CFTC Proposes to Amend Margin Requirements for Uncleared Swaps
CFTC is seeking comment on a proposed amendment to the margin requirements for uncleared swaps for swap dealers and major swap participants for which there is no prudential regulator (CFTC Margin Rule). As adopted in 2016, the CFTC Margin Rule, which mandates the collection and posting of variation margin and initial margin, takes effect under a phased compliance schedule extending from September 01, 2016 to September 01, 2020. The proposed amendment would extend the compliance schedule to September 01, 2021, for entities with smaller average daily aggregate notional amounts of swaps and certain other financial products. By extending the compliance schedule, the proposed amendment would mitigate the potential market disruption that could result from such a large number of entities coming into the scope of the initial margin requirements on September 01, 2020. Comments must be received on or before December 23, 2019.
BCBS and IOSCO revised their framework to extend the schedule for compliance with the initial margin requirements and provide an additional phase-in period for smaller counterparties. CFTC believes it is appropriate to amend the CFTC Margin Rule consistent with the revision in the BCBS and IOSCO framework. The proposal represents the CFTC effort to undertake coordinated action with international counterparts to achieve regulatory harmonization with respect to uncleared swaps margin. In proposing the change in the phase 5 compliance date, CFTC considered the relatively small amount of swap activity of the financial end-users that would be subject to the one-year extension. Given the relatively small amount of swap activity of the financial end-users in the extended compliance date group, CFTC believes the proposed compliance date extension will have a muted impact on the systemic risk, mitigating effects of the initial margin requirements during the extension period.
Accordingly, CFTC proposes to amend Commission § 23.161(a), which sets forth the schedule for compliance with the CFTC Margin Rule, to add a sixth phase of compliance for certain smaller entities that are currently subject to phase 5. The proposed amendment would require compliance by September 01, 2020, for covered swap entities and covered counterparties with an average daily aggregate notional amounts (AANA) ranging from USD 50 billion up to USD 750 billion. The compliance date for all other remaining covered swap entities and covered counterparties, including financial end-user counterparties exceeding an material swap exposure of USD 8 billion in AANA, would be extended to September 01, 2021. In addition, CFTC is proposing non-substantive, conforming technical changes to Commission § 23.161(a). The proposed change will conform the CFTC Margin Rule to the rule text of the Margin Rule of Prudential Regulators, promoting further harmonization between both rules.
Related Link: Federal Register Notice
Comment Due Date: December 23, 2019
Keywords: International, Americas, US, Banking, Securities, Margin Requirements, Implementation Timeline, Initial Margin, OTC Derivatives, Swaps, BCBS, IOSCO, CFTC
Featured Experts

María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer

Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.

Trevor Howes
IFRS 17 technical advisor; AXIS actuarial modeling system expert; extensive experience in life insurance and life reinsurance, with focus on modeling, valuation, and financial reporting
Previous Article
BCBS Workshop Examines Supervisory Issues on Artificial IntelligenceRelated Articles
OSFI Discusses Benchmark Rate Transition, Sets Out Work Priorities
The Office of the Superintendent of Financial Institutions (OSFI) published the strategic plan for 2022-2025 and the departmental plan for 2022-23.
EBA Proposes Standards to Support Secondary NPL Markets
The European Banking Authority (EBA) is consulting, until August 31, 2022, on the draft implementing technical standards specifying requirements for the information that sellers of non-performing loans (NPLs) shall provide to prospective buyers.
EU Confirms Agreement on Rules on Cybersecurity and Banking Resolution
The European Council and the Parliament reached an agreement on the revised Directive on security of network and information systems (NIS2 Directive).
EBA Issues Standards for Crowdfunding Service Providers Under ECSPR
The European Banking Authority (EBA) published the final draft regulatory technical standards specifying information that crowdfunding service providers shall provide to investors on the calculation of credit scores and prices of crowdfunding offers.
EU Confirms Agreement on Rules on Cybersecurity and Banking Resolution
The European Securities and Markets Authority (ESMA) published a paper that examines the systemic risk posed by increasing use of cloud services, along with the potential policy options to mitigate this risk.
EC Consults on PSD2 and Open Finance; EU Reaches Agreement on DORA
The European Commission (EC) published a public consultation on the review of revised payment services directive (PSD2) and open finance.
EC Mandates ESAs to Propose Amendments to SFDR Technical Standards
The European Commission (EC) has issued two letters mandating the European Supervisory Authorities (ESAs) to jointly propose amendments to the regulatory technical standards under Sustainable Finance Disclosure Regulation or SFDR.
EBA Examines Supervisory Practices, Issues Deposits Reporting Template
The European Banking Authority (EBA) published its annual report on convergence of supervisory practices for 2021. Additionally, following a request from the European Commission (EC),
US Agency Publications Address Basel, Reporting, and CECL Developments
The Farm Credit Administration published, in the Federal Register, the final rule on implementation of the Current Expected Credit Losses (CECL) methodology for allowances
SEC Extends Comment Period on Climate Risk Disclosures
The U.S. Securities and Exchange Commission (SEC) looks set to intensify focus on crypto-assets and cyber risk and extended the comment period on the proposed rules to enhance and standardize climate-related disclosures for investors.