May 23, 2018

CFTC proposed a rule amending the CFTC Margin Rule on margin requirements for uncleared swaps for swap dealers (SDs) and major swap participants (MSPs). CFTC approved the proposed rule to reduce regulatory burdens for U.S. market participants, by bringing certain CFTC requirements in line with those of other U.S. regulators. The comment period ends 60 days after publication of the proposal in the Federal Register.

The proposed rule would ensure that master netting agreements are not excluded from the definition of “eligible master netting agreement” under the CFTC Margin Rule based solely on such agreements’ compliance with certain rules of FED, FDIC, and OCC that impose restrictions on qualified financial contracts (QFC). The proposed rule would also ensure that any legacy uncleared swap that is not subject to the CFTC Margin Rule would not become so subject if it is amended solely to comply with the QFC Rules.

CFTC is required to establish margin requirements for uncleared swaps for all CFTC registered SDs and MSPs for which there is no prudential regulator (that is, FED, FDIC, OCC, Farm Credit Administration, FHFA). The prudential regulators impose similar margin requirements on SDs and MSPs for which there is a prudential regulator in their margin rule. This proposal is consistent with rule changes recently proposed by the Prudential Regulators to the Prudential Margin Rule and addresses suggestions received as part of CFTC’s Project KISS initiative for CFTC to harmonize its uncleared swap margin regime with that of the Prudential Regulators. The CFTC Margin Rule was issued in January 2016 and establishes minimum requirements for SDs and MSPs to collect and post initial and variation margin for certain swaps that are not cleared by a registered derivatives clearing organization or a derivatives clearing organization that the CFTC has exempted from registration. 

 

Related Link: Federal Register Notice
Comment Due Date: July 23, 2018

Keywords: Americas, US, Banking, Qualified Financial Contracts, Swap Margin Rule, Swap Dealers, Major Swap Participant, CFTC

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