ISDA CEO Urges International Coordination of CFTC Margin "Grace Period"
ISDA CEO Scott O'Malia urged regulators in the United States, Europe and Japan to match the six-month transition period for derivatives margin requirements adopted by CFTC staff (See, CFTC Grants Variation Margin Grace Period, Addresses Minimum Transfer Amounts for Managed Accounts). Mr. O'Malia referred to the CFTC action as a "practical approach," and argued that other regulators should take similar actions. He also warned that, absent any action from such regulators, there is a risk of market fragmentation where firms might shift trading relationships to avoid jurisdictions that don't grant relief.
Commentary
The CFTC action is not especially meaningful unless it is accompanied by relief from other regulators. Mr. O'Malia recognizes this, and is correct in diagnosing the potential for market fragmentation absent a "globally coordinated transition." (This would make sense, given the initial compliance schedule that also was globally coordinated.) The importance of such coordination is worth stressing at a time when it has become fashionable for some politicians to rail against international agreement on financial regulation. Certainly, there are times to put "America first," but truly global markets benefit from international coordination.
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The CFTC Division of Swap Dealer and Intermediary Oversight granted time-limited no-action relief from variation margin requirements for swaps that are subject to a March 1, 2017 compliance date.
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ISDA CEO Scott O'Malia discussed the upcoming deadline for collecting variation margin on swaps, as well as an industry request for a "transition period."
