CFTC issues grace period for Dodd-Frank variation margin compliance

CFTC issues grace period for Dodd-Frank variation margin compliance

The US Commodity Futures Trading Association (CFTC) has provided market participants with relief from compliance with upcoming variation margin (VM) rules. Edward Ivey, an associate in the New York office of Linklaters LLP, says the important point to remember is that the CFTC relief is not a blanket relief, it applies to swap dealers (SDs) only for not being in compliance with CFTC rules as of 1 March 2017 and they must act in good faith to progress with compliance.

Original news

The CFTC has issued relief delaying the upcoming 1 March 2017 deadline for compliance by SDs registered with the CFTC with its Dodd-Frank VM rules for uncleared swaps until 1 September 2017.

Why has the CFTC delayed implementation of the VM rules?

The CFTC, along with other global regulators, have received numerous requests from market participants who have asked for delays and/or relief from the 1 March 2017 compliance date. Leading up to the CFTC’s relief, the International Swaps and Derivatives Association (ISDA), the Global Financial Markets Association, including its Global FX Division (GFMA), the Investment Association (IA), Financial Services Roundtable (FSR), the ABA Securities Association (ABASA), and the American Council of Life Insurers (ACLI) co-signed a letter that went to many of the global regulators, including the CFTC, formally requesting on behalf of their members for a forbearance from the 1 March compliance date.

This letter was in addition to earlier letters from the Securities Industry and Financial Markets Association’s Asset Management Group (SIFMA AMG), the Investment Adviser Association (IAA), the Committee on Investment of Employee Benefit Assets Inc (CIEBA) and the ERISA Industry Committee (ERIC). All such letters similarly requested forbearance from the 1 March 2017 compliance date and some type of transitional relief. Data was presented to the CFTC and other regulators around the world that a small percentage of necessary CSAs were in place for compliance, despite

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About the author:

Meet Emma:

1.Banking and finance lawyer with experience in derivatives, debt capital markets, securitisation and structured finance in London and Paris

2.Likes ballet, playing the harp and holidays

3.Thinks the law is always changing!

Emma trained and qualified at Allen & Overy LLP and worked in their derivatives and structured finance teams in London and Paris.  She then joined the foreign exchange prime brokerage legal team at Deutsche Bank before spending 4 ½ years with Crédit Agricole CIB advising the fixed income and derivatives desk.