CFTC to finish swaps margin rule this year

OREANDA-NEWS. September 30, 2015. The Commodity Futures Trading Commission (CFTC) is on track to finalize a long-awaited rule setting margin requirements for uncleared swaps by the end of 2015, agency chairman Timothy Massad said today.

The CFTC for four years has been working on the rule, which would implement part of the Dodd-Frank financial reform law requiring major swap dealers other major traders to post and collect margin on swaps traded outside of a central clearinghouse. The agency has proposed to exempt commercial end-users from the margin requirements.

The rule is important for the energy industry because while most energy contracts are now traded on futures exchanges, some industry groups continue to rely on bilateral energy swaps. The margin rule will be "critical" to reducing the risks of swaps and to the financial system as a whole, Massad said today at a financial industry conference in Washington.

The CFTC has repeatedly delayed finalizing the margin rule in response to industry concerns. The agency proposed the first version of the rule in 2011 and re-proposed it in 2014. Massad said the agency now aims to finalize the rule before by the end of the year, revising an earlier plan to finish the rule by summer.

The margin requirements will begin to take effect next year, Massad said today, so the rule aligns with an implementation schedule developed by European and Japanese regulators. The CFTC last year proposed to phase in the rule beginning on 1 December 2015 and ending on 1 December 2019, but the agency has since pushed back that schedule to start sometime in 2016.

After finishing the margin rule, the CFTC will re-proposed rules related to capital requirements for swap dealers and major swap participants. Massad said this new proposal will "refresh" regulations the agency initially proposed in 2011.