’s credit rating falls below a Moody’s counterparty rating of A or an S&P counterparty rating of A-2, then the bank must reduce the total stated amount of letters of credit posted with the Clearing Corporation to zero, unless otherwise approved by the President.
To see the complete Acceptable Securities and Haircut Rates document, please click on the following link or copy and paste it to the location bar on your web browser: http://www.botcc.com/geninfo/AcceptableSecurities.html#TopOfPage
Should you have any questions, please call or e-mail one of the following in the Risk and Margins Group:
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