Margin Requirements for Uncleared Swaps for Swap Dealers and Major Swap Participants
Summary
SIFMA AMG and The Investment Company Institute (ICI) provided supplemental comments to their prior letters to the Commodity Futures Trading Commission (CFTC) on the proposed amendments to the CFTC’s initial margin (“IM”) requirements for uncleared swaps.
Excerpt
The Investment Company Institute 1 and the Asset Management Group of the Securities Industry and Financial Markets Association 2 (“SIFMA AMG,” and together with ICI, “we” or “our”) appreciate the opportunity to supplement our prior letters to the Commodity Futures Trading Commission (CFTC or “Commission”) on the proposed amendments to the CFTC’s initial margin (“IM”) requirements for uncleared swaps.3 The Proposal primarily relates to: (1) the treatment of “seeded funds” and eligibility of certain US money market funds regulated under Securities and Exchange Commission (SEC) Rule 2a-7 under the 1940 Act (“MMFs”) and other similar funds as “eligible collateral” for IM requirements; and (2) the related standard haircut schedule for eligible MMFs and other similar funds. This letter supplements our previous comments in the 2023 Letters with recommendations as to the appropriate haircut to be applied to securities of certain qualifying funds, including MMFs, used as eligible collateral for the IM requirements and follows up on the meetings we had with the Commission staff in March 2026.
Background
The Proposal would amend the standard haircut schedule under CFTC Regulation 23.156(a) (i.e., the standardized percentage discounts applied to eligible collateral) to adopt a haircut methodology that would apply to securities of MMFs and other similar funds that qualify as eligible collateral under CFTC Regulation 23.156(a)(1)(ix) (“Eligible Funds”) for purposes of the IM requirements for uncleared swaps. At a high level, this proposed methodology specifies that the haircut for securities of an Eligible Fund would be equal to the monthly weighted average discount that would apply to the assets held by the Eligible Fund at the end of the prior month. The weights to be applied would be calculated as a fraction of the Eligible Fund’s total market value that is invested in each asset with a given discount amount. The proposed methodology and calculation—based on “looking-through” to the Eligible Fund’s assets—mirrors the haircut methodology that applies to securities of Eligible Funds under the prudential regulators’ uncleared swaps margin requirements.
We acknowledge that this proposed amendment to the standard haircut schedule was intended to correct a prior omission and would harmonize the CFTC’s approach with the prudential regulators’ requirements. However, while we appreciate the CFTC’s objectives, we reiterate our recommendation in our 2023 Letters that the CFTC reconsider its proposed approach.
- The Investment Company Institute (ICI) is the leading association representing the asset management industry in service of individual investors.
ICI’s members include mutual funds, exchange-traded funds (ETFs), closed-end funds, and unit investment trusts (UITs) in the United States, and UCITS and similar funds offered to investors in other jurisdictions. Its members manage $44.7 trillion invested in funds registered under the US Investment Company Act of 1940 (“1940 Act”), serving more than 125 million investors. Members manage an additional $10.4 trillion in regulated fund assets managed outside the United States. ICI also represents its members in their capacity as investment advisers to collective investment trusts (CITs) and retail separately managed accounts (SMAs). ICI Associate Members include service providers to member firms
and CIT trust companies. ICI has offices in Washington DC, Brussels, and London. - SIFMA AMG brings the asset management community together to provide views on US and global policy and to create industry best practices. SIFMA AMG’s members represent US and global asset management firms that manage more than 50% of global AUM. The clients of SIFMA AMG member firms include, among others, tens of millions of individual investors, registered investment companies, endowments, public and private pension funds, UCITS and private funds such as hedge funds and private equity funds. For more information, visit http://www.sifma.org/amg.