Letter on Extended Relief for Initial Margin Rules Phase-In
On August 26th, 2020 MFA and several other associations submitted a letter to the U.S. prudential regulators in support of their decision to provide timely and valuable regulatory relief to market participants through its Interim Final Rule on Margin and Capital Requirements for Covered Swap Entities (“Margin Rule”). This rulemakings defer the compliance date for Phase 5 and 6 with respect to the application of initial margin requirements for covered swap entities and covered counterparties with an average aggregate notional amount exceeding $50 billion (Phase 5) and material swaps exposure (i.e., $8 billion) (Phase 6). The Associations supported the deferrals of the Phase 5 and 6 compliance dates as it would help facilitate orderly preparation for the exchange of regulatory initial margin between covered swap entities and covered counterparties. In addition, the Associations noted the CFTC’s recent August 14, 2020 margin rule proposals which amend the CFTC’s margin rule based on some of the recommendations from the CFTC’ Global Markets Advisory Committee; and urged the U.S. prudential regulators to amend the Margin Rule to align with any amendments that the CFTC adopts in order to effect domestic and global harmonization and provide regulatory clarity and certainty to prudentially-regulated covered swap entities and their covered counterparties.