SIFMA AMG Submits Comments to Regulators Regarding Margin and Capital Requirements for Covered Swap Entities

The Asset Management Group of SIFMA ("SIFMA AMG") submitted comments to the CFTC and U.S. prudential regulators (collectively, the "Agencies") regarding the Agencies' proposals on margin requirements for uncleared swaps.

SIFMA AMG stated that, although it supports the proposed rules' further harmonization of OTC margin requirements with the Basel Committee on Banking Supervision and IOSCO September 2013 final international policy framework ("BCBS-IOSCO Framework") and the EU OTC margin framework ("EU Proposal"), new elements in the proposal "diverge in potentially significant ways" from the BCBS-IOSCO Framework and EU Proposal. SIFMA AMG recommended that the Agencies take a number of steps to address these issues, including the following (among many others):

• facilitate the development, approval and use of standardized initial margin models;
• require (i) that counterparties establish "transparent and predictable procedures" for adjusting initial margin requirements in response to changing market conditions, and (ii) that these procedures allow a counterparty to post increased initial margin resulting from the recalibration of a model over a period longer than one day;
• permit market participants to categorize risk sensitivities, instead of products, and revert to the single commodity risk category contained in the BCBS-IOSCO Framework and EU Proposal; and
• permit the use of approved models to compute collateral haircuts.

See: SIFMA AMG Letter to the Agencies. Related news: Banking Agencies Re-Propose Margin and Capital Requirements for Covered Swap Entities (with Robins Comment and Cadwalader Summary) (September 3, 2014); CFTC Proposes Rules Regarding Margin Requirements for Uncleared Swaps for SDs and MSPs (Fed. Reg.) (October 2, 2014); CFTC Votes to Adopt Swaps Margin Rules (with Cadwalader Memorandum Regarding CFTC Meeting) (September 17, 2014).