Proposed Margin Requirements for Uncleared Swaps under Dodd-Frank: Federal Reserve Board, OCC, FDIC, Farm Credit Administration, Federal Housing Finance Agency and CFTC Propose Rules for Minimum Margin and Capital Requirements for Certain Dealers and Major Participants in Swaps and Security-Based Swaps

Sullivan & Cromwell LLP - April 18, 2011

On April 12, 2011, the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, the Farm Credit Administration and the Federal Housing Finance Agency (collectively, the “Prudential Regulators”) issued proposed rules to establish minimum initial and variation margin collection requirements for certain swap dealers and major swap participants. On April 14, 2011, the Commodity Futures Trading Commission (the “CFTC”) issued proposed rules covering the same subject matter, which are similar in a number of respects to the proposal made by the Prudential Regulators. If adopted, these proposed rules would require that swap dealers and major swap participants collect minimum and variation margin amounts from swap counterparties depending on the type of counterparty. The Prudential Regulators’ Proposed Rule would establish minimum margin requirements for all categories of counterparties, including nonfinancial end users. By contrast, the CFTC Proposed Rule does not establish minimum margin requirements for nonfinancial end users. Comments are due to the Prudential Regulators by June 24, 2011 and to the CFTC by 60 days after publication in the Federal Register.