Joint Trades Letter on Interim Final Rule Concerning the Swaps Margin Rule

Legislative and Regulatory Affairs Division
Office of the Comptroller of the Currency
RIN 1557-AE98
Docket ID OCC-2020-0027

Alfred M. Pollard, General Counsel
Federal Housing Finance Agency
Attn: Comments/RIN 2590-AB03

Ann E. Misback, Secretary
Board of Governors of the Federal Reserve System
Docket No. R-1721, RIN No. 7100-AF92

Robert E. Feldman, Executive Secretary
Federal Deposit Insurance Corporation
RIN 3064-AF55

Alfred M. Pollard, General Counsel
Federal Housing Finance Agency
Attn: Comments/RIN 2590-AB03

David P. Grahn, Director
Office of Regulatory Policy
Farm Credit Administration
RIN 3052-AD34

To Whom It May Concern,

The International Swaps and Derivatives Association (ISDA), Managed Funds Association (MFA), the U.S. Chamber’s Center for Capital Markets Competitiveness (CCMC), the Investment Company Institute (ICI), the Securities Industry and Financial Markets Association (SIFMA), SIFMA Asset Management Group (SIFMA AMG), the Global Financial Markets Association (GFMA), the Global Foreign Exchange Division (GFXD) of GFMA, American Bankers Association (ABA), ABA Securities Association (ABASA), the Investment Adviser Association (IAA), and the Institute of International Bankers (IIB) (together, the Associations) would like to express our appreciation for the swift and decisive actions taken by the U.S. prudential regulators (collectively, the “Agencies”) to provide timely and valuable regulatory relief to market participants in response to the global COVID-19 pandemic. In particular, we would like to express our gratitude for the Agencies’ support of the statement3 and revised version of the Final Framework on Margin Requirements for Non-Centrally Cleared Derivatives (Final Framework) issued on April 3, 2020 by the Basel Committee on Bank Supervision (BCBS) and the International Organization of Securities Commissions (IOSCO) in response to the letter submitted on March 25, 20205 by the Associations and other global financial market associations requesting a delay of the final phase-in periods for regulatory initial margin.

The Associations strongly support the Interim Final Rule6 issued in respect of the Agencies’ Margin and Capital Requirements for Covered Swap Entities (the “Margin Rules”) which defers the compliance dates for application of initial margin (IM) requirements for Covered Swap Entities (CSEs) and covered counterparties with an average aggregate notional amount
exceeding $50 billion (Phase 5) and material swaps exposure (i.e., $8 billion) (Phase 6) to 2021 and 2022 respectively. We believe deferrals of the Phase 5 and 6 compliance dates are necessary to facilitate orderly preparation for the exchange of regulatory IM between CSEs and the hundreds of covered counterparties with thousands of bilateral relationships expected to come into scope of these requirements during these final phases which have been, and continue to be, profoundly impacted by the global pandemic.

While our members have robust business continuity plans in place that are functioning well, given the overwhelmingly disruptive nature of the pandemic, our members’ efforts to prepare for
the final phases of regulatory IM have been severely impacted due to personnel, systems and other issues. Although the derivatives industry has adjusted to alternative working situations, the length and severity of the ongoing impact to operations cannot be predicted. Therefore, we greatly appreciate the additional time afforded to market participants by the Agencies and global regulators to come into compliance with the IM regulations. The Associations support the adoption of the Interim Final Rule as proposed and look forward to its finalization.

In addition, the Associations note our support of the issuance of the Notices of Proposed Rulemaking (NPRs) approved by the Commodity Futures Trading Commission (CFTC) on August 14, 2020 (the August 14, 2020 NPRs) which amend the CFTC’s Margin Requirements for Uncleared Swaps for Swap Dealers and Major Swap Participants (the CFTC Margin Rule) based on some of the recommendations in the Recommendations to Improve Scoping and Implementation of Initial Margin Requirements for Non-Cleared Swaps (Margin Subcommittee Report). The Margin Subcommittee Report was adopted by CFTC’s Global Markets Advisory Committee (GMAC) on July 22, 2020, and the GMAC recommended to the CFTC that it consider adopting the report’s recommendations.

We commend the swift action taken by the CFTC to consider the Margin Subcommittee Report and propose amendments which would address several of the recommendations. We request that the Agencies amend the Margin Rules to align with any amendments that the CFTC adopts from the August 14, 2020 NPRs in order to effect domestic and global harmonization and provide regulatory clarity and certainty to prudentially-regulated CSEs and their covered counterparties. We also recommend that the Agencies coordinate with any future efforts by the CFTC to address the remaining recommendations in the Margin Subcommittee Report.

We would be happy to discuss these matters at your convenience.

Sincerely,

Tara Kruse
Global Head, Infrastructure, Data and Non-Cleared Margin
ISDA

Executive Vice President
Center for Capital Markets Competitiveness
U.S. Chamber of Commerce

Jennifer W. Han
Managing Director & Counsel, Regulatory Affairs
Managed Funds Association

Kyle Brandon
Managing Director, Head of Derivatives Policy
SIFMA

Tom Quaadman
Executive Vice President
Center for Capital Markets Competitiveness
U.S. Chamber of Commerce

Sarah A. Bessin
Associate General Counsel
Investment Company Institute

Timothy W. Cameron, Esq.
Asset Management Group – Head and, Managing Director
Securities Industry and Financial Markets Association

Allison Parent
Executive Director
GFMA

Ananda Radhakrishnan
Vice President, Bank Derivatives Policy
American Bankers Association

Gail C. Bernstein
General Counsel
Investment Adviser Association

James Kemp
Managing Director
Global Foreign Exchange Division, GFMA

Ananda Radhakrishnan
General Counsel
ABA Securities Association

Chief Executive Officer
Institute of International Bankers