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01 October 2014
On September 3 2014 the Board of Governors of the Federal Reserve System, the Farm Credit Administration, the Federal Deposit Insurance Corporation, the Federal Housing Finance Agency and the Office of the Comptroller of the Currency – in consultation with the US Commodity Futures Trading Commission and the Securities and Exchange Commission – issued a notice of proposed rulemaking to establish margin requirements for swap dealers, major swap participants, security-based swap dealers and major security-based swap participants. The proposed rule, mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act, would establish minimum requirements for the exchange of initial and variation margin between covered swap entities and their counterparties to non-cleared swaps and non-cleared security-based swaps entered into after the proposed rule's applicable compliance dates. The required margin would differ based on the relative risk of the counterparty and of the non-cleared swap or non-cleared security-based swap.
The proposed rule modifies and expands an earlier rule – first released by the agencies in April 2011 – based on comments received on that rule. For example, the proposed rule increases the types of collateral eligible to be posted as initial margin and aims to promote global consistency by generally following the final framework for margin requirements on non-cleared derivatives that the Basel Committee on Banking Supervision and the International Organisation of Securities Commissions adopted in September 2013. The agencies have requested comments on the proposed rule no later than 60 days after publication in the Federal Register.
For further information on this topic please contact Donna M Parisi, Geoffrey B Goldman or Azam H Aziz at Shearman & Sterling LLP by telephone (+1 212 848 4000), fax (+1 212 848 7179) or email (firstname.lastname@example.org, email@example.com or firstname.lastname@example.org).The Shearman & Sterling website can be accessed at www.shearman.com.
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