Trade Groups Support CFTC-Proposed Amendments To Uncleared Swap Margin Rules

In comments responding to recent CFTC-proposed amendments to the uncleared swap margin requirements, ISDA, the Global Foreign Exchange Division ("GFXD"), SIFMA, SIFMA's Asset Management Group, the Investment Company Institute, the Managed Funds Association ("MFA"), FIA and the American Council for Life Insurers ("ACLI") expressed support for the proposals (see here and here). The groups also offered recommendations to enhance the proposals to further their intended impact.

As previously covered, the CFTC proposed changes related to initial margin ("IM"), including with regard to (i) determinations of the calculation period for whether IM requirements apply and (ii) certain swap dealers ("SDs") being permitted to rely on models used by SD counterparties for limited purposes (the "IM proposal"). The CFTC also proposed to codify prior no-action relief related to the application of rules on minimum transfer amounts ("MTA") (the "MTA proposal").

All of the trade groups supported the provision in the MTA proposal that would establish a separate $50,000 MTA to be applicable to Separately Managed Accounts (or "SMAs") and allow separate MTAs for IM and variation margin, codifying the relief outlined in CFTC Letter 19-25. Several associations recommended that the CFTC implement additional recommendations from the CFTC Global Markets Advisory Committee's Recommendations to Improve Scoping and Implementation of Initial Margin Requirements for Non-Cleared Swaps ("GMAC IM Report") (see previous coverage) to reduce the operational burden associated with the implementation of IM Phase 5 and IM Phase 6. Specifically, the ACLI urged the CFTC to adopt the relief described in the GMAC IM Report concerning seeded funds.

ISDA, GFXD and SIFMA requested that the CFTC amend the IM proposal to be inclusive of the risk-based IM calculations of a financial end user affiliate of a swap entity. FIA outlined several concerns identified by its members concerning the uncleared swap margin requirements that are not addressed by either proposal, including (i) the dissimilarities between the definitions of "financial entity" and "financial end user" under Section 2(h)(7)(C) of the CEA and (ii) the inclusion of small SDs' treasure affiliates in the non-financial end used exception under Section 2(h)(7)(D)(ii) of the CEA. Additionally, MFA and FIA disagreed with the scope of the hedging limitation in the IM proposal, citing their view that the proposed amendments may only be beneficial, with regard to hedging, for commercial SDs.

Primary Sources

1. SIFMA AMG Comment Letter: Margin Requirements for Uncleared Swaps for Swap Dealers and Major Swap Participants (RIN 3038-AF06)
2. ICI Comment Letter: Margin Requirements for Uncleared Swaps for Swap Dealers and Major Swap Participants (RIN 3038-AE77)
3. MFA Comment Letter: Margin Requirements for Uncleared Swaps for Swap Dealers and Major Swap Participants (RIN 3038-AF05 and RIN 3038-AF06)
4. FIA Comment Letter: Margin Requirements for Uncleared Swaps for Swap Dealers and Major Swap Participants (RIN 3038-AF06 and RIN 3038-AF05)
5. ISDA, GFMA, SIFMA Comment Letter: Margin Requirements for Uncleared Swaps for Swap Dealers and Major Swap Participants - RIN 3038-AF05 and RIN 3038-AF06
6. American Council of Life Insurers Comment Letter: RIN 3038-AE77, Margin Requirements for Uncleared Swaps for Swap Dealers and Major Swap Participants

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