On February 13, the Commodity Futures Trading Commission’s Division of Swap Dealer and Intermediary Oversight said it would not recommend enforcement action to be taken against a swap dealer (“SD”) if it failed to comply with variation margin requirements for uncleared swaps effective March 1 (“March 1 VM Requirements”). DSIO said its no-action relief would apply through September 1 where an SD (1) did not comply with the March 1 VM Requirements solely because it failed to complete necessary credit support documentation or, acting in good faith, required more time to resolve operational issues; (2) made best efforts to comply with its March 1 VM Requirements “as soon as possible” after March 1; (3) continued to post and collect variation margin with counterparties when there were pre-existing variation margin requirements until such time it could comply with the March 1 VM Requirements; and (4) by no later than September 1, complied with the March 1 VM Requirements for all swaps for which the requirements were applicable on or after March 1. Subsequently, a number of other regulators and regulatory organizations worldwide indicated that they were also cognizant of the difficulty SDs were having in complying with the March 1 VM Requirements and said or implied they would (or that regulators under their purview should) likely exercise some forbearance on a caseby-case basis for some additional time, provided the SDs acted diligently to meet their obligations. Relevant regulators or regulatory organizations included the Board of Governors of the Federal Reserve System and the Office of the Comptroller of the Currency in the US, the International Organization of Securities Commissions, the European Supervisory Authorities (including the European Securities and Markets Authority) and the Financial Conduct Authority in Europe. Under international rules, SDs with the largest outstanding notional amounts of uncleared swaps began complying with initial and variation margin requirements on September 1, 2016. As of March 1, 2017, SDs are required to comply with variation margin requirements with all relevant counterparties not included in the first phase. (Click here for some background on the current deadline dates for margin requirements for uncleared swaps in the article “BIS/IOSCO Delays Rollout of Margin Requirements for Uncleared Swaps” in the March 22, 2015 edition of Bridging the Week.) Separately, the CFTC’s DSIO indicated it would not recommend an enforcement action against an SD that failed to comply with minimum transfer amount requirements under its rules in connection with one or more uncleared swaps with any legal entity that owned more than one separately managed account, subject to certain conditions. (Click here to access CFTC Rule 23.152(b)(3) and here for CFTC Rule 23.153(c).)

Please see link for original article's footnotes