The US Commodity Futures Trading Commission ("CFTC") has taken another step in refining its framework for cross-border activities, with a new set of proposed rules applicable to the cross-border application of margin requirements for uncleared swaps.
The proposal, issued by the CFTC on June 29, 2015, differs in certain significant respects from the CFTC's existing Cross-Border Guidance1 as well as its prior advance notice of proposed rulemaking with respect to the cross-border application of margin requirements.2 The proposal reflects certain aspects of the cross-border approach proposed by the US bank regulators ("Prudential Regulators") in their parallel proposed rules with respect to uncleared swap margin for swap entities subject to their jurisdiction.
Notably, the CFTC's proposal would:
- Require US swap dealers (and non-US swap dealers guaranteed by a US person) to comply with US requirements for collection of margin, but potentially allow compliance with a comparable foreign regime for the initial margin they post to a non-US counterparty.
- Establish a new category of non-US swap dealers that are consolidated as an accounting matter with a US parent (but are not guaranteed by that entity), which would generally be subject to US requirements but would have potentially greater opportunity to rely on substituted compliance.
- Exclude transactions between a non-US swap dealer (that is not guaranteed by or consolidated with a US entity) and certain non-US counterparties from the CFTC margin rules.
- Establish new definitions of "US person" and "guarantee," solely for purposes of the application of its margin rules, that are narrower in certain key respects than those in the Guidance.
Comments on the proposed rules are due within 60 days following publication of the proposal in the Federal Register.
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Footnotes
1. See Interpretative Guidance and Policy Statement Regarding Compliance with Certain Swap Regulations, 78 FR 45292 (July 26, 2013) (the "Cross-Border Guidance" or the "Guidance").
2. See Margin and Capital Requirements for Covered Swap Entities, 79 FR 53748 (Sept. 24, 2014), available at http://www.gpo.gov/fdsys/pkg/FR-2014-09-24/pdf/2014-22001.pdf.
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