CFTC Finalizes Margin Rules for Security Futures and Uncleared Swaps

Final rule on margin requirements for uncleared swaps for market participants without prudential regulator

CFTC adopted amendments to its margin requirements for uncleared swaps for swap dealers and major swap participants, for which there is no prudential regulator (CFTC Margin Rule). CFTC is amending the CFTC Margin Rule to revise the calculation method for determining whether certain entities come within the scope of its initial margin requirements for uncleared swaps beginning in the last phase of the phased compliance schedule, which starts on September 01, 2022, and the timing for compliance with the initial margin requirements after the end of the phased compliance schedule. These amendments align certain aspects of the CFTC Margin Rule with the BCBS-IOSCO framework for margin requirements for non-centrally cleared derivatives. CFTC is also amending the CFTC Margin Rule to allow swap dealers and major swap participants subject to the CFTC Margin Rule to use the risk-based model calculation of initial margin of a counterparty that is a CFTC-registered swap dealer or major swap participant to determine the amount of initial margin to be collected from the counterparty and to determine whether the initial margin threshold amount for the exchange of initial margin has been exceeded such that documentation concerning the collection, posting, and custody of initial margin would be required.

Final rule on margin requirements for security futures

CFTC and SEC are adopting rule amendments to lower the margin requirement for an unhedged security futures position from 20% to 15% and adopting certain conforming revisions to the security futures margin offset table. In July 2019, CFTC and SEC  had proposed to amend the security futures margin rules. CFTC and SEC sought to align margin requirements for security futures held in futures accounts and customer securities accounts that are not subject to the Portfolio Margin Rules with security futures and exchange-traded options held in customer securities accounts subject to the Portfolio Margin Rules. CFTC and SEC also proposed certain conforming revisions to the Strategy-Based Offset Table. CFTC and SEC received a number of comments in response to the proposal. After considering the comments, CFTC and SEC are adopting, as proposed, amendments to the security futures margin rules to lower the required initial and maintenance margin levels for an unhedged security futures position from 20% to 15%. CFTC and SEC are also publishing a revised Strategy-Based Offset Table as proposed.

Consultation on portfolio margining of uncleared swaps and security-based swaps

CFTC and SEC are seeking public comment on the potential ways to implement portfolio margining of uncleared swaps and non-cleared security-based swaps, including whether there are opportunities to enhance efficiencies, reduce complexity, increase consistency, and add resiliency to the financial system through adjustments to the current margin rules. CFTC and SEC are requesting comment on all aspects of the portfolio margining of uncleared swaps and non-cleared security-based swaps, including on the merits, benefits, and risks of portfolio margining these types of positions and on any regulatory and operational issues associated with portfolio margining them. Additionally, comments are being solicited on specific aspects of the margining of uncleared swaps, non-cleared security-based swaps, and related positions.

Related Links

• Press Release
• Final Margin Rule for Swaps
• Final Margin Rule for Futures
• Proposal on Portfolio Margining of Uncleared Swaps

Comment Due Date: December 07, 2020

Effective Date: February 04, 2021/December 24, 2020

Keywords: Americas, US, Banking, Securities, Margin Rule, Derivatives, Swaps, Futures, CGTC, SEC