Swap dealers failing to post margin with custodians have been granted an extension period by the US Commodity Futures Trading Commissions (CFTC.)
The extension has reportedly been put down to custodian hold-ups with a lack of custodial accounts for banks to post initial margin for their uncleared derivatives.
Collateral requirements for uncleared derivatives came into force on 1 September for the US, Canada and Japan, despite hopes from many dealers that it would delay implementation of the rules alongside Europe, Australia, Singapore and Hong Kong.
This has caused many dealers to implement last minute systems to comply, and therefore the CFTC’s Division of Swap Dealer and Intermediary Oversight (DSIO) has given swap dealers until 3 October to set up a custodial account for initial margin.
The DSIO has granted this extension period, subject to certain conditions, providing that swap dealers are making “diligent good faith implementation efforts in this period of transition.”
“CFTC staff has been made aware that some dealers have not been able to complete all documentation required to comply with the custodial arrangements required by CFTC rules, due to the limited number of providers of such services and the volume of custodial agreements that market participants are requesting,” said CFTC chairman Timothy Massad.