MFA Submits Comments to CFTC on Uncleared Margin Proposal

MFA submitted comments to the CFTC outlining concerns and recommendations for the CFTC's proposed rulemaking on margin requirements for uncleared swaps for swap dealers and major swap participants.

MFA's letter to the CFTC was similar to the letter recently sent to U.S. prudential regulators regarding the re-proposal of uncleared margin and capital requirements for prudentially regulated covered swap entities.

The letter to the CFTC also responded to the CFTC's advance notice of proposed rulemaking on three alternative approaches to the cross-border application of its uncleared margin requirements. In particular, MFA:

• requested that the CFTC work with the U.S. Prudential Regulators and the SEC to develop a single, harmonized, U.S. approach to cross-border derivatives regulation. In particular, MFA requested that the CFTC adopt its Cross-Border Guidance Approach; provided that the CFTC also (i) modifies its Final Cross-Border Guidance definition of "U.S. person" to exclude collective investment vehicles that are "U.S. persons" solely by virtue of having majority "U.S. person" ownership; and (ii) modifies its approach to substituted compliance in its Final Cross-Border Guidance to allow substituted compliance for trades between "U.S. persons" and non-U.S. persons at such parties' mutual agreement; and
• urged the CFTC to coordinate with U.S. and non-U.S. regulatory counterparts prior to implementation of the final margin rules to ensure that (i) the details of how substituted compliance will work in practice are resolved; and (ii) regulatory conflicts are resolved that substituted compliance alone will not address.

See: MFA Letter; MFA Blog Post.