Swap Dealers Get CFTC Collateral Relief

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By Richard Hill

Swap dealers will have a six-month reprieve from complying with new collateral requirements for uncleared swaps, CFTC staff said Feb. 13 (CFTC No-Action Letter No. 17-11, 2/13/17).

The “grace period"–-from March 1 to Sept. 1--will prevent what could have been a significant disruption of money managers’ ability to hedge assets contained in workers’ retirement plans, the Commodity Futures Trading Commission’s Division of Swap Dealer and Intermediary Oversight said. Under the rule, swap dealers and financial end-user customers will have to post variation collateral--which is collected on a continuing basis, as opposed to initial collateral--on uncleared swaps transactions beginning March 1.

The relief applies to swap dealers that can’t comply with new variation collateral requirements because they couldn’t complete necessary credit support documentation with a particular counterparty. It also applies when dealers, acting in good faith, need more time to implement procedures to settle variation collateral in accordance with the new requirements.

In a separate no-action letter, DSIO offered relief to dealers that don’t comply with collateral rules when transacting with an institution that employs more than one asset manager (CFTC No-Action Letter No. 17-12, 2/13/17).

To contact the reporter on this story: Richard Hill in Washington at rhill@bna.com

To contact the editors responsible for this story: Phyllis Diamond at pdiamond@bna.com; Seth Stern at sstern@bna.com

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