September 4, 2014

Proposed Margin Rules for Un-Cleared Swaps | US & EU Rules

The FDIC has published their proposed rules for IM on un-cleared OTC business, with some differences to the EU proposals and the original BCBS paper.

In an earlier article over here I summarised the proposals for IM on un-cleared OTC business. Now the FDIC in the US has announced their own rule drafting to implement a solution to the BCBS proposal, see this announcement here. The paper from the FDIC is attached below. The EBA paper for Europe on the same topic is attached below and can be downloaded here (PDF) and announced via this page at the EBA website.

Some differences are occurring between the BCBS paper and the US and EU implementations, whilst reading 211 pages from the FDIC is too time consuming, a quick scan highlights some points:

  • US: Firms must execute a new master netting agreement (including a CSA I assume) to cover OTC business from 1st Dec onwards, to segregate the pre- and post- portfolios. (see page 32 of the PDF)
  • US: The IM requirements also apply to swaps between entities within the same corporate group (see page 44) – which is a big deal. EMIR provides an exemption for such transactions, so firms have a bigger impact from the proposed FDIC rules than EU firms.
  • US: Threshold for inclusion from Dec 1st is $3bn aggregate average notional, EU is €8bn – a difference which will mean EU firms may be incorproated into the US regime when trading with US counterparties (page 144)

The actual proposed rules from the FDIC start on page 155 of their PDF.  I don't have time to exhausitvely analyse the two texts, so anyone else who happens to carry out such a comparison is welcome to make contact and get credit if we can post such a comparison here.

Thanks to Nick Newport at Intedelta for a clarification on the inclusion thresholds.


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