In testimony earlier today before the House Agricultural Committee, CFTC Chairman Christopher Giancarlo announced his advocacy of a one-year delay in the implementation of the reduction in swap dealer de minimis level.  As background, a bank or other market participant can engage in a de minimis level of swap dealing activity without having to register as a swap dealer.  Presently, the de minimis level is set at $8 billion,
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Overview
At an open meeting of the U.S. Commodity Futures Trading Commission (CFTC) last Thursday, September 8, Chairman Massad indicated that adopting a final rule to expand the scope of interest rate swaps (IRS) required to be cleared under Section 2(h) of the Commodity Exchange Act (the Clearing Requirement) is a priority for the end of 2016.  The CFTC published a proposed rule to amend CFTC Regulation 50.4(a) on June 9, 2016 (the Proposal).  As proposed, the expanded Clearing Requirement generally consists of adding new currencies to the various classes of IRS and extending the termination date for Overnight Index IRS already subject to the Clearing Requirement.  The proposed additions to the Clearing Requirement are:
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Links to Text of Rules

Final Rules: http://www.sec.gov/rules/final.shtml

Proposed Rules: http://www.sec.gov/rules/proposed.shtml

2015 Timeline Final Rules (F) and Proposed Rules (P)

(F) February 2015 Finalized Registration and Governance Rules that Apply to SBS Data Repositories

(F) February 2015 Finalized SBS Data Reporting Rules

(P) February 2015 Proposed Rules to Implement the Finalized Reporting Rules, Establish Certain

On October 22, 2015, the prudential banking regulators (which includes the OCC, FDIC and the Federal Reserve Board) approved the final version of the non-cleared swap margin rule (available here). We will be considering many aspects of this rule in a series of postings, but in this posting we focus on a single discrete issue:

Whether a money market mutual fund (“MMF”) constitutes eligible collateral that can be posted in respect of a non-cleared swap. 

The answer, of course, is it depends. In sum, a MMF will constitute eligible collateral, as long as the following conditions are met:
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Earlier today, the Board of Directors (the “Board”) of the Federal Deposit Insurance Corporation (FDIC) approved a final rule to establish margin requirements on non-cleared swaps and security-based swaps (collectively, for this posting, “non-cleared swaps”).  The FDIC is issuing the rule jointly with the OCC, the board of the Federal Reserve,
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On June 17th, the Securities and Exchange Commission (“SEC”) announced an enforcement action against a company for illegally offering “complex derivatives products to retail investors”.  According to the related SEC enforcement order, the respondents operated a website that allowed its users to buy or sell contracts that were valued by reference (or “linked”) to the

By Andrew P. Cross and Shawn R. Durrani

In a speech before the FIA International Derivatives Conference earlier this week, CFTC Chairman Timothy G. Massad outlined a proposal for dealing with the issue of margin on uncleared swaps in situations where one of the counterparties (or perhaps one or both of their guarantors or parent companies) are located in the United States and the other counterparty is not a U.S. entity.  We have prepared a table that summarizes Chairman Massad’s comments and is available for download at the end of this posting.

In short, Chairman Massad’s comments appear to be focused on two key principles:

1) U.S. margin rules should apply if a counterparty has its obligations guaranteed by, or financial results consolidated with, a U.S. Person.

2) U.S. margin rules are designed to mitigate systemic risk introduced into the U.S. markets vis-à-vis the swap dealing activity of a U.S. swap dealer or a non-U.S. swap dealer with obligations guaranteed by, or financials consolidated with, a U.S. person. Accordingly, the CFTC appears to be considering an application of U.S. rules to the collection of margin by a swap dealer, even if the counterparty to the swap is a non-U.S. person.

Consistent with those principles, the CFTC is also considering
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