United States: CFTC Adopts Final Rules Regarding The Cross-Border Application Of Its Swap Margin Requirements

On May 24, 2016, the US Commodity Futures Trading Commission ("CFTC") adopted a final rule defining the cross border application of its margin requirements for uncleared swaps. The final rule covers all swap dealers and major swap participants subject to the CFTC's margin rules—that is, those registered with the CFTC but not subject to the margin rules of the US bank regulators.1

Such entities are referred to as covered swap entities ("CSEs")2. The CFTC rule generally requires CSEs engaging in uncleared cross-border swaps to comply with the CFTC's margin requirements, with certain exceptions depending on the location of the CSE and the type of counterparty with which the CSE transacts:

  • US CSEs must comply with the CFTC margin rules when transacting with a US counterparty or a non-US counterparty whose swap obligations are guaranteed by a US person.
  • US CSEs must comply with the CFTC margin rules when transacting with certain other non-US counterparties, but may be eligible for substituted compliance with respect to certain requirements.
  • Non-US CSEs must generally comply with the CFTC margin rules when transacting with a US counterparty, but may be eligible for substituted compliance with respect to certain requirements.
  • Non-US CSEs must generally comply with CFTC margin rules when transacting with a non-US counterparty whose swap obligations are guaranteed by a US person, but may be eligible for substituted compliance with respect to certain requirements.
  • Non-US CSEs whose swap obligations are not guaranteed by a US person generally need not comply with the CFTC margin rules when transacting with a non-US counterparty whose swap obligations are not guaranteed by a US person. These rules are generally similar to the cross-border approach adopted by the US banking regulators (the "Prudential Regulators")3 for swap dealers and major swap participants under their jurisdiction.4 As discussed further below, however, the Prudential Regulators' approach may allow more expansive application of substituted compliance for Non-US CSEs that are not guaranteed by US persons than under the CFTC cross-border rule.


Requiring initial and variation margin for uncleared swaps is a key aspect of derivatives regulatory reform both in the United States under the Dodd-Frank Act and in other jurisdictions. In furtherance of this goal, on December 16, 2015, the CFTC adopted final rules imposing margin requirements for uncleared swaps entered into by CSEs5. At that time, the CFTC deferred addressing the application of its rules on a cross-border basis until the current rulemaking.6

The final rules on cross-border application of margin requirements will take effect in accordance with the same compliance schedule for the margin requirements themselves set forth in the Final Margin Rules. The timetable for implementation is set out in Appendix B.

Key Categories

The cross-border rules classify CSEs and their counterparties based on regulated status and certain connections to the US. Under the rules, a "US person" is (i) a natural person who is a resident of the United States; (ii) an estate of a decedent who was a resident of the United States at the time of death; (iii) a corporation, partnership, limited liability company, business or other trust, association, joint-stock company, fund or any form of entity similar to any of the foregoing other than an entity described in (iv) or (v) below (a "legal entity"), in each case that is organized or incorporated under the laws of the United States or that has its principal place of business in the United States, including any branch of such legal entity; (iv) a pension plan for the employees, officers or principals of a legal entity described in (iii), unless the pension plan is primarily for foreign employees of such entity; (v) a trust governed by the laws of a state or other jurisdiction in the United States, if a court within the United States is able to exercise primary supervision over the administration of the trust; (vi) a legal entity (other than a limited liability company, limited liability partnership or similar entity where all of the owners of the entity have limited liability) that is owned by one or more persons described in (i) through (v) and for which such person(s) bears unlimited responsibility for the obligations and liabilities of the legal entity, including any branch of the legal entity; or (vii) an individual account or joint account (discretionary or not) where the beneficial owner (or one of the beneficial owners in the case of a joint account) is a person described in (i) through (vi). Notably, the definition does not include one of the prongs of the US person definition under the CFTC's general Cross-Border Guidance: collective investment vehicles that are organized and have their principal places of business outside the United States, but are majority owned by US persons.7

As used herein, a "US CSE" is a CSE that is a US person, and a "Non-US CSE" is a CSE that is not a US person. The CFTC definition of a Non-US CSE includes a US branch of a non-US CSE and a Foreign Consolidated Subsidiary. The distinction is relevant in that US branches of non-US CSEs and Foreign Consolidated Subsidiaries are not treated as US persons but are treated differently from other Non-US CSEs in some instances under the cross-border rules. A Foreign Consolidated Subsidiary ("FCS") is a non-US CSE in which a US person ultimate parent entity has a controlling financial interest, such that the FCS's operating results, financial position and statement of cash flows is consolidated in the US ultimate parent entity's financial statements, as determined in accordance with US GAAP. The cross-border rules also distinguish among counterparties based on whether there is a guarantee by a US person of the relevant swap obligations of a party to the uncleared swap. A guarantee for this purpose is an arrangement pursuant to which one party to an uncleared swap has rights of recourse against a guarantor, with respect to its counterparty's obligations under the uncleared swap.8

To view the full article please click here.


1 17 C.F.R. § 23.160 (2016) available at http://www.cftc.gov/idc/groups/public/@lrfederalregister/documents/file/2016-12612a.pdf.

2 Specifically, a CSE is a swap dealer and major swap participant registered with the CFTC for which there is no Prudential Regulator (as defined below).

3 The Prudential Regulators are as follows: Office of the Comptroller of the Currency, Treasury; Board of Governors of the Federal Reserve System; Federal Deposit Insurance Corporation; Farm Credit Administration; and Federal Housing Finance Agency.

4 See Margin and Capital Requirements for Covered Swap Entities, 80 Fed. Reg. 229 (Nov. 30, 2015) (to be codified at 12 C.F.R. pts. 45, 237, 349, 624, 1221); 12 C.F.R. pts. 45, 237, 349, 624, 1221 (2016). ("Prudential Regulators' Final Margin Rule").

5 Margin Requirements for Uncleared Swaps for Swap Dealers and Major Swap Participants, 81 Fed. Reg. 3 (Jan. 6, 2016) (to be codified at 17 C.F.R. pts. 23, 140); 17 C.F.R. pts. 23, 140 (2016). (the "Final Margin Rules").

6 The CFTC had previously reproposed rules regarding the cross-border application of the margin rules after taking into consideration comments on their prior proposal. Margin Requirements for Uncleared Swaps for Swap Dealers and Major Swap Participants-Cross-Border Application of the Margin Requirements, 80 Fed. Reg. 134 (proposed July 14, 2015) (to be codified at 17 C.F.R. pt. 23).

7 See Interpretative Guidance and Policy Statement Regarding Compliance with Certain Swap Regulations, 78 Fed. Reg. 144 (July 26, 2013).

8 For these purposes, it is a guarantee if a party to an uncleared swap has rights of recourse against a guarantor if the party has a conditional or unconditional legally enforceable right to receive or otherwise collect, in whole or in part, payments from the guarantor with respect to its counterparty's obligations under the uncleared swap.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.