CFTC chairman asks FRB to issue guidance on implementation of impending Phase Five margin requirements

By Brad Rosen, J.D. In a letter to Federal Reserve Board Vice Chairman Randal Quarles dated April 29, 2019, CFTC Chairman J. Christopher Giancarlo laid out a number of significant issues concerning the “Phase Five” implementation requirements for initial margin on uncleared swaps which are scheduled to take effect in September 2020. New requirements will impose significant costs on smaller firms. Giancarlo explained in the letter that, “As market participants prepare for Phase Five, many of the smaller entities are realizing that, while their notional amounts exceed $8 billion, their calculated margin amounts are less than $50 million.” Identifying the central problem, Giancarlo noted these firms “will soon be required to incur the time and expense of preparing to exchange initial margin even though they will not be required to exchange margin.” Under the current uncleared margin rules, swap market participants do not have to exchange…

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