CFTC to Consider Raising Margin Levels for Uncleared Derivatives

The U.S. Commodity and Futures Trading Commission (CFTC) is considering raising margin levels for derivatives traded outside of clearing houses, says the head of the agency.
By Joe Parsons(2147488729)
The U.S. Commodity and Futures Trading Commission (CFTC) is considering raising margin levels for derivatives traded outside of clearing houses, says the head of the agency.

Timothy Massad, chairman of the CFTC, said the U.S. will have to harmonize its rules on margin levels following discussions with European and Japanese regulators.

“I am willing to consider some changes to our proposed rule in order to ensure greater consistency,” he says.

“The threshold for when margin is required is currently lower in our proposed rule than in the proposals in Europe and Japan, and I believe we should harmonize those even if it means increasing ours.”

Massad says a decision on raising margin levels could be finalized by the summer of this year, and will incorporate a delay in the implementation of the rules.

A decision to raise the amount of collateral needed for uncleared derivatives could be vital for agreements on the recognition of U.S. clearinghouses by European regulators.

Speaking at an industry conference in December 2014, a senior member of the European Commission criticized the lower margin levels in the U.S., deeming it “anti-competitive” against Europe.

However, any increase in margin levels could be a significant blow for U.S. brokers and futures commission merchants (FCMs), in which many have had to close their swaps desks because of the tough clearing and collateral rules.

Initial margin requirements are expected to be finalized in April, and then rolled out in December 2015 under a phased approach until the final wave is captured in 2019.

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