SIFMA Submits Comments on Margin Requirements for Non-Centrally Cleared Swaps and Security-Based Swaps

SIFMA submitted comments to the CFTC, SEC, the Board of Governors of the Federal Reserve System ("FRB"), the Office of the Comptroller of the Currency ("OCC"), FDIC, the Federal Housing Finance Agency ("FHFA") and the Farm Credit Administration ("FCA") (collectively, the "Agencies") on margin requirements for non-centrally cleared swaps and security-based swaps ("SBS").

SIFMA stated that it understands the Agencies are considering modifications to the proposed margin requirements for non-centrally cleared swaps and SBS in order to harmonize U.S. margin requirements with the final policy framework agreed by the Basel Committee on Banking Supervision ("BCBS") and IOSCO for margin requirements for non-centrally cleared derivatives ("BCBS-IOSCO Framework"). SIFMA noted that the Agencies' principal objective should be to ensure inter- and intra-national consistency in margin requirements for non-centrally cleared derivatives in the BCBS-IOSCO Framework.

To achieve this objective, SIFMA recommended that the Agencies take a number of steps to address key issues, including:

• mitigate adverse procyclical effects to avoid resulting destabilizing calls for collateral during periods of extreme market stress;
• adopt a weekly initial margin schedule to minimize disruptive margin disputes;
• conformation of the "financial entity" definition to the "financial counterparty" definition applicable under European rules to promote international harmonization; and
• phased implementation, among other recommendations.

See: SIFMA Comment Letter. Related news: Basel Committee and IOSCO Release Margin Requirements for Non-Centrally Cleared Derivatives Final Framework (September 3, 2013); Delta Strategy Group Update: Basel and IOSCO Final Framework for Minimum Margin Requirements (September 6, 2013).