November 26, 2018

CFTC is adopting amendments to the margin requirements for uncleared swaps for swap dealers (SDs) and major swap participants (MSPs), for which there is no prudential regulator. CFTC is adopting these amendments in light of the recently adopted rules by FED, FDIC, and OCC (collectively, the qualified financial contract or QFC rules) that impose restrictions on certain uncleared swaps, uncleared security-based swaps, and other financial contracts. The rule will be effective from December 26, 2018.

CFTC is amending the definition of “eligible master netting agreement” in the CFTC Margin Rule to ensure that master netting agreements of firms subject to the CFTC Margin Rule are not excluded from the definition of eligible master netting agreement based solely on such agreements' compliance with the QFC rules. CFTC is also amending the Margin Rule such that any legacy uncleared swap (that is, an uncleared swap entered into before the applicable compliance date of the CFTC Margin Rule) that is not now subject to the margin requirements of the CFTC Margin Rule will not become so subject if it is amended solely to comply with the QFC rules. These amendments are consistent with amendments that FED, FDIC, OCC, the Farm Credit Administration (FCA), and the Federal Housing Finance Agency (FHFA) jointly published in the Federal Register on October 10, 2018.

CFTC had published the proposal for amendments to the margin requirements in May 2018. The comment period for the proposal ended in July 2018. CFTC received four relevant comments in response to the proposal. Though the comments raised issues unrelated to the proposal or suggested additions that would go beyond the scope of the proposal, the comments were generally supportive of the aims of the proposal. The final rule is consistent with rule changes recently adopted by the Prudential Regulators to the Prudential Margin Rule and addresses suggestions received as part of the CFTC’s Project KISS [“Keep It Simple, Stupid”] initiative for the CFTC to harmonize its uncleared swap margin regime with that of the Prudential Regulators.

 

Related Link: Final Rule

Effective Date: December 26, 2018

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

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