During an open meeting on July 22, 2020, the CFTC Commissioners heard a staff presentation on three specific recommendations for changes to the margin requirements for uncleared swaps for swap dealers and major swap participants. These changes would:
- Align the timing and methodology for both the material swaps exposure calculations and the post phase‐in compliance periods with the Basel Committee on Banking Supervision and the International Organization of Securities Commissions and other global regulations;
- Codify relief related to minimum transfer amounts as addressed by CFTC staff letters 17‐12 and 19‐25; and
- Codify an alternative method for calculating the initial margin that must be collected from the counterparty, in which small swap dealers may rely on the initial margin models of a larger swap dealer counterparty.
The proposals, among others, are covered in more detail in the associated staff report. Commissioner Stump issued a statement generally supportive of the recommendations in the staff report, noting that, “it really should not come as a surprise that now is the time to thoughtfully consider whether rules designed to ensure the exchange of margin between the largest financial institutions need to be tailored to account for the exchange of margin in which one of the counterparties is an insurance provider, a pension plan manager, a mortgage service provider, or other type of end user.”
After Q&A with the staff on these proposals, Chairman Tarbert stated the Commission would consider them over the next few weeks through the CFTC’s seriatim process, by which the proposals are circulated to each Commissioner and voted on in turn, as opposed to consideration and voting being done in an open and public full Commission meeting.
See our blog post on the final rules that the Commission approved during this open meeting and an open meeting on the following day, July 23, 2020.