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CFTC to delay enforcement of margin requirements on certain derivatives trades

Commodity Futures Trading Commission

The CFTC late Monday said it would delay for six months enforcement of variation margin requirements for non-centrally-cleared derivatives trades that were due to go into effect March 1.

The no-action letter from the Commodity Futures Trading Commission’s swap dealer and intermediate oversight division said the agency would maintain the March 1 effective date but would not enforce the rule until Sept. 1.

The March 1 date had been set by the European Market Infrastructure Regulation, the CFTC and five U.S. banking regulators — the Federal Reserve, Federal Deposit Insurance Corp., Office of the Comptroller of the Currency, Federal Housing Finance Agency and Farm Credit Administration. It’s part of International Organization of Securities Commissions and Basel Committee regulations on overall margin requirements for non-centrally-cleared derivatives. Initial margin, based on worst-case losses in a default, is being phased in gradually through September 2020.

Other regulators enforcing the rule have not announced any delay in enforcing the March 1 deadline. CFTC Acting Chairman J. Christopher Giancarlo said last month that the agency would take steps to ease the March 1 deadline that will require pension funds and financial firms to post cash, gold or select debt securities.

“The CFTC remains committed to the March 1 date, agreed with its fellow U.S. and overseas regulators, for posting of variation margin on swaps transactions between swaps dealers and their financial end-user customers,” Mr. Giancarlo said in a separate news release. “Nevertheless, the facts on the ground cannot be ignored that as much as 90% of those end-users are not ready to meet the new requirements despite their best efforts to do so.”

Mr. Giancarlo said that while the no-action letter “does not change the scheduled time of arrival for the agreed margin implementation, it just foams the runway to ensure a safe landing.”