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 731of the DoddFrank Wall Street Reform and Consumer Protection Act. The proposed rules would address margin requirements 

for uncleared swaps entered into by swap dealers (SDs) or major swap participants (MSPs). 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 CFTC and the prudential regulators have attempted to make their respective 

proposals comparable to the maximum extent practicable.

Market Participants 

The rules would apply to SDs and MSPs that are not subject to oversight by prudential regulators. The rules would 

not impose margin requirements on commercial end users, defined under the proposed rules as non-financial 

entities. 

The margin requirements under the proposed rules would vary by counterparty. In this regard, the rules would 

distinguish between financial entities and non-financial entities. The definition of financial entity is based on section 

2(h)(7)(C) of the Commodity Exchange Act, which addresses the exemption from mandatory clearing. 

For trades between SD/MSPs and other SD/MSPs, the rules would require paying and collecting initial and 

variation margin for each trade. Similarly, for trades between SD/MSPs and financial entities, the rules would 

require the SD/MSP to collect, but not pay, initial and variation margin for each trade, subject in certain 

circumstances to permissible thresholds. 

By contrast, the rule would not require SD/MSPs to pay or collect initial or variation margin from non-financial 

entities. The rule would simply require SD/MSPs to enter into credit support arrangements with their 

counterparties and to abide by those arrangements. 

Products 

The rules would apply to uncleared swaps entered into after the effective date of the regulation. The proposal 

would not apply retroactively.

Initial Margin Calculation 

Initial margin could be calculated using a model that is approved by the Commission and (i) is used by a derivatives 

clearing organization for clearing swaps, (ii) is used by an entity subject to oversight by a prudential regulator or (iii) 

made available for licensing to any market participant by a vendor. If no such model is available, initial margin 

Commodity Futures Trading Commission ♦ Office of Public Affairs ♦ 202-418-5080 
Commodity Futures Trading Commission ♦ Office of Public Affairs ♦ 202-418-5080 

would be calculated by selecting a comparable cleared swap or futures contract and applying a multiplier set forth in 

the rule. All initial margin must cover 99% of 10-day price moves. 

Variation Margin Calculation 

Variation margin would be calculated to cover the current exposure arising from changes in the market value of the 

swap since the trade was executed or the previous time the position was marked to market. Rules previously 

proposed for SDs and MSPs would require that documentation include agreement on the methods, procedures, 

rules, and inputs for determining the value of each swap at any time from execution to the termination, maturity, or 

expiration of the swap. 

Forms of Margin 

SD/MSPs would be required to accept only certain specified assets as initial or variation margin from other 

SD/MSPs or from financial entities. Appropriate haircuts are specified in the proposed rule. 

By contrast, in cases where non-financial entities posted collateral, they would be permitted to post non-traditional 

forms of collateral in accordance with their individually-negotiated agreements. 

Location of Margin 

Collateral for trades between SD/MSPs and other SD/MSP would be required to be held at third-party custodians 

and could not be rehypothecated. SDs and MSPs would be required to offer non-SD/MSPs the opportunity to 

have any initial margin segregated.