The Commodity Futures Trading Commission (CFTC) approved a rule to amend the margin requirements for uncleared swaps for swap dealers and major swap participants.
The proposed rule would ensure that master netting agreements are not excluded from the definition of “eligible master netting agreement” under the CFTC Margin Rule based solely on compliance with certain rules that impose restrictions on qualified financial contracts.
Also, the rule would ensure that any legacy uncleared swap that is not subject to the CFTC Margin Rule would not become subject to them.
“For more than a century, U.S. businesses have relied on the derivatives markets to hedge their cost of production,” CFTC Chairman Christopher Giancarlo said. “These markets have allowed farmers and ranchers to hedge their costs of production and delivery price so that Americans can always find plenty of food on grocery store shelves. More than 90 percent of Fortune 500 companies use derivatives to manage commercial or market risk in their worldwide business operations. By reducing regulatory burdens for those who use our derivatives markets, that eliminates unnecessary red tape that hinders job creation, economic growth, and innovation. We must enable U.S. job creators to remain competitive globally, and this proposed rule seeks to assist with that effort.”
The CFTC Margin Rule establishes minimum requirements for swap dealers and major swap participants to collect and post initial and variation margin for certain swaps. The rule is designed to help ensure the safety and soundness of swap dealers and major swap participants.
There will be a 60-day comment period on the rule after its publication in the Federal Register.