NFA Provides Guidance on Initial Margin Models for Swaps

The NFA advised swap dealers of the approval process for models used to calculate the initial margin required for uncleared swaps.

In a Notice to members, NFA advised firms that (1) the NFA and the CFTC plan to coordinate with "prudential regulators" in order to avoid duplications, e.g., where a CFTC-regulated swap dealer is the affiliate of a prudentially regulated swap dealer, and (2) the NFA intends to issue an additional notice detailing the documentation required to be submitted by a CFTC-regulated swap dealer seeking NFA approval of a model.

The first compliance date for the CFTC Margin Rules will be September 1, 2016, and will apply to CFTC-covered swap entities with outstanding notional amounts over $3 trillion in specified swap transactions during a measuring period.

A Cadwalader memorandum on the adoption of CFTC margin requirements for uncleared swaps is available here.