MFA Blog

CFTC Approves Rule on Segregation of Assets Held as Collateral

Posted on March 29, 2019

On Thursday, March 28, the Commodity Futures Trading Commission (CFTC) approved in seriatim the final rule on “Segregation of Assets Held as Collateral in Uncleared Swap Transactions” as part of its Project K.I.S.S. (Keep It Simple Stupid) initiative.  The final rule simplifies requirements related to notifying counterparties of their right to segregate their initial margin for uncleared swaps pursuant to an individual segregation arrangement with an independent third-party custodian.  Specifically, the final rule retains the notification requirement generally, but among other things:

  • Requires notification only at the beginning of the first trade with a counterparty;
  • Eliminates the annual re-notification requirement;
  • Eliminates the requirement that the terms of the segregation agreement be established by written agreement with the counterparty; and
  • Eliminates the requirement that the notification must identify one or more creditworthy custodians and provide information regarding the cost for segregation for each named custodian.

Click here for the Final Rule Release
Click here for Chairman Giancarlo’s Statement
Click here for Commissioner Benham’s Statement
Click here for Commissioner Berkowitz’s Statement

 

The final rule will become effective 30 days after publication in the Federal Register.