Under the Commodity Futures Trading Commission's uncleared swap margin rules, participants that do not exceed a $50 million threshold amount for initial margin are exempt, the agency said in an advisory Tuesday.
Until the initial margin threshold amount exceeds that $50 million, documentation governing the posting, collection and custody of the initial margin is not required, the CFTC said. The advisory, issued by the CFTC's division of swap dealer and intermediary oversight, furthers a March statement by the Basel Committee on Banking Supervision and the International Organization of Securities Commissions concerning initial margin implementation. The March statement did not specify documentation, custodial or operational requirements if the bilateral initial margin amount does not exceed a €50 million ($56 million) initial margin threshold.
"This advisory makes clear to CFTC registrants that documentation requirements will not apply until the firms exceed the $50 million initial margin threshold," DSIO Director Matthew Kulkin said in a statement.
The advisory also clarifies that while no specific initial margin documentation is required prior to reaching the $50 million threshold, DSIO expects CFTC-regulated swap dealers to have appropriate risk management systems in place to calculate and monitor initial margin amounts and to act diligently as the amounts approach the $50 million threshold to ensure compliance with the documentation requirements, the CFTC said.