MFA Submits Comments to U.S. Prudential Regulators on Uncleared Margin Proposal

MFA submitted a comment letter in response to the uncleared margin re-proposal from U.S. regulators regarding margin and capital requirements for prudentially regulated covered swap entities.

In the letter, MFA expressed support for mandatory bilateral initial margin exchange, but also requested modifications to the proposed thresholds for consistency with the final Basel Committee on Banking Supervision and IOSCO international margin framework. Additionally, MFA requested that the U.S. prudential regulators work together – along with the CFTC, the SEC and foreign regulators – to develop a single, unified regulatory framework.

The letter also appended a sample standardized initial margin table to assist the U.S. prudential regulators in modifying the proposed table to "provide more granularity" to account for the variety of products within asset classes and the different risk profiles of such products.

MFA's letter also expressed concern with the retroactivity of the margin requirements on certain types of precompliance date swaps, as well as the need to allow the customers of covered swap entities to choose, or opt out of, individual segregation for their initial margin.

See: MFA Comment Letter; MFA Blog Post. Related news: Banking Agencies Re-Propose Margin and Capital Requirements for Covered Swap Entities (with Robins Comment and Cadwalader Summary) (September 3, 2014).