On September 17, the Commodity Futures Trading Commission issued proposed rules that would impose margin requirements on certain market participants with respect to their transactions in uncleared swaps. Similar to the proposal that was recently issued by the Board of Governors of the Federal Reserve system and other federal prudential regulators (Prudential Regulators) (as summarized in the September 5, 2014 edition of Corporate and Financial Weekly Digest), the CFTC’s proposed rules would require swap dealers (SDs) and major swap participants (MSPs) to post and collect initial margin with respect to the swaps they transact with other SDs and MSPs as well as with respect to the swaps they transact with financial end users whose level of trading activity in the foreign exchange and swap markets exceeds certain thresholds. The proposal would also establish mandatory variation margin requirements for swaps between SDs, MSPs and financial end users (without regard to their level of trading activity). The proposed rules do not impose mandatory margin requirements for transactions involving commercial end users, but leaves this matter to be negotiated between the parties. Like the Prudential Regulators’ margin proposal, the CFTC’s proposal would require variation margin to be collected in cash commencing on December 1, 2015, while initial margin requirements would be phased in over a four-year period commencing on that date.
More information on the proposed rule is available here.