Covered Swap Entities Regulation - Comment Letter - SIFMA - July 11, 2011

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Dodd-Frank Timeline, Margin Requirements for Uncleared Swaps for Swap Dealers and Major Swap Participants, CFTC
Original Proposal Re-proposal Approved Final Rule Approved
May 12, 2011 September 17, 2014 December 16, 2015
Dodd-Frank Timeline, Capital Requirements for Swap Dealers and Major Swap Participants
Proposal Date Comment Deadline Final Rule Issue
May 12, 2011 July 11, 2011 TBA
Dodd-Frank Timeline, Margin and Capital Requirements for Covered Swap Entities
Re-proposed Rule Issue Final Rule Issue Effective Date
September 24, 2014 October 22, 2015 April 1, 2016

Margin and Capital Requirements for Covered Swap Entities
July 11, 2011

This letter was submitted by the Asset Management Group (AMG) of SIFMA. Summary of key points from the comment letter:

  • Variation margin requirements for uncleared swaps should be bilateral. To the extent the Prudential Regulators or the CFTC require CSEs to collect initial margin, they should also require those CSEs to post margin to the counterparty upon the election of such counterparty.
  • The initial margin calculation methodology in the Proposals should be substantially revised.
  • CSEs should not be required to collect initial margin from RICs, ERISA funds, government benefit plans or foreign pension plans.
  • The definition of “low-risk financial end user” should be substantially revised.
  • The maximum allowable uncollateralized threshold of initial margin for “low-risk” financial end users should be increased to $100 million and there should be no uncollateralized threshold for variation margin.
  • Variation margin should be collected and posted by both parties on a daily basis, though minimum transfer amounts up to $500,000 should be allowed.
  • The classes of eligible collateral should be broadened to include assets beyond those explicitly allowed by the Proposals.
  • Each party to a swap should be provided a sufficient period of time after execution of the swap to collect margin from its counterparty.
  • Uncleared margin collection rules should only become effective once submitted margin models have been reviewed and operational requirements for uncleared margin requirements can be met. If the CFTC and SEC phase in swap clearing requirements by category of swap, the uncleared margin collection rules for a given swap should not become effective until clearing is required for that category of swap.
  • Parties to swaps entered into prior to the effectiveness of the margin rules should be permitted to include those swaps in post-effective margin calculations only if both parties agree to do so.
  • The AMG is concerned that the extraterritorial application of initial margin requirements on foreign CSEs could result in duplicative and potentially inconsistent margin requirements being imposed on U.S. buy-side counterparties.


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