SIFMA AMG - Comment Letter to Multiple Regulators on Margin Requirements for Uncleared Swaps for Swap Dealers and Major Swap Participants (with Lofchie Comment)

SIFMA's Asset Management Group (AMG) submitted the attached comment letter to the CFTC, OCC, Federal Reserve Board, FDIC, FCA, FHFA and BCBS/IOSCO regarding margin requirements for uncleared swaps for SDs and MSPs. The letter covers a wide variety of topics from the scope of applicability of the margin rules, margin calculation procedures, eligible collateral, handling of collateral, trading with affiliates to cross-border issues.

Lofchie Comment: One of the many problems that Dodd-Frank creates is that it is far too prescriptive in what it requires; that is particularly a problem because some of its prescriptions seem to me impossible to achieve. Thus, there are a fair number of proposals in this letter which, although quite reasonable, would raise statutory issues under Dodd-Frank. I don't quite know how the CFTC, given its very limited exemptive authority under the CEA, can respond to reasonable proposals that run up against the words of the statute. On the other hand, I'm equally unsure as to how the CFTC can ignore them, given the implicit support that many of them have from non-U.S. regulators.Short of the repeal of Dodd-Frank (my personal favored solution), the best/quickest/easiest legislative remedy would be to give the regulators full exemptive power from all provisions of the statute. That way, the regulators could carve back the prescriptions (drastically) in a manner that made them workable domestically and less unpalatable internationally.

View letter here (links externally to SIFMA website). This letter should also be read in conjunction with the industry letter on clearing requirements which is covered in today's news.