On May 24, 2016, the Commodity Futures Trading Commission (“CFTC”) in a much anticipated action approved the issuance of final rules (“Final Rules”) regarding the cross-border application of its uncleared swaps margin requirements that it adopted on December 16, 2015. The Final Rules are closely aligned with the cross-border rules for uncleared swaps margin that the Prudential Regulators1 adopted in October of 2015 for swap dealers and major swap participants subject to their supervision. The CFTC’s Final Rules, which were published in the Federal Register on May 31, 2016, are scheduled to become effective on August 1, 2016.
I. BACKGROUND –
In December of 2015, the CFTC adopted final rules (“December 2015 Final Margin Rules”) regarding margin requirements for uncleared swaps for swap dealers and major swap participants that do not have a Prudential Regulator (“Covered Swap Entities” or “CSEs”). The rules that became the December 2015 Final Margin Rules had been re-proposed in October of 2014 (along with those of the Prudential Regulators) to take into account recommendations of the Basel Committee on Bank Supervision (“BCBS”) and the Board of the International Organization of Securities Commissions (“IOSCO”) (referred to herein as the “BCBS/IOSCO Standards”). The CFTC’s October 2014 re-proposal did not include proposed rules regarding the cross-border application of these rules; instead, the October 2014 re-proposal included an advance notice of proposed rulemaking requesting comment on three alternative approaches.
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