Dodd-Frank Developments

On July 23, the Basel Committee on Banking Supervision (BCBS) and the International Organization of Securities Commissions (IOSCO) published a revised framework for mandatory initial margin applicable to swaps that are not cleared with a central clearing party. The key revision was the insertion of an additional year into the implementation schedule for the margin rules.
Continue Reading Delay of Final Implementation of Swap Initial Margin Rules

On July 8, the staff of the Division of Swap Dealer and Intermediary Oversight (DSIO) of the Commodity Futures Trading Commission issued a report containing data and analysis concerning possible exclusions from the calculation of the swap dealer de minimis registration threshold for swaps executed on a regulated exchange and/or cleared by a derivatives clearing organization.
Continue Reading CFTC Report Concerning On-Venue and Cleared Swaps

On April 29, Commodity Futures Trading Commission Chairman Chris Giancarlo sent a letter to Randy Quarles, the Vice Chair for Supervision of the Board of Governors of the Federal Reserve System, in which he proposed that the US regulators responsible for the administering the margin rules for uncleared swaps should collaborate in providing some relief to non-dealer swap market participants who may become subject to initial margin requirements in 2020. The specific relief would be the issuance of the same guidance issued by the Basel Committee on Banking Supervision (BCBS) and the International Organization of Securities Commissions (IOSCO) in March (for more information, see the March 8, 2019 edition of Corporate & Financial Weekly Digest), which stated that in-scope parties do not have to put in place compliant documentation and custodial relationships if there is no expectation that the exposure associated with their swaps will actually exceed the regulatory threshold for posting initial margin ($50 million for the United States).
Continue Reading CFTC Chair Proposes Relief for Phase 5 Initial Margin Implementation

On October 11, the Securities and Exchange Commission demonstrated renewed interest in completing the regulatory regime for security-based swaps (SBS) by re-opening the comment periods for a number of SBS rules that were previously proposed but never adopted. Specifically, the SEC is requesting further comment on the following proposals:
Continue Reading SEC Reopens Comment Period for Unfinished Security-Based Swap Rules

The Commodity Futures Trading Commission KISS initiative has finally produced some substantive results for swap dealers in the form of proposed amendments to Subpart L of the CFTC’s regulations (“Segregation of Assets in Uncleared Swap Transactions”) that were issued for comment on July 24. Subpart L (which encompasses CFTC Regulations 23.700-704) has been problematic for swap dealers since it was adopted early in 2014 because of the compliance challenges created by the extremely complicated and prescriptive nature of these provisions.
Continue Reading CFTC Proposes Improvements to Initial Margin Segregation Rule

On July 17, the Federal Register published proposed changes to the Volcker Rule that were jointly approved by the Federal Reserve Board, the Commodity Futures Trading Commission, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency and the Securities and Exchange Commission. As described in greater detail in the June 1,

On February 21, the US Supreme Court decided Digital Realty Trust, Inc. v. Somers (583 U.S. ____ (2018)), which resolved a circuit split related to whether the anti-retaliation provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act, 124 Stat. 1376 (Dodd-Frank) extend to individuals who have not reported a securities law violation to the Securities and Exchange Commission and, therefore, falls outside of Dodd-Frank’s definition of a “whistleblower.”
Continue Reading Supreme Court Limits Scope of Dodd-Frank Whistleblower Protections

On February 5, the Prudential Regulators—the five federal banking regulators for swap dealers that are banks—proposed technical amendments to their margin rules for uncleared swaps. The amendments aim to harmonize the definition of Eligible Master Netting Agreement (EMNA) in the margin rules with recent changes made to the definition of “Qualifying Master Netting Agreement” (QMNA) in the capital and liquidity rules applicable to banks.
Continue Reading Conforming Amendments Proposed for Bank Swap Margin Rules

On October 13, the Commodity Futures Trading Commission and the European Commission (EC) made three announcements that are significant for cross-border swap activity between the United States and Europe.

  1. CFTC Margin Rule Comparability Determination.

The CFTC has made a determination that the margin rules for uncleared swaps that apply in the European Union are comparable to the CFTC’s margin rules. This determination activates the substituted compliance provisions found in Section 23.160(b)(2)(iii) of the CFTC margin rules that until now have not been available to EU entities registered as swap dealers.
Continue Reading Three Developments Concerning EU-US Cross-Border Swaps

On September 5, the regular settlement cycle for most securities transactions in the United States will change from three days (T+3) to two days (T+2). In order to assist derivative market participants that have existing equity derivative transactions with payment dates based on T+3, the International Swaps and Derivatives Association (ISDA) has developed the 2017 OTC Equity Derivatives T+2 Settlement Cycle Protocol (“T+2 Protocol”).
Continue Reading ISDA To Publish T+2 Protocol