Commenters Support CFTC Proposal to Simplify IM Notice Requirement

The National Futures Association ("NFA"), ISDA and SIFMA, among others, expressed support for the CFTC proposal to amend Rules 23.700-704 to simplify certain requirements regarding the rights of counterparties to require segregation initial margin ("IM") in transactions with swap dealers. (See previous coverage of the proposal here.)

The NFA called the existing requirements "unnecessarily prescriptive," and generally supported the various amendments proposed by the CFTC. The NFA also requested that the CFTC clarify whether Rule 23.704(a) requires a quarterly report when a swap dealer's collateral management arrangements are not in compliance with a counterparty contract (as opposed to only when they are in compliance).

SIFMA and ISDA expressed broad support for the CFTC-proposed amendments. In addition, the groups (i) asked the CFTC to clarify whether the notice regarding IM segregation rights must be provided only at the beginning of the first swap between the parties or whether it could be provided earlier - e.g., at the outset of the relationship - and (ii) suggested that the quarterly notice requirement in Rule 23.704(a) should be required only in instances where the swap dealer's margin and collateral procedures are not in compliance with the agreement of the counterparties.

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