SIFMA today released the following statement from Randy Snook, executive vice president in response to the proposed rule released by the Commodity Futures Trading Commission (CFTC) regarding margin for uncleared swaps and a joint release by Federal Deposit Insurance Corporation (FDIC) on behalf of all prudential regulators that addresses margin and capital requirements for swap entities.
“Today’s proposal by the CFTC and the prudential regulators will have a significant impact on the future operations of the derivatives markets and on the financial and commercial companies that use these products to hedge their risks. We appreciate the prudential regulators proposal’s reliance on existing capital rules, which we believe are appropriate for swap entities.
“While we are still reviewing both proposals, some troubling differences in approaches are already apparent. Specifically, while the CFTC proposal does not require commercial end users to post margin for uncleared swap transactions, the prudential regulators’ proposal requires swap entities to collect margin from these end users if credit limit exposures are exceeded.
“These and other differences must be addressed before fully implementing new rules, otherwise regulators risk providing little certainty to market participants, and threatening the orderly operations of these markets. We will work with all prudential regulators, the CFTC and the SEC as this process moves forward to ensure these new rules are coordinated and have the least adverse impact on the financial and commercial companies that rely tremendously on these products.”