BBA has submitted its response to Parts II and III of FSA’s consultation “Client assets regime: EMIR, multiple pools and the wider review”. On the possibility of creating differentiated client money sub-pools, BBA makes the following general comments:

  • FSA should develop policies which discourage a sub-pools model that results in participants in the general client money pool enjoying less protection than those in the sub-pools;
  • the benefits of insulating separate groups could be overridden by the operational risk and cost arising from such complex arrangements;
  • FSA may want to discourage firms from creating hierarchical participation in sub-pools on the basis of clients’ creditworthiness;
  • clients should be able to opt out of FSA’s 80% diversification requirement, as it could compound operational complexity in the context of several sub-pools;
  • a sub-pool to support cleared business would not guarantee porting in all situations, because the effect of netting in omnibus accounts is that there is insufficient margin to port positions separately. Clients would have to agree to use the same back-up clearing member, although it is unlikely that any clearing member would accept the transfer of positions in block. Another solution would be to use gross margin accounts; and
  • splitting omnibus accounts into sub-pools would reduce netting potential.

(Source: BBA Response on CASS Regime)