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CFTC Issues Guidance on Initial Margin Documentation Requirements

The Division of Swap Dealer and Intermediary Oversight (DSIO) of the Commodity Futures Trading Commission has issued an advisory clarifying that the initial margin documentation requirement for swap dealers does not apply until the initial margin amount exceeds the regulatory posting threshold of $50 million (which is measured on a group basis). More specifically, DSIO’s advisory provides that swap dealers subject to the CFTC’s margin requirements are not required to complete documentation governing the posting, collection and custody of initial margin until the amount of initial margin exchangeable between the swap dealer and a counterparty exceeds $50 million. However, because the CFTC also makes the point that it expects that a swap dealer will take appropriate steps to have the required initial margin documentation fully executed on before the date the initial margin exposure threshold is reached, a dealer faces the practical challenges of estimating when that event will occur and starting the documentation effort well in advance of that estimated date.

More information, including access to CFTC Letter No. 19-16, is available here.

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About this Author

Guy Dempsey Jr., Bank Regulations Legal Specialist, Katten Muchin
Partner

Guy C. Dempsey Jr. concentrates his practice on derivatives and structured products and on bank regulation. He advises clients on derivatives transactions of all types across all asset classes, as well as on the corporate governance, regulatory, collateral, compliance, insolvency and litigation issues associated with such products.

Much of Guy’s work involves helping bank and non-bank clients analyze the details and impact of the Dodd-Frank Act. He maintains deep knowledge of the banking laws and regulations relating to capital markets activities....

212-940-8593
James M. Brady, Katten Muchin Law Firm, Finance Attorney
Associate

James Brady concentrates his practice in financial services matters.

While in law school, James was an editor of the Michigan Journal of International Law. He also served as a judicial intern to the Honorable Stephen J. Markman of the Michigan Supreme Court. http://www.kattenlaw.com/James-Brady

312-902-5362