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BILLING CODE [6351-01]

COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 23 

RIN 3038-[ ]

Margin Requirements for Uncleared Swaps for Swap Dealers and Major Swap 

Participants

AGENCY: Commodity Futures Trading Commission

ACTION: Interim final rule with request for comment.

SUMMARY: The Commodity Futures Trading Commission (“Commission” or 

“CFTC”) is adopting and invites comment on an interim final rule amending its margin 

requirements for uncleared swaps for swap dealers (“SDs”) and major swap participants 

(“MSPs”) for which there is no prudential regulator (“CFTC Margin Rule”). The 

Commission is revising the compliance schedule for the posting and collection of initial 

margin under the CFTC Margin Rule to defer the compliance date of September 1, 2020, 

to September 1, 2021 (“Interim Final Rule”). The Commission is issuing the Interim 

Final Rule to address the operational challenges faced by certain entities subject to the 

CFTC Margin Rule as a result of the coronavirus disease 2019 (“COVID-19”) pandemic, 

consistent with the recent revision of the Basel Committee on Banking Supervision and 

Board of the International Organization of Securities Commissions (together, 

“BCBS/IOSCO”) implementation schedule for margin requirements for non-centrallycleared derivatives.

DATES: Effective Date: This rule is effective [INSERT DATE PUBLISHED IN THE 

FEDERAL REGISTER].
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Comment Date: Comments must be received on or before [INSERT DATE 60 

DAYS AFTER PUBLICATION IN FEDERAL REGISTER].

Comments submitted by mail will be accepted as timely if they are postmarked on 

or before that date. 

ADDRESSES: You may submit comments, identified by RIN 3038-[ ], by any of 

the following methods:

• CFTC Comments Portal: https://comments.cftc.gov. Select the “Submit 

Comments” link for this rulemaking and follow the instructions on the Public Comment 

Form.

• Mail: Send to Christopher Kirkpatrick, Secretary of the Commission, 

Commodity Futures Trading Commission, Three Lafayette Center, 1155 21st Street, NW, 

Washington, DC 20581.

• Hand Delivery/Courier: Follow the same instructions as for Mail, above.

Please submit your comments using only one of these methods. Submissions 

through the CFTC Comments Portal are encouraged.

All comments must be submitted in English, or if not, accompanied by an English 

translation. Comments will be posted as received to https://comments.cftc.gov. You 

should submit only information that you wish to make available publicly. If you wish the 

Commission to consider information that you believe is exempt from disclosure under the 

Freedom of Information Act (“FOIA”), a petition for confidential treatment of the exempt 

information may be submitted according to the procedures established in § 145.9 of the 
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Commission’s regulations.1

The Commission reserves the right, but shall have no obligation, to review, prescreen, filter, redact, refuse or remove any or all of your submission from

https://comments.cftc.gov that it may deem to be inappropriate for publication, such as 

obscene language. All submissions that have been redacted or removed that contain 

comments on the merits of the rulemaking will be retained in the public comment file and 

will be considered as required under the Administrative Procedure Act (“APA”)2 and 

other applicable laws, and may be accessible under the FOIA.3

FOR FURTHER INFORMATION CONTACT: Joshua B. Sterling, Director, 202-

418-6056, jsterling@cftc.gov; Thomas J. Smith, Deputy Director, 202-418-5495, 

tsmith@cftc.gov; Warren Gorlick, Associate Director, 202-418-5195, 

wgorlick@cftc.gov; or Carmen Moncada-Terry, Special Counsel, 202-418-5795, 

cmoncada-terry@cftc.gov, Division of Swap Dealer and Intermediary Oversight, 

Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st Street NW, 

Washington, DC 20581.

SUPPLEMENTARY INFORMATION:

I. Background

Section 4s(e) of the Commodity Exchange Act (“CEA”)4 directs the Commission 

to adopt rules establishing minimum initial and variation margin requirements on all 

 1 17 CFR 145.9. Commission regulations referred to herein are found at 17 CFR Chapter I.

2 5 U.S.C. Subchapter II.

3 5 U.S.C. 552.

4 7 U.S.C. 6s(e) (capital and margin requirements).
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swaps5 that are (i) entered into by an SD6 or MSP7 for which there is no prudential 

regulator8 (collectively, “covered swap entities” or “CSEs”)9 and (ii) not cleared by a 

registered derivatives clearing organization (“uncleared swaps”).10 To offset the greater 

risk to the SD or MSP and the financial system arising from the use of uncleared swaps, 

these requirements must (i) help ensure the safety and soundness of the SD or MSP and 

(ii) be appropriate for the risk associated with the uncleared swaps held as an SD or 

MSP.11

BCBS/IOSCO established an international framework for margin requirements 

for uncleared derivatives in September 2013 (the “BCBS/IOSCO framework”).

12 After 

the establishment of the BCBS/IOSCO framework, the CFTC, on January 6, 2016, 

consistent with Section 4s(e), promulgated rules requiring CSEs to collect and post initial 

 5 CEA section 1a(47), 7 U.S.C. 1a(47) (swap definition); Commission regulation 1.3, 17 CFR 1.3 (further 

definition of a swap). A swap includes, among other things, an interest rate swap, commodity swap, credit 

default swap, and currency swap. 6 CEA section 1a(49), 7 U.S.C. 1a(49) (swap dealer definition); Commission regulation 1.3 (further 

definition of swap dealer).

7 CEA section 1a(32), 7 U.S.C. 1a(32) (major swap participant definition); Commission regulation 1.3 

(further definition of major swap participant). 8 CEA section 1a(39), 7 U.S.C. 1a(39) (defining the term ‘‘prudential regulator’’ to include the Board of 

Governors of the Federal Reserve System; the Office of the Comptroller of the Currency; the Federal 

Deposit Insurance Corporation; the Farm Credit Administration; and the Federal Housing Finance Agency). 

The definition of prudential regulator further specifies the entities for which these agencies act as prudential 

regulators. The prudential regulators published final margin requirements in November 2015. See 

generally Margin and Capital Requirements for Covered Swap Entities, 80 FR 74840 (Nov. 30, 2015) 

(“Prudential Margin Rule”). The Prudential Margin Rule is similar to the CFTC Margin Rule, including 

with respect to the CFTC’s phasing-in of margin requirements, as discussed below. 9 CEA section 4s(e)(1)(B), 7 U.S.C. 6s(e)(1)(B). SDs and MSPs for which there is a prudential regulator 

must meet the margin requirements for uncleared swaps established by the applicable prudential regulator. 

CEA section 4s(e)(1)(A), 7 U.S.C. 6s(e)(1)(A). 

10 CEA section 4s(e)(2)(B)(ii), 7 U.S.C. 6s(e)(2)(B)(ii). In Commission regulation 23.151, the Commission 

further defined the term uncleared swap to mean a swap that is not cleared by a registered derivatives 

clearing organization or by a derivatives clearing organization that the Commission has exempted from 

registration as provided under the CEA. 17 CFR 23.151.

11 CEA section 4s(e)(3)(A), 7 U.S.C. 6s(e)(3)(A). 12 See generally BCBS/IOSCO, Margin requirements for non-centrally cleared derivatives (Sept. 2013), 

https://www.bis.org/publ/bcbs261.pdf.
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margin (“IM”)13 and variation margin (“VM”)14 for uncleared swaps,

15 adopting the 

implementation schedule set forth in the BCBS/IOSCO framework, including the revised 

implementation schedule adopted on March 18, 2015.16 

In July 2019, BCBS/IOSCO further revised the framework to extend the 

implementation schedule to September 1, 2021.17 Consistent with this revision to the 

international framework, in April 2020, the Commission promulgated a final rule 

amending the compliance schedule for the IM requirements under the CFTC Margin Rule 

(“April 2020 Final Rule”).18

The World Health Organization declared the COVID-19 outbreak a global 

pandemic on March 11, 2020.19 On March 13, 2020, President Donald J. Trump declared 

 13 Initial margin is the collateral (calculated as provided by § 23.154 of the Commission’s regulations) that 

is collected or posted in connection with one or more uncleared swaps pursuant to § 23.152. Initial margin 

is intended to secure potential future exposure following default of a counterparty (i.e., adverse changes in 

the value of an uncleared swap that may arise during the period of time when it is being closed out). See

CFTC Margin Rule, 81 FR at 683.

14 Variation margin, as defined in Commission regulation 23.151, is the collateral provided by a party to its 

counterparty to meet the performance of its obligation under one or more uncleared swaps between the 

parties as a result of a change in the value of such obligations since the trade was executed or the last time 

such collateral was provided. 17 CFR 23.151.

15 See generally Margin Requirements for Uncleared Swaps for Swap Dealers and Major Swap 

Participants, 81 FR 636 (Jan. 6, 2016). The CFTC Margin Rule, which became effective April 1, 2016, is 

codified in part 23 of the Commission’s regulations. 17 CFR 23.150 - 23.159, 23.161. In May 2016, the 

Commission amended the CFTC Margin Rule to add Commission regulation 23.160, 17 CFR 23.160, 

providing rules on its cross-border application. See generally Margin Requirements for Uncleared Swaps 

for Swap Dealers and Major Swap Participants—Cross-Border Application of the Margin Requirements, 81 

FR 34818 (May 31, 2016).

16 See generally BCBS/IOSCO, Margin requirements for non-centrally cleared derivatives (March 2015), 

https://www.bis.org/bcbs/publ/d317.pdf. 17 See generally BCBS/IOSCO, Margin requirements for non-centrally cleared derivatives (July 2019), 

https://www.bis.org/bcbs/publ/d475.pdf . 18 See generally Margin Requirements for Uncleared Swaps for Swap Dealers and Major Swap 

Participants, 85 FR 19878 (April 9, 2020).

19 WHO Director-General's opening remarks at the media briefing on COVID-19 (March 11, 2020), 

https://www.who.int/dg/speeches/detail/who-director-general-s-opening-remarks-at-the-media-briefing-oncovid-19---11-march-2020.
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a national emergency due to the COVID-19 pandemic.20 The disease has impacted 

individuals across the world.

The COVID-19 outbreak has severely disrupted domestic and international 

business, and adversely impacted the global economy. In March 2020, a group of global 

financial market trade associations wrote a letter to BCBS/IOSCO requesting a 

suspension of the nearing compliance dates, set to begin on September 1, 2020, and 

September 1, 2021, in light of the pandemic.21 The Trade Association Letter stated that 

staff at financial firms have been displaced and repurposed given the increased market 

volatility.

22 The letter further stated that working from home limits access to legal and 

operational documentation and also limits abilities to communicate with counterparties.23 

With operational teams working at full capacity to ensure proper business continuity, the 

trade associations declared that the strained working conditions at firms had “impaired” 

such firms’ ability to undertake preparations to exchange IM, such as custodian 

onboarding and custodian documentation, by the upcoming September 1, 2020 

deadline.

24

Under these circumstances, the Trade Association Letter emphasizes the industry 

concern about diverting resources from ongoing business continuity efforts to the

 20 Proclamation on Declaring a National Emergency Concerning the Novel Coronavirus Disease (COVID19) Outbreak (March 13, 2020), https://www.whitehouse.gov/presidential-actions/proclamation-declaringnational-emergency-concerning-novel-coronavirus-disease-covid-19-outbreak/. 21 Margin Requirements for Non-Centrally Cleared Swaps Margin—Impact of COVID-19 on Initial Margin 

Phase-In (March 25, 2020), https://www.isda.org/2020/03/25/joint-trade-association-letter-on-impact-ofcovid-19-on-initial-margin-phase-in/ (“Trade Association Letter”). 22 Trade Association Letter at 2. 23 Id. 24 Trade Association Letter at 3.
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substantial preparations needed for the exchange of regulatory IM ahead of the 

September 1, 2020 deadline.

25

In response to these concerns, BCBS/IOSCO decided to further extend the 

implementation schedule for the margin requirements for non-centrally cleared 

derivatives by one year.

26 BCBS/IOSCO, in a joint statement, stated that the extension 

would provide additional operational capacity for firms to respond to the immediate 

impact of COVID-19 and at the same time facilitate firms’ diligent efforts to comply with 

the requirements by the revised deadlines.

27

Recently, a Global Markets Advisory Committee (“GMAC”) subcommittee 

encouraged the adoption of the BCBS/IOSCO recommendation to extend the 

implementation schedule given the circumstances brought about by the COVID-19 

pandemic. The subcommittee noted that the April 2020 BCBS‐IOSCO action “serves as 

confirmation by the collective international standard‐setting bodies that it is critical for 

the industry to be able to divert and dedicate scarce resources to respond to the COVID‐

19 crisis and related market volatility and liquidity issues without jeopardizing 

compliance with upcoming regulatory obligations under uncleared swap margin rules.”28

 25 See id. 26 See generally BCBS/IOSCO, Margin requirements for non-centrally cleared derivatives (April 2020), 

https://www.bis.org/bcbs/publ/d499.htm (“2020 BCBS/IOSCO Margin Framework”) and Press Release, 

April 3, 2020, https://www.bis.org/press/p200403a.htm (“April 2020 BCBS/IOSCO Press Release”). 27 Basel Committee and IOSCO announce deferral of final implementation phases of the margin 

requirements for non-centrally cleared derivatives (April 3, 2020), 

https://www.bis.org/press/p200403a.htm. 28 See Recommendations to Improve Scoping and Implementation of Initial Margin Requirements for NonCleared Swaps, Report to the CFTC’s Global Markets Advisory Committee by the Subcommittee on 

Margin Requirements for Non-Cleared Swaps, at 3 (April 2020), 

https://www.cftc.gov/media/3886/GMAC_051920MarginSubcommitteeReport/download. The GMAC 

adopted the subcommittee’s report and recommended to the Commission that it consider adopting the 

report’s recommendations. The GMAC subcommittee was not tasked to respond to the COVID-19

pandemic. Rather, its establishment pre-dates the pandemic’s impact and its directive was to address the 
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II. Interim Final Rule

The Commission is issuing the Interim Final Rule to amend the CFTC Margin 

Rule by deferring for one year to September 1, 2021, compliance with the IM 

requirements for entities subject to the September 1, 2020 deadline. The Commission is 

issuing this deferral in recognition of the extraordinary operational challenges and riskmanagement demands faced by the entities as a result of the COVID-19 pandemic, 

consistent with the recent revision of BCBS/IOSCO’s implementation schedule.

29

The CFTC Margin Rule requires covered swap entities to post and collect IM 

with counterparties that are SDs, MSPs, or financial end users with material swaps

exposure (“MSE”)30 (“covered counterparties”) in accordance with a phased compliance 

schedule set forth in Commission regulation 23.161.31 The compliance schedule applies 

progressively to CSEs and their covered counterparties in staggered phases, starting with

 ongoing challenges involving the implementation of the CFTC margin requirements during the last stages 

of the compliance schedule, which may be taken up at a later date by the Commission. See CFTC 

Commissioner Stump Announces New GMAC Subcommittee on Margin Requirements for Non-Cleared 

Swaps (Oct. 28, 2019), https://www.cftc.gov/PressRoom/PressReleases/8064-19. 29 See generally 2020 BCBS/IOSCO Margin Framework. The Framework extends the BCBS/IOSCO 

implementation schedule to September 1, 2022, by deferring the compliance dates of September 1, 2020, 

and September 1, 2021, to September 1, 2021, and September 1, 2022, respectively. Given the immediate 

need to address the impact of the COVID-19 pandemic on entities nearing the September 1, 2020 deadline, 

the Commission is issuing the Interim Final Rule discussed herein. As discussed below, the Commission 

intends to issue a notice of proposed rulemaking with respect to the September 1, 2021 compliance date in 

the near term. 30 Commission regulation 23.151 provides that MSE for an entity means that the entity and its margin 

affiliates have an average daily aggregate notional amount of uncleared swaps, uncleared security-based 

swaps, foreign exchange forwards, and foreign exchange swaps with all counterparties for June, July, and 

August of the previous calendar year that exceeds $8 billion, where such amount is calculated only for 

business days. A company is a “margin affiliate” of another company if: (i) either company consolidates 

the other on a financial statement prepared in accordance with U.S. Generally Accepted Accounting 

Principles, the International Financial Reporting Standards, or other similar standards; (ii) both companies 

are consolidated with a third company on a financial statement prepared in accordance with such principles 

or standards; or (iii) for a company that is not subject to such principles or standards, if consolidation as 

described in paragraph (1) or (2) of this definition would have occurred if such principles or standards had 

applied. 17 CFR 23.151.

31 17 CFR 23.161.
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entities with the largest average daily aggregate notional amounts (“AANA”) of 

uncleared swaps and certain other financial products, and then successively with lesser 

AANA. 

The compliance schedule originally spanned from September 1, 2016 to 

September 1, 2020. The April 2020 Final Rule extended the schedule by one year by 

dividing the last compliance “phase”—which would have brought into scope CSEs and 

covered counterparties with an AANA between $8 billion and $750 billion—into two 

compliance phases. Under the April 2020 Final Rule, CSEs and covered counterparties 

with an AANA between $50 billion and $750 billion must comply with the IM 

requirements beginning on September 1, 2020.32 In addition, again pursuant to the April 

2020 Final Rule, other remaining CSEs and covered counterparties, including financial 

end users with MSE, must comply beginning on September 1, 2021.33

This Interim Final Rule amends Commission regulation 23.161, as revised by the 

April 2020 Final Rule,34 by deferring for one year the April 2020 Final Rule’s 

compliance date of September 1, 2020. The Interim Final Rule reflects the recent 

revisions to the BCBS/IOSCO framework extending the margin implementation 

schedule.

35 More specifically, the Interim Final Rule defers compliance for entities that 

would come into scope beginning on September 1, 2020, requiring CSEs and covered 

counterparties with an AANA between $50 billion up to $750 billion during the three-

 32 See 17 CFR 23.161(a)(6). 33 17 CFR 23.161(a)(7). 34 17 CFR 23.161. 35 2020 BCBS/IOSCO Margin Framework.
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month period of March-May of 2021 to come into compliance beginning on September 1, 

2021. 

By extending the September 1, 2020 deadline for compliance with the IM 

requirements under the CFTC Margin Rule, the Commission, consistent with 

BCBS/IOSCO’s revision of the margin implementation schedule, seeks to alleviate the 

challenges, operational and otherwise, that COVID-19 poses to entities nearing the 

September 1, 2020 deadline. In the Commission’s view, compliance with the existing 

requirements could exacerbate COVID-19’s adverse impact on operations by causing 

entities to divert scarce resources from more pressing operational needs, which could 

hinder business continuity efforts and adequate management of volatility, liquidity, and 

other risks brought about by the pandemic.

36 

The COVID-19 pandemic has severely and adversely impacted preparations for 

the exchange of regulatory IM in advance of the current compliance deadlines, including 

procuring rule-compliant documentation, setting up custodial arrangements, and 

establishing internal processes for the calculation, collection, and posting of IM, among 

other things. In the midst of high market volatility, firms have experienced a reduction in 

operational capacity, carrying out remote operations, with employees performing critical 

functions from home or other temporary locations, which has limited access to legal and 

operational documentation and limited the ability to work with counterparties. 

 36 To be sure, the exchange of IM mitigates various risks, such as counterparty credit risk. However, given 

the relatively small share of the swaps market affected by this IFR, the Commission believes it is 

appropriate to defer covered entities’ IM obligations to allow such entities to focus on immediate 

operational, volatility, and liquidity risks arising from the COVID-19 pandemic. 
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Service providers, such as custodians, are facing similar operational challenges. 

As the next phase of compliance, beginning on September 1, 2020, approaches, custodian 

onboarding is being impeded, resulting in further delays in the establishment of custodian 

accounts. Other vendors providing IM-related services are being similarly affected. 

The Commission notes that the compliance delay provided by the Interim Final 

Rule applies to entities whose uncleared swap portfolios tend to be smaller than the 

portfolios of entities that came into scope in earlier phases of the compliance schedule. 

The CFTC’s Office of the Chief Economist (“OCE”) has estimated that entities with such 

smaller uncleared swap portfolios represent only 8% of total AANA across all phases.

37 

This modest share of notional amount, spread across many small entities, likely means 

that the uncollateralized swaps entered into by these entities—taking into account that no 

exchange of IM is required by the CFTC Margin Rule until the IM threshold amount has 

been exceeded38—pose less risk to the financial markets than the risk posed by uncleared 

swaps entered into by entities that have already come into the scope of IM compliance.

This Interim Final Rule does not address the last phase of compliance beginning 

on September 1, 2021. As discussed below, the Commission is making a finding that 

notice and public procedure on this rule is impracticable because the need for relief is 

immediate. Because there is more time to address the last phase of compliance currently 

 37 Richard Haynes, Madison Lau, & Bruce Tuckman, Initial Margin Phase 5, at 4 (Oct. 24, 2018), 

https://www.cftc.gov/sites/default/files/About/Economic%20Analysis/Initial%20Margin%20Phase%205%

20v5_ada.pdf (“OCE Initial Margin Phase 5 Study”). 38 Under Commission regulation 23.154(a)(3), there is no requirement to post or collect IM until the initial 

margin threshold amount has been exceeded. See 17 CFR 23.154(a)(3). The term “initial margin threshold 

amount” is defined in Commission regulation 23.151 as an aggregate credit exposure of $50 million from 

all uncleared swaps between a CSE and its margin affiliates on one hand, and a covered counterparty and 

its margin affiliates on the other. 17 CFR 23.151. For the definition of “margin affiliate,” see supra note 

30.
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set to commence on September 1, 2021, the Commission will address that compliance 

date through a notice of proposed rulemaking and public comment process. The

Commission intends to take action with respect to the final compliance phase in the near 

term. The Commission notes that without an extension of the final compliance phase, 

approximately 700 entities would come into the scope of the IM requirements 

simultaneously on September 1, 2021.39

III. Request for Comment

The Commission is issuing this Interim Final Rule to revise Commission 

regulation 23.161 to address concerns relating to the COVID-19 pandemic, as discussed 

above. Issuing an Interim Final Rule means that the amendment to delay the April 2020 

Final Rule’s compliance deadline of September 1, 2020, will take effect sooner than if the 

Commission followed the usual prior notice and comment rulemaking process. A 

discussion of the Commission’s finding that there is good cause to omit the usual prior 

notice and comment procedures appears below in the section entitled “Administrative 

Procedure Act.”

The Commission welcomes public comments from interested persons regarding 

any aspect of the changes made by this Interim Final Rule. The Commission also seeks 

comment on the following specific questions. The Commission will take into 

consideration comments received and may modify the Interim Final Rule if warranted.

(1) This Interim Final Rule delays by one year compliance with the IM requirements 

under the CFTC Margin Rule for entities subject to the September 1, 2020 deadline

 39 See OCE Initial Margin Phase 5 Study at 4.
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to alleviate the challenges, operational and otherwise, that COVID-19 poses to 

entities engaging in uncleared swaps nearing the existing compliance deadline as 

discussed above. Uncleared swaps that are entered into during the one year extension 

period will be legacy swaps not subject to the IM requirements (although they would 

be subject to VM requirements) and, as such, lesser amounts of margin would be 

collected for these swaps, potentially increasing counterparty risk and the risk of 

contagion.

40 In light of these risks, should the Commission consider any alternative 

to extending the compliance schedule? Please describe the alternatives if any can be 

identified.

(2) As an alternative to the Interim Final Rule deferring compliance for the entities 

coming into scope in September 2020, should the Commission consider a longer 

deferral period for such firms? Please describe the potential benefits and any costs 

were the CFTC to provide a longer deferral period.

Please refer to the ADDRESSES section above with respect to the submission of 

comments. 

IV. Related Matters

A. Administrative Procedure Act.

The APA generally requires federal agencies to publish a notice of proposed 

 40 Pursuant to Commission regulation 23.161, the compliance dates for the IM and VM requirements under 

the CFTC Margin Rule are staggered across a phased schedule that extends from September 1, 2016, to 

September 1, 2021. The compliance period for the VM requirements ended on March 1, 2017 (though the 

CFTC and other regulators provided guidance permitting a six month grace period to implement the 

requirements following the implementation date), while the IM requirements continue to phase in through 

September 1, 2021. An uncleared swap entered into prior to an entity’s IM compliance date is a “legacy 

swap” that is not subject to IM requirements. See CFTC Margin Rule, 81 FR at 651 and Commission 

regulation 23.161. 17 CFR 23.161.
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rulemaking and provide an opportunity for public comment before issuing a new rule.41 

However, an agency may issue a new rule without publication in the Federal Register of a 

notice of proposed rulemaking with an opportunity for comment if “the agency for good 

cause finds (and incorporates the finding and a brief statement of the reasons therefor in 

the rules issued) that notice and public procedure thereon are impracticable, unnecessary, 

or contrary to the public interest.”42 The Commission for good cause finds that such 

notice and public procedure on the instant amendments to Commission regulation 23.161 

are impracticable and contrary to the public interest due to the COVID-19 pandemic. 

The World Health Organization declared the COVID-19 outbreak a global pandemic on 

March 11, 2020.43 On March 13, 2020, President Donald J. Trump declared a national 

emergency due to the COVID-19 pandemic.44 

The Commission for good cause finds that notice and public procedure on this 

rule are impracticable because the need for relief is immediate. With respect to the 

change to the compliance schedule for the CFTC Margin Rule, time is of the essence. 

Participants in the uncleared swaps markets have experienced diminished operational 

capacity due to stay-at-home orders, closures, and other community nonpharmaceutical 

interventions.

45 Efforts to comply with the IM requirements may divert manpower and 

funding resources from already strained operations, hindering business continuity efforts 

and focus on management of risks posed by the pandemic. 

 41 See 5 U.S.C. 553(b). 42 5 U.S.C. 553(b)(B). 43 See supra note 19. 44 See supra note 20. 45 See Nonpharmaceutical Interventions (NPIs) (describing strategies to slow the spread of COVID-19), 

https://www.cdc.gov/nonpharmaceutical-interventions/index.html (last visited April 28, 2020).
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The practical effect of these contagion mitigation strategies is to require many 

businesses to carry out remote operations with employees performing critical functions 

from their homes or other temporary locations. Preparations in anticipation of IM 

compliance by, among other things, procuring rule compliant documentation, setting up 

custodial arrangements, and establishing internal processes for the calculation, collection, 

and posting, are more difficult to accomplish when personnel are working remotely. 

Undertaking the regular rulemaking proceedings would therefore be impracticable 

to provide the immediate relief market participants need to focus on immediate COVID19 response. Delays in the response could exacerbate the adverse impact of the pandemic 

on these entities’ operations and detract from more urgent operational matters. 

The next compliance phase commences on September 1, 2020. Entities coming 

into scope need to prepare for months in advance to comply with the IM requirements. 

These preparations may be affected by the entities’ reduced operational capacity. A 

compliance delay until September 1, 2021, will alleviate the operational burden. This 

militates against the delay needed to conduct the regular notice and comment rulemaking.

The Commission for good cause also finds that notice and public procedure 

thereon are contrary to the public interest in the context of the COVID-19 national 

emergency. As explained above, participants in the uncleared swaps markets have an 

immediate need for operational flexibility due to the COVID-19 pandemic. The 

Commission has determined that issuing this Interim Final Rule, to be effective 

immediately upon publication in the Federal Register, is crucial to alleviate the burden 

associated with the exchange of regulatory IM for entities whose operations may be 

already strained given the effect of COVID-19 on their operations. Providing a notice 
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and comment period pursuant to normal rulemaking process would delay relief and thus 

be contrary to the public interest. 

For the above reasons, the Commission’s implementation of this rule as an 

Interim Final Rule, with provision for post-promulgation public comment, is in 

accordance with section 553(b) of the APA.46 

Similarly, for the same reasons set forth above under the discussion of section 

553(b)(B) of the APA, the Commission, for good cause, finds that no transitional period, 

after publication in the Federal Register, is necessary before the amendment to § 23.161

made by this Interim Final Rule becomes effective. Accordingly, this Interim Final Rule

shall be effective immediately upon publication in the Federal Register. 

B. Regulatory Flexibility Act.

The Regulatory Flexibility Act47 requires federal agencies to consider whether the 

rules they propose will have a significant economic impact on a substantial number of 

small entities and, if so, to provide a regulatory flexibility analysis regarding the

economic impact on those entities. Because, as discussed above, the Commission is not 

required to publish a notice of proposed rulemaking for this rule, a regulatory flexibility 

analysis is not required.48

C. Paperwork Reduction Act.

The Paperwork Reduction Act of 1995 (“PRA”)49 imposes certain requirements 

on Federal agencies, including the Commission, in connection with their conducting or 

 46 5 U.S.C. 553(b)(B); 553(d)(3). 47 5 U.S.C. 601 et seq. 48 See 5 U.S.C. 603(a).

49 44 U.S.C. 3501 et seq.
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sponsoring any collection of information, as defined by the PRA. The Commission may 

not conduct or sponsor, and a person is not required to respond to, a collection of 

information unless it displays a currently valid Office of Management and Budget 

(“OMB”) control number. 

The Commission believes that this Interim Final Rule does not impose any new 

recordkeeping or information collection requirements, or other collections of information 

that require approval of OMB under the PRA. 

D. Cost-Benefit Considerations

Section 15(a) of the CEA requires the Commission to consider the costs and 

benefits of its actions before promulgating a regulation under the CEA. Section 15(a) 

further specifies that the costs and benefits shall be evaluated in light of the following 

five broad areas of market and public concern: (1) protection of market participants and 

the public; (2) efficiency, competitiveness, and financial integrity of futures markets; 

(3) price discovery; (4) sound risk management practices; and (5) other public interest 

considerations. The Commission considers the costs and benefits resulting from its 

discretionary determinations with respect to the section 15(a) considerations.

This Interim Final Rule revises the compliance schedule for the CFTC Margin 

Rule by deferring compliance with the IM requirements from September 1, 2020, to

September 1, 2021, for CSEs and covered counterparties with an AANA ranging from 

$50 billion up to $750 billion,. 

The baseline against which the benefits and costs associated with the Interim 

Final Rule are compared is the uncleared swaps markets as they exist today and the 

current compliance schedule. As discussed in both the CFTC Margin Rule and the April 
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2020 Final Rule, the existing compliance schedule represented an attempt to balance the 

costs and benefits of requiring margin for uncleared swaps for different entities. For 

example, the CFTC Margin Rule noted that “[t]he compliance dates have been structured 

to ensure that the largest and most sophisticated CSEs and counterparties that present the 

greatest potential risk to the financial system comply with the requirements first. These 

swap market participants should be able to make the required operational and legal 

changes more rapidly and easily than smaller entities [that] engag[e] in swaps less 

frequently and pose less risk to the financial system.”50 As discussed below, the COVID19 pandemic has raised the cost of compliance for the next cohort of entities, and hence 

altered the calculus in setting the CFTC Margin Rule’s compliance schedule, which is 

based on balancing costs and benefits.

1. Benefits

As described above, the Interim Final Rule defers compliance with the IM 

requirements for CSEs and their covered counterparties subject to IM compliance 

beginning on September 1, 2020. The Interim Final Rule creates a benefit as it is 

intended to mitigate the disruptive effect of COVID-19 and the attendant market 

volatility by permitting firms to allocate their resources to ensure proper business 

continuity and management of risks brought about by the pandemic. 

Starting in March, 2020, entities that trade uncleared swaps have experienced 

diminished operational capacity, due to stay-at-home orders, closures, and other 

 50 Margin Requirements for Uncleared Swaps for Swap Dealers and Major Swap Participants, 81 FR at 

676.
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community nonpharmaceutical interventions.

51 These entities are currently conducting 

business operations remotely and employees are performing critical business functions 

from their homes or other temporary locations. 

With reduced operational capacity, preparations to come into compliance with the 

IM requirements in the next phase of the compliance schedule represent a challenge to 

these entities. Compliance will require procuring documentation addressing the 

exchange of regulatory IM, setting up custodial arrangements, and establishing processes

for the calculation, posting, and collection of IM, among other things. Absent the Interim 

Final Rule, which delays compliance with the IM requirements, some market participants 

may be unable to secure necessary documentation and establish processes for the 

exchange of IM by the September 1, 2020 deadline. As a result, these entities may be 

required to cease uncleared swap trading in September, with a resulting reduction in their 

ability to hedge their risk. The inability of some entities to trade uncleared swaps may 

reduce liquidity in this market, and thereby potentially harm other traders as well.

Another potential benefit of the Interim Final Rule is that it would mitigate the 

effect on entities that would have otherwise been required to collect and post IM 

beginning on September 1, 2020, under the April 2020 Final Rule. Many of these entities 

would likely have reduced cash reserves due to the effects of COVID-19 on their 

business operations. For these firms, the compliance delay in the Interim Final Rule may

mitigate the temporary cash constraint by eliminating or suspending the cost of IM 

collateralization, allowing for continued hedging and the management of risks posed by

 51 See supra note 45.
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the pandemic. By extending the September 1, 2020 compliance deadline, the Interim 

Final Rule defers the timeline for compliance, thereby promoting diligent risk 

management and allowing entities who might be precluded from trading uncleared swaps 

to continue to hedge using uncleared swaps. 

2. Costs

The Interim Final Rule delays compliance with the IM requirements by one year 

for CSEs and covered counterparties that are subject to the September 1, 2020 

compliance deadline. Uncleared swaps entered into between September 1, 2020, and the 

new deadline of September 1, 2021, may be treated as legacy swaps exempt from the IM 

requirements and, as such, lesser amounts of collateral would be collected to offset the 

risk of uncleared swaps, potentially increasing the risk of contagion and systemic risk to 

the United States.

52 

In addition, many entities in advance of the nearing September 1, 2020 deadline

may have already engaged in preparations for the exchange of regulatory IM, procuring 

compliant documentation and setting up processes for the exchange of IM. Given the 

extension of the compliance deadline, these entities would likely need to re-negotiate the 

existing documentation and refresh processes put into place as the new compliance 

deadlines approach and would thus incur additional costs to come into compliance with 

the IM requirements. 

The Interim Final Rule provides relief to entities whose uncleared swap portfolios 

tend to be smaller than the portfolios of entities that came into scope in earlier phases. 

 52 See supra note 40 for the definition of “legacy swaps.”
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The decision to defer the compliance date of September 1, 2020, to September 1, 2021, 

affects slightly fewer than 200 entities, representing approximately 8% of AANA across 

all phases, as estimated by the OCE. This modest share of notional amount spread across 

many small entities likely means that the uncollateralized swaps entered into by these 

entities—taking into account that no exchange of IM is required by the CFTC Margin 

Rule until the initial margin threshold amount has been exceeded53—pose less risk to the 

financial markets than the risk posed by uncleared swaps entered into by entities that

have already come into the scope of IM compliance. 

3. Section 15(a) Considerations 

In light of the foregoing, the CFTC has evaluated the costs and benefits of this 

Interim Final Rule pursuant to the five considerations identified in section 15(a) of the 

CEA as follows:

(a) Protection of Market Participants and the Public

As discussed above, as a result of the COVID-19 pandemic, entities trading 

uncleared swaps are facing a reduction in their operational capacities due to stay-at-home 

orders, closures, and other community nonpharmaceutical interventions54 to contain the 

spread of the virus and slow its progress. To alleviate the effect on entities nearing the 

September 1, 2020 deadline for compliance with the IM requirements, the Interim Final 

Rule delays compliance by one year for those entities, allowing them to continue to trade 

uncleared swaps and hedge their risk without incurring the full costs and operational 

demands of preparing for compliance while simultaneously responding to the COVID-19 

 

54 See supra note 45.
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pandemic. 

The Interim Final Rule also allows entities that would otherwise be focused on 

implementing regulatory margin requirements, in order to continue to trade uncleared 

swaps, to instead focus on and respond to the challenges posed by COVID-19. 

Because the Interim Final Rule delays the implementation of mandatory IM for 

uncleared swaps, there may not be as much IM posted to protect the financial system as 

would be the case if the Interim Final Rule were not promulgated. This could potentially 

make market participants’ positions more risky.

(b) Efficiency, Competitiveness, and Financial Integrity of Markets

Entities nearing the September 1, 2020 deadline for compliance with the IM 

requirements may face difficulties in preparing to exchange regulatory IM given the 

reduced operational capacity as a result of COVID-19. By extending the compliance 

deadline for these entities by one year, the Interim Final Rule may enhance efficiencies in 

several ways, as this extension allows these entities to shift their focus to emerging risks 

and to act diligently to comply with the IM requirements by the revised deadlines. As 

such, the Interim Final Rule promotes the financial integrity of the markets. 

The Commission acknowledges that delaying compliance with the IM 

requirements will result in the collection of less IM overall, potentially making the 

uncleared swaps markets more susceptible to financial contagion where the default of one 

counterparty could lead to subsequent defaults of other counterparties. This could 

potentially harm market integrity. However, because this extension covers a relatively 

smaller share of the swaps market, the Commission believes that such a contagion is less 

likely to occur during the limited extension period.
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(c) Price Discovery

Delaying the margin requirement for one year for some entities may have an 

effect on trading behavior, and consequently, may potentially have an effect on price 

discovery. Postponing the requirement may allow more firms to trade uncleared swaps 

(i.e., those who would have an AANA above $50 billion based on March-May 2020, yet 

could not comply with the IM requirements by September 2020). This, in turn, could 

make the uncleared swaps market more liquid, so that trading would be more likely to 

result in prices that reflect fundamentals. 

(d) Sound Risk Management

By deferring the September 1, 2020 deadline by one year, the Interim Final Rule 

will have the effect of relieving some of the burden on managerial resources, at a time 

when such resources are strained from the COVID-19 outbreak. As such, the Interim 

Final Rule allows covered entities to more readily undertake proper business continuity 

measures and address the market, liquidity, operational, and other risks brought about by 

the pandemic. In this sense, the Interim Final Rule promotes sound risk management.

Uncleared swaps entered into during the one year compliance delay may be 

treated as legacy swaps exempt from the IM requirement. As such, less collateral would 

be collected to offset the risk of uncleared swaps, increasing the risk of contagion and 

systemic risk to the United States. 

As noted above, the Interim Final Rule addresses entities whose uncleared swap 

portfolios tend to be smaller than entities that came into scope in earlier phases, 

comprising approximately 200 entities that represent 8% of total AANA, as estimated by 
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the OCE.55 This modest share of notional amount spread across those entities likely 

means that the uncollateralized swaps entered into by these entities during the one year 

delay pose relatively less risk to the financial markets than the swaps entered into by the 

entities with larger swap portfolios that are already subject to the IM requirements.

(e) Other Public Interest Considerations

The Interim Final Rule amends the CFTC Margin Rule consistent with the revised 

BCBS/IOSCO margin framework, promoting harmonization with international and 

domestic margin regulatory requirements and reducing the potential for regulatory 

arbitrage.

4. Request for Comments on Cost-Benefit Considerations

The Commission invites public comment on its cost-benefit considerations, 

including the section 15(a) factors described above. Commenters are also invited to 

submit any data or other information that they may have quantifying or qualifying the 

costs and benefits of the proposed amendment with their comment letters.

D. Antitrust Laws

Section 15(b) of the CEA requires the Commission to “take into consideration the 

public interest to be protected by the antitrust laws and endeavor to take the least 

anticompetitive means of achieving the purposes of this Act, in issuing any order or 

adopting any Commission rule or regulation (including any exemption under section 4(c) 

or 4c(b)), or in requiring or approving any bylaw, rule, or regulation of a contract market 

or registered futures association established pursuant to section 17 of this Act.”56

 55 See OCE Initial Margin Phase 5 Study at 4. 56 7 U.S.C. 19(b).
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The Commission believes that the public interest to be protected by the antitrust 

laws is generally to protect competition. The Commission requests comment on whether 

the Interim Final Rule implicates any other specific public interest to be protected by the 

antitrust laws.

The Commission has considered the Interim Final Rule to determine whether it is 

anticompetitive and has preliminarily identified no anticompetitive effects. The 

Commission requests comment on whether the Interim Final Rule is anticompetitive and, 

if it is, what the anticompetitive effects are.

Because the Commission has preliminarily determined that the Interim Final Rule

is not anticompetitive and has no anticompetitive effects, the Commission has not 

identified any less anticompetitive means of achieving the purposes of the Act. The 

Commission requests comment on whether there are less anticompetitive means of 

achieving the relevant purposes of the Act that would otherwise be served by adopting 

the Interim Final Rule.

List of Subjects in 17 CFR Part 23

Capital and margin requirements, Major swap participants, Swap dealers, Swaps.

For the reasons stated in the preamble, the Commodity Futures Trading 

Commission proposes to amend 17 CFR part 23 as follows:

PART 23—SWAP DEALERS AND MAJOR SWAP PARTICIPANTS

1. The authority citation for part 23 continues to read as follows:

Authority: 7 U.S.C. 1a, 2, 6, 6a, 6b, 6b-1,6c, 6p, 6r, 6s, 6t, 9, 9a, 12, 12a, 13b, 

13c, 16a, 18, 19, 21.

Section 23.160 also issued under 7 U.S.C. 2(i); Sec. 721(b), Pub. L. 111-203, 124 

Stat. 1641 (2010).
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1. Amend § 23.161 by revising paragraph (a)(6) as follows.

§ 23.161 Compliance dates.

(a) Covered swap entities shall comply with the minimum margin requirements 

for uncleared swaps on or before the following dates for uncleared swaps entered into on 

or after the following dates:

* * * * * 

(6) September 1, 2021 for the requirements in §23.152 for initial margin for any 

uncleared swaps where both—

(i) The covered swap entity combined with all its margin affiliates; and

(ii) Its counterparty combined with all its margin affiliates have an average daily 

aggregate notional amount of uncleared swaps, uncleared security-based swaps, foreign 

exchange forwards, and foreign exchange swaps in March, April, and May 2021 that 

exceeds $50 billion, where such amounts are calculated only for business days; and 

where

(iii) In calculating the amounts in paragraphs (a)(6)(i) and (ii) of this section, an 

entity shall count the average daily notional amount of an uncleared swap, an uncleared 

security-based swap, a foreign exchange forward, or a foreign exchange swap between 

the entity and a margin affiliate only one time and shall not count a swap that is exempt 

pursuant to § 23.150(b) or a security-based swap that is exempt pursuant to section 

15F(e) of the Securities Exchange Act of 1934 (15 U.S.C. 78o.10(e)).

* * * * *

Issued in Washington, DC, on May [ ], 2020, by the Commission.
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Christopher Kirkpatrick,

Secretary of the Commission.