margin on non-cleared swaps

On October 31st, the CFTC’s Office of the Chief Economist (the “OCE”) issued a report about “Phase 5” of the uncleared margin rules (“UMR”) that are slated to go into effect on September 1, 2020.  The purpose of the report was “to guide regulators in their responses to industry requests for relief” from the scheduled application of Phase 5.

This post will provide an overview of the main conclusions of the report.  Any potential implementation of revisions to the UMR consistent with the conclusions in the report would have the effect of reducing the number of market participants subject to UMR, thereby simplifying compliance processes and burdens on entities that may have otherwise been impacted by the UMR.  It is too early to forecast whether regulators will propose and ultimately implement revisions to the UMR based upon this report.  Although, we believe that its issuance is a noteworthy development.

At the outset, the UMR are complex and their application to any particular trading activities should be undertaken in consultation with counsel familiar with these rules.  This post is not legal advice.


Continue Reading Initial Margin Phase 5: Report from CFTC’s Office of the Chief Economist

Many buy-side market participants are in the process of grappling with issues related to the amendment of their derivatives trading documentation in order to account for new U.S. margin requirements that will apply to non-cleared swaps beginning on March 1, 2017 (the “Implementation Date”).  But, in our experience, a large number of market participants have not yet begun to consider how they are going to implement the required changes despite the fact that the Implementation Date is only a little over three months away.  In this posting, we offer a few thoughts on a protocol that was recently published by the International Swaps and Derivatives Association (“ISDA”) to facilitate amendments to ISDA Master Agreements and related Credit Support Annexes that account for the new non-cleared swap margin rules recently enacted by U.S. regulators.
Continue Reading Don’t Forget March 1, 2017: Amending Trading Documentation to Account for New Non-Cleared Swap Margin Requirements

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:
Continue Reading Margin on Non-Cleared Swaps – Are Money Market Funds Eligible Collateral?

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,
Continue Reading A Marginally Important Day: FDIC’s Board Approves Joint Final Rule on Margin for Uncleared Swaps and Finalizes Relief for End-Users

Margin Proposal Outline 09_08_2014 On September 2nd, the Federal banking regulators (OCC, Federal Reserve, FDIC, FCA and FHFA) issued a new rule proposal and request for comment on rules that would govern the posting of margin on non-cleared swaps.  The rules would apply, in pertinent part, to swap dealer banks (i.e, prudentially regulated banks that are registered as a swap dealer or a security-based swap dealer with the CFTC or SEC, respectively), a term that is used interchangably in this posting with the term “covered swap entity(ies)”.  This posting will provide a summary of these proposed rules and related commentary as to their significance for end-users.  Additional information can be found in the attached slide deck.
Continue Reading Banking Regulators Propose New Margin Rules for Non-Cleared Swaps