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    CFTC Approves Rules on Swap Clearing and Margin Requirements

    May 12, 2020

    CFTC, at its open meeting in April 2020, approved certain proposed rules and final rules. One of the proposed rules includes amendments to part 50 clearing requirements for central banks, sovereigns, international financial institutions, bank holding companies, and community development financial institutions. The comment period for this proposed rule ends on July 13, 2020. One of the adopted final rules amends the margin requirements for uncleared swaps for swap dealers and major swap participants for which there is no prudential regulator; the rule is being amended to add the European Stability Mechanism to the list of entities that are expressly excluded from the definition of financial end-user under CFTC regulation 23.151. This final rule will become effective on June 10, 2020.

    Proposed Amendments to Part 50 Clearing Requirements

    CFTC approved proposed amendments to the regulations governing which swaps are exempt from the clearing requirement in section 2(h)(1) of the Commodity Exchange Act. The proposed amendments would address the treatment of swaps entered into by certain central banks, sovereign entities, and international financial institutions. The proposed rulemaking also addresses four no-action letters that the Division of Clearing and Risk of CFTC issued in 2013 and 2017. CFTC is also proposing amendments to exempt from required clearing swaps entered into by certain bank holding companies, savings and loan holding companies, and community development financial institutions. CFTC is proposing to re-codify the regulatory provisions exempting eligible banks, savings associations, farm credit institutions, and credit unions from the definition of “financial entity” for purposes of section 2(h)(7)(A) of the Commodity Exchange Act by moving the current requirements to a separate rule. Additionally, CFTC is proposing to publish a compliance schedule setting forth all the past compliance dates for the 2012 and 2016 swap clearing requirement regulations. The proposal also includes other non-substantive technical amendments.

    Final Rule on Amendments to Part 23 Margin Requirements for the European Stability Mechanism

    CFTC approved a final rule that codifies a CFTC No-Action Letter 19-22 concerning the European Stability Mechanism (ESM). Letter 19-22 states that the Division of Swap Dealer and Intermediary Oversight (DSIO) will not recommend an enforcement action against a registered swap dealer that does not follow the uncleared margin rules with respect to swaps entered into with the European Stability Mechanism. In October 2019, CFTC proposed to codify CFTC Letter No. 17-34 and amend regulation 23.151 to exclude the European Stability Mechanism from the definition of financial end-user and thus exempt from the CFTC Margin Rule uncleared swaps entered into by the European Stability Mechanism. On CFTC approval of the publication of the proposal, DSIO issued staff no-action letter 19-22, which modified the no-action relief under Letter 17-34. CFTC also proposed to correct a typographical error in CFTC regulation 23.157. CFTC is adopting the amendments to regulations 23.151 and 23.157 as proposed.


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    Comment Due Date: July 13, 2020

    Effective Date: June 10, 2020

    Keywords: Americas, US, Banking, Securities, Swaps, Clearing Requirement, Commodity Exchange Act, Margin Requirements, Margin Rules, Derivatives, CFTC

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