CFTC – Unanimously Approved Two Proposals Amending Margin Requirements for Swap Dealers (SD) and Major Swap Participants (MSP)

August 14, 2020

CFTC Margin Rule

First proposal approved would align CFTC margin rule under 17 CFR 23 with BCBS/ IOSCO framework margin requirements for non-cleared derivatives. SDs and MSPs allowed to rely on certain counterparties’ calculation of initial margin. Revised method for determining whether an entity comes within scope of initial margin requirements under CFTC margin rule, beginning last phase of compliance schedule. Last phase of the phased compliance schedule set to begin September 1, 2021, timing for compliance with initial margin requirements after end of phased compliance schedule.
Allowed SDs and MSPs subject to the CFTC margin rule (covered swap entities) to use risk-based model calculation of initial margin of CTFC-registered SD or MSP counterparty. The covered swap entity would be able to rely on calculation of its counterparty to determine the amount of initial margin that is to be collected from such counterparty. Also, to determine whether initial margin threshold amount has been exceeded such that documentation for collection, posting, custody of initial margin would be required.

Minimum Transfer Amount

The second proposal approved by CFTC would amend the CFTC margin rule to permit the application of separate minimum transfer amounts for initial and variation margin. Permitted a minimum transfer amount up to $50k for separately managed accounts.

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