The Commodities Futures Trading Commission (CFTC) has thrown its hands up and postponed yet another compliance deadline for swaps dealers.
In a statement, CFTC acting Chairman Christopher Giancarlo said that he wanted to move forward but the vast majority of swap dealers weren’t ready.
“The CFTC remains committed to the March 1 date, agreed with its fellow US and overseas regulators, for posting of variation margin on swaps transactions between swaps dealers and their financial end-user customers,” Mr. Giancarlo said. “Nevertheless, the facts on the ground cannot be ignored that as much as ninety percent of those end-users are not ready to meet the new requirements despite their best efforts to do so.”
In a time-limited no-action letter issued Monday, February 13, the CFTC’s Division of Swap Dealer and Intermediary Oversight (DSIO) said that it would maintain the March 1 effective date but would not enforce the rule until Sept. 1 – explaining that the letter did not postpone the March 1, 2017 compliance date for variation margin, rather it allowed market participants a grace period to come into compliance.
In the words of no-action letter: “It is the understanding of DSIO that the Commission remains committed to implementing the March 1 VM Requirements in accordance with the March 1, 2017 compliance date for variation margin requirements that was agreed upon in 2013 by 26 regulatory authorities from around the world, and thus all swaps entered into from March 1, 2017 must be subject to such requirements.”
“Given the foregoing,” the letter continued, “DSIO believes that a specific and limited no-action position will serve to preserve the Commission’s March 1 implementation commitment, while helping to avoid a disruption in the uncleared swap market.”
Earlier this month, the CFTC issued a similar no-action letter granting swap dealers relief from compliance with European Union margin requirements, in the belief that attempting to comply with both regulators would prove too burdensome.
Defending its decision to refrain from acting against swaps dealers for failure to meet the March 1, 2017 compliance date, the CFTC said: “Without a proper transition, DSIO believes there could be a significant impact on the ability to hedge positions for pension funds, asset managers, and insurance companies that manage Americans’ retirement savings and financial security.”