MFA submitted the attached supplemental comment letter to the U.S. prudential regulators during the reopened comment period for their proposed rulemaking on “Margin and Capital Requirements for Covered Swap Entities” in which it sets forth the following six positions:
- Internationally uniform margin requirements;
- A single compliance date for the final margin rules for all uncleared swaps for all market participants;
- Requiring swap dealers to transfer variation margin to counterparties on uncleared swaps with financial entity counterparties;
- MFA appended its accompanying portfolio margining letter to advocate for the continued use of portfolio margining arrangements across suitably correlated cleared products and non-cleared swaps in a buy-side firm’s portfolio that are subject to a cross-product master netting agreement;
- Requiring dealers to provide a transparent model for determining initial margin (though dealers could collect more margin from a less creditworthy counterparty); and
- MFA urged the prudential regulators to adopt risk-based margin requirements that are appropriately tailored to address the risks posed by the relevant non-cleared swap transaction, which MFA argues would have the effect of substantially lowering initial margin requirements for reasons including that the regulators have overstated the time necessary to liquidate uncleared swap positions.
Click here to view letter in full (links externally to MFA website).