Commodity Futures Trading Commission ♦ Division of Clearing and Risk ♦ 202-418-5430

Commodity Futures Trading Commission

Office of Public Affairs

Three Lafayette Centre

1155 21st Street, NW

Washington, DC 20581

www.cftc.gov

Proposed Rules Regarding Margin for Uncleared Swaps

The Commodity Futures Trading Commission (CFTC) is proposing rules to implement section 4s(e) of the 

Commodity Exchange Act. The proposed rules would address margin requirements for uncleared swaps entered 

into by swap dealers (SDs) or major swap participants (MSPs).

Margin requirements will protect the safety and soundness of SD/MSPs and the integrity of the financial system. 

Requiring parties to collect margin will provide them with collateral to cover the risk posed by counterparties with 

open swap positions. Requiring parties to post margin will reduce the ability of firms to take on excessive risk.

The rules would apply to SD and MSPs that are not subject to regulation by the Federal Reserve Board, the Office 

of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Farm Credit Administration’ or 

the Federal Housing Finance Agency (collectively the Prudential Regulators).

The CFTC consulted with the Prudential Regulators as well as with the Securities and Exchange Commission in 

developing the proposed rules. The proposed rules are very similar to the rules recently proposed by the Prudential 

Regulators. The proposed rules are also very similar to international standards issued in 2013 by the Basel 

Committee on Banking Supervision and the International Organization of Securities Commissions.

Products

The rules would apply to uncleared swaps entered into after the effective dates of the regulation (see 

implementation schedule below). The proposal would not apply retroactively.

Market Participants

The rules would apply to those SDs and MSPs that are not subject to oversight by the Prudential Regulators 

(covered swap entities or CSEs). 

The rules would impose margin requirements on (i) trades between CSEs and SDs or MSPs and (ii) trades between 

CSEs and financial end users.

The rules would not impose margin requirements on commercial end users.

Nature and Timing of Margin Requirements

Initial Margin (IM)

The rules would require two-way margin (posting and collecting) for all trades between CSEs and SD/MSPs. 

The rules would require two-way margin for all trades between CSEs and financial end users that have over $3 

billion in gross notional exposure in uncleared swaps.
Commodity Futures Trading Commission ♦ Division of Clearing and Risk ♦ 202-418-5430

Variation Margin (VM)

The rules would require daily payment for all trades between CSEs and SD/MSPs.

The rules would require daily payment for all trades between SD/MSPs and financial end users.

Calculation of IM

The rules would permit the calculation of margin to be based on models or a standardized table.

Models would be required to use a 99% confidence level over 10-day liquidation time.

The rules would permit $65 million threshold below which margin need not be collected.

Calculation of VM

The rules would require the use of methods and inputs that rely on recent trades or third-party valuations.

Forms of Margin

The rules would permit IM to include cash, sovereign debt, government-sponsored debt, investment grade debt 

including corporate and municipal bonds, equities, and gold.

The rules would require VM to be in cash.

Custodial Arrangements

The rules would require IM to be held at independent custodian.

The rules would not permit require rehypothecation of IM.

Implementation Schedule

IM requirements would be phased-in starting Dec 1, 2015 and ending Dec 1, 2019 from the largest participants to 

smaller ones.

VM requirements would be effective Dec 1, 2015.