Uncleared Swaps—Proposed Amendments to Margin Requirements: Prudential Regulators Propose Rules Amending Current Swap Margin Requirements for Covered Swap Entities

Sullivan & Cromwell LLP - October 4, 2019
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On September 18, 2019, the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Farm Credit Administration and the Federal Housing Finance Agency proposed rules that would amend their regulations requiring swap dealers and security-based swap dealers to post and collect margin with their counterparties for uncleared swaps.  The proposal would make the following changes: (i) most significantly, repeal the requirement that affiliates of the dealer post initial margin to the dealer; (ii) permit legacy swaps to retain legacy status in the event that amendments are made in order to implement a transition away from references to interbank offered rates, or in connection with certain routine life-cycle activities; and (iii) extend the initial margin requirement compliance date for certain smaller counterparties and clarify the timing by which trading documentation must be completed.