The CFTC recently issued a rule proposal that would result in the imposition of margin on uncleared swaps for certain transactions. The CFTC’s proposal, which is open for comment for 60 days, would apply to swap dealers and major swap participants (SDs/MSPs) that are not subject to regulation by U.S. banking regulators.
The rules would apply to trades between SDs/MSPs and certain financial end-users. The rules would not directly impose margin requirements on commercial end-users. However, SDs/MSPs are permitted to require commercial end-users to post margin on uncleared swaps.
In addition, the CFTC’s uncleared margin rules would require, among other things, initial two-way margin (posting and collecting) for all swap trades between SDs/MSPs and financial end-users that have more than $3 billion in gross notional exposure in uncleared swaps and permit a $65 million threshold below which margin need not be collected.