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Uncleared Swap Margin Requirements

Issue

OTC Derivatives→

Summary

SIFMA, SIFMA AMG, ISDA, and GFXD together are requesting that U.S. regulators provide clarification that covered swap entities and their counterparties which will become subject to the initial margin requirements of the Margin and Capital Requirements for Covered Swap Entities or the Margin Requirements for Uncleared Swaps for Swap Dealers and Major Swap Participants as of September 1, 2019 and on or after September 1, 2020 do not have to comply with the documentation requirements described therein unless the bilateral IM amount exceeds $50 million.

The Associations request that US regulators provide certainty to CSEs and their counterparties that documentation requirements do not apply until the aggregate regulatory IM amount of a CSE and its consolidated entities for a set of trading relationships with a counterparty and its consolidated entities exceeds the $50 million threshold.

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Submitted To

Commodity Futures Trading Commission
Board of Governors of the Federal Reserve System
Department of the Treasury/Office of the Comptroller of the Currency
Securities and Exchange Commission
Farm Credit Administration
Federal Deposit Insurance Corporation
Federal Housing Finance Agency

Submitted By

SIFMA, SIFMA AMG, ISDA, and GFXD

Related Committee(s)

  • Swap Dealer Committee

Date

3

June

2019

Excerpt

To: Commodity Futures Trading Commission
Board of Governors of the Federal Reserve System
Department of the Treasury/Office of the Comptroller of the Currency
Securities and Exchange Commission
Farm Credit Administration
Federal Deposit Insurance Corporation
Federal Housing Finance Agency

Re: Uncleared Swap Margin Requirements – March 5, 2019 BCBS-IOSCO Statement

Ladies and Gentlemen,

The International Swaps and Derivatives Association1 (“ISDA”), the Securities Industry and Financial Markets Association (“SIFMA”), the Global Foreign Exchange Division of the Global Financial Markets Association (“GFXD”) and the Securities Industry and Financial Markets Association’s Asset Management Group (“SIFMA AMG”) (together, the “Associations”) are requesting that U.S. regulators provide clarification that covered swap entities (“CSEs”) and their counterparties which will become subject to the initial margin (“IM”) requirements of the Margin and Capital Requirements for Covered Swap Entities2 (“USPR rule”) or the Margin Requirements for Uncleared Swaps for Swap Dealers and Major Swap Participants3 (“CFTC rule”) (collectively, “US rules”) as of September 1, 2019 (“Phase IV”) and on or after September 1, 2020 (“Phase V”) do not have to comply with the documentation requirements described therein unless the bilateral IM amount exceeds $50 million.

On March 5, 2019, BCBS and IOSCO published a joint statement on the final implementation phases of the margin requirements for non-centrally cleared derivatives. The statement specifically noted that “the framework does not specify documentation, custodial or operational requirements if the bilateral initial margin amount does not exceed the framework of €50 million initial margin threshold.”4

We welcome this statement and request that the US financial regulatory agencies provide clarification that US market participants may rely on the March 5th BCBS and IOSCO statement in interpreting their obligations under the US rules5. Due to the massive documentation and operational burden facing counterparties, any US regulatory action clarifying the applicable requirements needs to be done expeditiously in light of the upcoming September 2019 deadline for Phase IV firms.

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