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Letters
Joint Trades on Margin Requirements for Uncleared Swaps for Swap Dealers and Major Swap Participants
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Excerpt
October 22, 2020
Christopher Kirkpatrick
Secretary of the Commission
Commodity Futures Trading Commission
Three Lafayette Center
1155 21st Street NW
Washington, DC 20581
Re: Margin Requirements for Uncleared Swaps for Swap Dealers and Major Swap Participants: RIN 3038–AF05 and RIN 3038-AF06
Dear Secretary Kirkpatrick,
The International Swaps and Derivatives Association (ISDA), the Global Foreign Exchange Division (GFXD) of the Global Financial Markets Association and the Securities Industry and Financial Markets Association (SIFMA) (the “Associations”) 1, appreciate the opportunity to respond to the Notices of Proposed Rulemaking2 (“NPRs”) issued by the Commodity Futures Trading Commission (the “CFTC” or “Commission”) in respect of the Margin Requirements for Uncleared Swaps for Swap Dealers and Major Swap Participants (the “Margin Rules”) in response to the Recommendations to Improve Scoping and Implementation of Initial Margin Requirements for NonCleared Swaps3 adopted by the Global Markets Advisory Committee (the “GMAC Report”) and recommended to the Commission. We appreciate the swift action taken by the CFTC to consider the GMAC Report and propose corresponding amendments in respect of several of the recommendations. As discussed below, the Associations and their members are broadly supportive of the NPRs with the exception of the restriction in proposed §23.154(a)(5) which only allows a covered swap entity (CSE) to rely on the risk-based model initial margin (IM) calculation of a swap entity for uncleared swaps entered into for the purpose of hedging. We also request that §23.154(a)(5) be extended to allow reliance on the IM calculation of the financial end user affiliate of a swap entity.
We encourage the CFTC to propose further amendments to the Margin Rules to address the other recommendations in the GMAC Report which are valuable for the preparation for the final IM phase in periods commencing September 1, 2021 (“Phase 5) and September 1, 2022 (“Phase 6”) and for continued compliance with the Margin Rules.