CFTC Staff Ratifies Cross-Margining of Customer Swaps Collateral (with Lofchie Comment)

CFTC Division of Clearing and Risk staff issued an interpretation providing clarification that CFTC Rule 22.2(d) does not prohibit a customer from granting a lien on the account at the FCM, nor does it prohibit the FCM from allowing or facilitating the lien.

Cross-Reference(s): CFTC Rule 22.2(d) [Futures Commission Merchants: Treatment of Cleared Swaps and Associated Cleared Swaps Customer Collateral].

Lofchie Comment: The interpretation is very significant as it will allow the cross-margining, at least for risk purposes, of cleared swap accounts with other accounts at the same or affiliated financial institutions. Of course, as margin requirements are not integrated between regulators, customers will still have to post margin amounts that satisfy CFTC, SEC and any bank regulatory requirements.

See: CFTC Letter No. 12-28.