The Commodities Futures Trading Commission is providing more relief for swap dealers, this time for margin requirements for uncleared swaps.
The rule is being pushed back largely because European regulators still have not finalized similar rules for swap dealers on that continent.
“The U.S. Commodity Futures Trading Commission’s (CFTC) Division of Swap Dealer and Intermediary Oversight (DSIO) today issued an extension of the time-limited no-action relief provided in CFTC Staff Letter 17-05 from May 8, 2017 until November 7, 2017.” A press release from the CFTC stated. “The relief extended today states that DSIO will not recommend an enforcement action against a swap dealer (SD) that is subject to, and in compliance with, the margin requirements for non-centrally cleared OTC derivatives in the European Union (EMIR RTS) for failure to comply with the CFTC’s final margin rule.”
The rule “would require daily two-way margin (posting and collecting) for all trades between CSEs (covered swap entities) and SD/MSPs (swap dealers/major swap participants). The rules would require daily two-way margin for all trades between CSEs and financial end users that have over $8 billion in gross notional exposure in uncleared swaps,” according to a fact sheet released when the rule was first approved.
The rule would also require that “daily cash payment for all trades between CSEs and SD/MSPs,” and “daily posting for all trades between SD/MSPs and financial end users.
The rule wa first approved in December 2015, by a 2 to 1 vote of CFTC commissioners, but implementation has been pushed back ever since.
Now, the rule won’t go into effect until November 2017, at the earliest.
Swap dealers have been cut several breaks from rule implementation by the CFTC since 2017 started; a rule on disclosure was pushed back in March, in February, the CFTC pushed back a rule for the collection of margin requirements, and in January this rule was pushed back until May.
The CFTC warned swap dealers that pushing back this rule still means swap dealers must comply with other regulators: “However, SDs should not presume that the Commission’s ultimate determination on substituted compliance for the European Union will be comparable to the relief provided for under this letter.”