iCFTC Approves a Final Rule to Amend Uncleared Swap Margin Requirements
On November 19, the Commodity Futures Trading Commission approved a final rule to amend its margin requirements for uncleared swaps for swap dealers and major swap participants for which there is no prudential regulator (CFTC Margin Rule). As a part of the Project KISS initiative, the amendments were designed to harmonize the CFTC Margin Rule with related rules that certain prudential regulators have adopted (QFC Rules).
The CFTC Margin Rule establishes minimum requirements for swap dealers and major swap participants to collect and post margin for certain swaps not cleared by a registered derivatives clearing organization or by a derivatives clearing organization exempt from CFTC registration. The amendments to the CFTC Margin Rule revise the definition of “eligible master netting agreement” to confirm that master netting agreements of entities subject to the CFTC Margin Rule are not excluded from the definition of eligible master netting agreement based on the agreements’ compliance with QFC Rules. In addition, the amendments clarify that any uncleared swap entered into before the CFTC Margin Rule’s effective date that is not currently subject to the CFTC Margin Rule margin requirements will not become subject to such requirements if it is amended to comply with QFC Rules.
The final rule amendments go into effect on December 26.
More information on the final rule is available here.
CFTC Announces Agenda for Market Risk Advisory Committee Public Meeting
The Commodity Futures Trading Commission has announced that its Market Risk Advisory Committee will hold a meeting on December 4. The meeting will be held at CFTC’s headquarters in Washington, DC beginning at 9:30 a.m. and is open to the public.
The Committee will receive a report from the Interest Rate Benchmark Reform Subcommittee, followed by panels that will consider (1) clearinghouse risk management and governance; (2) non-default losses in recovery and resolution; (3) central counterparty resolution, the leverage ratio and incentives to clear; and (4) oversight of third-party service providers and vendor risk management.
The full agenda is available here.
CFTC’s LabCFTC Releases Primer on Smart Contracts
On November 27, the Commodity Futures Trading Commission’s LabCFTC released “A CFTC Primer on Smart Contracts” to provide information on a variety of financial technology (FinTech) topics. LabCFTC is a hub designed for the CFTC to engage with the FinTech community.
The primer defines a “smart contract” as “a set of coded computer functions” that may or may not be a binding contractual agreement. Among other attributes, smart contracts can authenticate the identities of parties (and contra-parties), access data to trigger actions based on external stimuli (delivery of an asset, weather conditions, change in a reference rate, etc.), and automate the execution process. The primer also delves into the challenges and risks of smart contracts, as well as the potentially applicable legal frameworks.
More information on the primer is available here.
