CFTC Delays Initial Margin "Phase Five" Requirements for Uncleared Derivatives

The CFTC voted to adopt an interim final rule to delay the implementation of "Phase Five" initial margin requirements for uncleared derivatives from September 1, 2020 to September 1, 2021. The delay will affect firms with an aggregate average notional amount of between $50-750 billion over the relevant measuring period.

The delay follows on a recommendation from the Basel Committee on Banking Supervision and IOSCO ("BCBS-IOSCO"). Unlike the BCBS-IOSCO recommendation, the CFTC did not, at this time, address the compliance date for "Phase Six" entities (which would continue to be September 1, 2021 for firms with $8-50 billion notional over the measuring period).

CFTC Chair Heath P. Tarbert made the case for the need to act by interim final rule, noting the relatively short amount of time before the current September 1, 2020 compliance date. Mr. Tarbert also indicated that the CFTC would address a potential "Phase Six" extension through a "traditional notice-and-comment rulemaking process" and that a proposal would be issued "in the very near term." Commissioner Brian D. Quintenz indicated he would also support such a delay, as contemplated by the BCBS-IOSCO recommendations. Mr. Quintenz, along with Commissioner Dawn D. Stump, also urged the CFTC to take up recommendations for initial margin-related rule changes suggested by a subcommittee of the CFTC Global Markets Advisory Committee.

CFTC Commissioners Dan M. Berkovitz and Rostin Behnam each supported the interim final rule in light of the COVID-19 pandemic and international cooperation (see here and here), but expressed skepticism about the need for granting further extensions.