Margin and Capital Requirements for Covered Swap Entities, Interim Final Rule


SIFMA as part of a joint industry letter provides comments to the Office of the Comptroller of the Currency, Federal Housing Finance Agency, Federal Reserve, Farm Credit Administration and Federal Deposit Insurance Corporation regarding proposed rules extending the Phase 5 and 6 compliance dates for regulatory initial margin.

The Associations support the Interim Final Rule issued in respect of the Agencies’ Margin and Capital Requirements for Covered Swap Entities (CSEs).






Submitted To

OCC, FHFA, Federal Reserve, FCA, FDIC

Submitted By







August 26, 2020

Legislative and Regulatory Affairs Division
Office of the Comptroller of the Currency
RIN 1557-AE98
Docket ID OCC-2020-0027

Alfred M. Pollard, General Counsel
Federal Housing Finance Agency
Attn: Comments/RIN 2590-AB03
Ann E. Misback, Secretary
Board of Governors of the Federal Reserve
Docket No. R-1721, RIN No. 7100-AF92

David P. Grahn, Director
Office of Regulatory Policy
Farm Credit Administration
RIN 3052-AD34

Robert E. Feldman, Executive Secretary
Federal Deposit Insurance Corporation
RIN 3064-AF55

Re: Margin and Capital Requirements for Covered Swap Entities, Interim Final Rule

To Whom It May Concern,

The International Swaps and Derivatives Association (ISDA), Managed Funds Association (MFA), the U.S. Chamber’s Center for Capital Markets Competitiveness (CCMC), the Investment Company Institute (ICI), the Securities Industry and Financial Markets Association (SIFMA), SIFMA Asset Management Group (SIFMA AMG), the Global Financial Markets Association (GFMA), the Global Foreign Exchange Division (GFXD) of GFMA, American Bankers Association (ABA), ABA Securities Association (ABASA), the Investment Adviser Association (IAA), and the Institute of International Bankers (IIB) (together, the Associations1) would like to express our appreciation for the swift and decisive actions taken by the U.S. prudential regulators2 (collectively, the “Agencies”) to provide timely and valuable regulatory relief to market participants in response to the global COVID-19 pandemic. In particular, we would like to express our gratitude for the Agencies’ support of the statement3 and revised version of the Final Framework on Margin Requirements for Non-Centrally Cleared Derivatives (Final Framework)4 issued on April 3, 2020 by the Basel Committee on Bank Supervision (BCBS) and the International Organization of Securities Commissions (IOSCO) in response to the letter submitted on March 25, 20205 by the Associations and other global financial market associations requesting a delay of the final phase-in periods for regulatory initial margin.

The Associations strongly support the Interim Final Rule6 issued in respect of the Agencies’ Margin and Capital Requirements for Covered Swap Entities (the “Margin Rules”) which defers the compliance dates for application of initial margin (IM) requirements for Covered Swap Entities (CSEs) and covered counterparties with an average aggregate notional amount exceeding $50 billion (Phase 5) and material swaps exposure (i.e., $8 billion) (Phase 6) to 2021 and 2022 respectively. We believe deferrals of the Phase 5 and 6 compliance dates are necessary to facilitate orderly preparation for the exchange of regulatory IM between CSEs and the hundreds of covered counterparties with thousands of bilateral relationships7 expected to come into scope of these requirements during these final phases which have been, and continue to be, profoundly impacted by the global pandemic.

While our members have robust business continuity plans in place that are functioning well, given the overwhelmingly disruptive nature of the pandemic, our members’ efforts to prepare for the final phases of regulatory IM have been severely impacted due to personnel, systems and other issues. Although the derivatives industry has adjusted to alternative working situations, the length and severity of the ongoing impact to operations cannot be predicted. Therefore, we greatly appreciate the additional time afforded to market participants by the Agencies and global regulators to come into compliance with the IM regulations. The Associations support the adoption of the Interim Final Rule as proposed and look forward to its finalization.

In addition, the Associations note our support of the issuance of the Notices of Proposed Rulemaking8 (NPRs) approved by the Commodity Futures Trading Commission (CFTC) on August 14, 2020 (the August 14, 2020 NPRs) which amend the CFTC’s Margin Requirements for Uncleared Swaps for Swap Dealers and Major Swap Participants (the CFTC Margin Rule) based on some of the recommendations in the Recommendations to Improve Scoping and Implementation of Initial Margin Requirements for Non-Cleared Swaps 9 (Margin Subcommittee Report). The Margin Subcommittee Report was adopted by CFTC’s Global Markets Advisory Committee (GMAC) on July 22, 2020, and the GMAC recommended to the CFTC that it consider adopting the report’s recommendations.

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1 See Appendix for descriptions of the Associations.
2 The U.S. prudential regulators include: the Treasury Department (Office of the Comptroller of the Currency) (“OCC”); Board of Governors of the Federal Reserve System (“Federal Reserve”); Federal Deposit Insurance Corporation (“FDIC”) ; Farm Credit Administration (“FCA”); and the Federal Housing Finance Agency (“FHFA”).
3 https://www.iosco.org/news/pdf/IOSCONEWS560.pdf
4 BCBS-IOSCO Final Framework on Margin Requirements for Non-Centrally Cleared Derivatives (April 2020), available at: https://www.iosco.org/library/pubdocs/pdf/IOSCOPD651.pdf.
5 https://www.isda.org/a/sM7TE/IMPhase5-6COVID-19Letter.pdf
6 85 Fed. Reg. 39465 (July 1, 2020)
7Analysis conducted by ISDA estimates that the scale of counterparties coming into scope in the final phases will be exponentially greater than in all prior phases combined with over 1000 parties needing to build infrastructure, prepare for IM calculation, source collateral, execute IM CSAs, and establish custodial arrangements to cover more than 9500 relationships.
8 https://www.cftc.gov/media/4401/FederalRegister081420/download