Associations Request Clarification on Implementing BCBS-IOSCO Exemptions from Certain Swaps Margin Requirements

Commentary by Nihal Patel

ISDA, SIFMA, the Global Financial Markets Association and SIFMA AMG (collectively, the "associations") urged U.S. regulators to provide guidance on implementing Basel Committee on Banking Supervision and IOSCO ("BCBS-IOSCO") recommended exemptions from swaps margin requirements where the amounts to be transferred are below relevant thresholds.

In a letter to the CFTC, the SEC and prudential regulators, the associations requested assurance that swap dealers and their counterparties would be exempt from Phase IV and V initial margin requirements unless the bilateral initial margin amount exceeds $50 million. According to the associations, such an action would save many Phase IV and V counterparties from a "massive documentation and operation[al] burden."

The associations stressed the need for immediate action, given that the compliance date for Phase IV entities is September 2019 and preparations are ongoing. In addition, the associations indicated that a "CSA lite" arrangement is "not a viable option," as a temporary replacement of existing documentation used by market participants would require "extensive" work to develop and to bring in-scope counterparties on board.


As the letter notes, CFTC Chairman Giancarlo already expressed support for making clarifications regarding documentation below the threshold. It seems likely to be the case that relief is forthcoming, but the letter makes a good case why faster action from regulators would be beneficial to the market.

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