The Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) recently issued a joint request for public comment on issues related to further harmonizing regulatory frameworks applicable to portfolio margining across securities, security-based swaps, futures, swaps, and related positions.
Issues include existing portfolio margining models and practices, customer protection considerations, cross-margining and cross-product offsets, risk management and margin methodologies, clearing agency and derivatives clearing organization considerations, operational and technical implementation issues, potential impacts on market liquidity and competition, and capital, segregation, and collateral treatment.
The agencies will use the comments to help evaluate whether greater coordination or alignment in portfolio margining requirements may improve risk management efficiency, reduce unnecessary market fragmentation, and enhance customer protections.
“Cross-margining offers a clear opportunity to unlock liquidity that remains frozen in separate accounts, and we encourage market participants to provide feedback on ideas that will help improve coordination between both agencies,” SEC Chairman Paul Atkins said.
“Fostering enhanced cooperation between the CFTC and SEC with respect to portfolio margining promises to unleash untapped capital while ensuring a more robust risk management framework and market protections,” CFTC Chairman Mike Selig said.
The public comment period will remain open for 60 days following publication of the request for comment.