The CFTC Division of Clearing and Risk, and the Division of Swap Dealer and Intermediary Oversight (collectively, the "Divisions") granted no-action relief in response to a request by ISDA. The relief permits a covered swap entity ("CSE") (i.e., a swap dealer or major swap participant that is regulated by the CFTC for uncleared swaps margin) to include security-based swaps ("SBS") in the product set for initial margin calculations ("IM") where the SBS are subject to the margin requirements that are applicable to the CSE's counterparty.
The relief is subject to the following conditions, among others:
- The swaps and SBS must be subject to the same eligible master netting agreement and netting portfolio thereunder.
- The swaps and SBS must be in the same broad-risk category pursuant to CFTC Rule 23.154(b)(2)(v).
- All SBS in the netting set must be included consistently in the margin calculation.
- The SBS must be treated as though they were swaps for purposes of the CFTC margin rules.
- Upon request by the CFTC and/or the NFA, the relying CSE must provide the information that is required by the CFTC margin rules.
- If the CSE has obtained approval from the NFA to use a model to compute its initial margin for uncleared swaps (an "Approved IM Model"), then the CFTC will allow the CSE to include SBS in the model, as long as the CSE notifies the NFA that it intends to (i) include SBS in the portfolio and (ii) provide any necessary documentation to NFA.
- If the CSE fails to obtain approval to include SBS in its Approved IM Model, it may post and collect margin on a portfolio basis for swaps and SBS, as long as it uses the standardized initial margin schedule under CFTC Rule 23.154(c).
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