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Federal Register / Vol. 86, No. 2 / Tuesday, January 5, 2021 / Rules and Regulations

Issued in Washington, DC, on November 25, 2020, by the Commission.
Robert Sidman, Deputy Secretary of the Commission.

Appendices to Portfolio Reconciliation Requirements for Swap Dealers and Major Swap ParticipantsRevision of Material Terms DefinitionVoting Summary and Chairmans and Commissioners Statements Appendix 1Voting Summary On this matter, Chairman Tarbert and Commissioners Quintenz, Behnam, Stump, and Berkovitz voted in the affirmative. No Commissioner voted in the negative.

Appendix 2Statement of Commissioner Dan M. Berkovitz I support todays interim final rule that will maintain the continuity of swap portfolio reconciliation requirements for swap dealers. In September 2012, the Commission established in regulation 23.502
the requirement for swap dealers to regularly reconcile key material terms of swaps in portfolios with certain counterparties. These portfolios can include hundreds, thousands, and even tens of thousands of individual swap transactions. Regularly reconciling economic terms that determine the periodic payments made on swap portfolios reduces the likelihood of significant disputes and potential payment shortfalls or interruptions.
Reducing these events reduces risk in the financial system, particularly during times of market stress.1
On September 17, 2020, the Commission adopted a final rule revising parts 45, 46, and 49 of its regulations on swap data recordkeeping and reporting requirements. In the amendments, significant changes were made to material terms that are crossreferenced in regulation 23.502. The unintended consequence would be to render the portfolio reconciliation requirement ineffective when the swap data regulations go into effect in approximately 60 days. The IFR
corrects this unintended consequence by reestablishing the same material economic terms identified for regulation 23.502, thereby maintaining the status quo for the portfolio reconciliation requirement. This is a necessary action to maintain the risk reducing effects of that requirement.
FR Doc. 202026536 Filed 1421; 8:45 am jbell on DSKJLSW7X2PROD with RULES

BILLING CODE 635101P

1 See Confirmation, Portfolio Reconciliation, Portfolio Compression, and Swap Trading Relationship Documentation Requirements for Swap Dealers and Major Swap Participants, 77 FR
55904, 55927 Sept. 11, 2012.

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17 CFR Part 23

I. Background
Commodity Futures Trading Commission.
ACTION: Final rule.
AGENCY:

The Commodity Futures Trading Commission Commission or CFTC is adopting amendments Final Rule to its margin requirements for uncleared swaps for swap dealers SDs and major swap participants MSPs for which there is not a prudential regulator CFTC
Margin Rule. The Commission is amending the CFTC Margin Rule to revise the calculation method for determining whether certain entities come within the scope of its initial margin IM requirements for uncleared swaps beginning in the last phase of the phased compliance schedule, which starts on September 1, 2022, and the timing for compliance with the IM requirements after the end of the phased compliance schedule.
These amendments align certain aspects of the CFTC Margin Rule with the Basel Committee on Banking Supervision and the International Organization of Securities Commissions BSBS/
IOSCO Framework for margin requirements for non-centrally cleared derivatives BCBS/IOSCO
Framework. The Commission is also amending the CFTC Margin Rule to allow SDs and MSPs subject to the CFTC Margin Rule to use the risk-based model calculation of IM of a counterparty that is a CFTC-registered SD or MSP to determine the amount of IM to be collected from the counterparty and to determine whether the IM
threshold amount for the exchange of IM has been exceeded such that documentation concerning the collection, posting, and custody of IM
would be required.
DATES: This rule is effective February 4, 2021.
FOR FURTHER INFORMATION CONTACT:
Joshua B. Sterling, Director, 202418
6056, jsterling@cftc.gov; Thomas J.
Smith, Deputy Director, 2024185495, tsmith@cftc.gov; Warren Gorlick, Associate Director, 2024185195, wgorlick@cftc.gov; or Carmen MoncadaTerry, Special Counsel, 2024185795, cmoncada-terry@cftc.gov, Market Participants Division, Commodity SUMMARY:

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Futures Trading Commission, Three Lafayette Centre, 1155 21st Street NW, Washington, DC 20581.
SUPPLEMENTARY INFORMATION:

RIN 3038AF05

Margin Requirements for Uncleared Swaps for Swap Dealers and Major Swap Participants
Note: The following appendices will not appear in the Code of Federal Regulations.

VerDate Sep<11>2014

COMMODITY FUTURES TRADING
COMMISSION

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Section 4se of the Commodity Exchange Act CEA or Act 1
requires the Commission to adopt rules establishing minimum initial and variation margin requirements for all swaps 2 that are i entered into by an SD
or MSP for which there is no prudential regulator 3 collectively, covered swap entities or CSEs 4 and ii not cleared by a registered derivatives clearing organization uncleared swaps.5 To offset the greater risk to the SD 6 or MSP 7 and the financial system arising from the use of uncleared swaps, these requirements must i help ensure the safety and soundness of the SD or MSP and ii be appropriate for the risk associated with the uncleared swaps held by the SD or MSP.8
Pursuant to its rulemaking authority under section 4se, the Commission in 2016 promulgated Regulations 23.150
through 23.161, namely the CFTC
Margin Rule, which requires CSEs to 17

U.S.C. 6se capital and margin requirements.
section 1a47, 7 U.S.C. 1a47 swap definition; Regulation 1.3, 17 CFR 1.3 further definition of a swap. A swap includes, among other things, an interest rate swap, commodity swap, credit default swap, and currency swap.
3 CEA section 1a39, 7 U.S.C. 1a39 defining the term prudential regulator to include the Board of Governors of the Federal Reserve System; the Office of the Comptroller of the Currency; the Federal Deposit Insurance Corporation; the Farm Credit Administration; and the Federal Housing Finance Agency. The definition of prudential regulator further specifies the entities for which these agencies act as prudential regulators. The prudential regulators published final margin requirements in November 2015. See generally Margin and Capital Requirements for Covered Swap Entities, 80 FR 74840 Nov. 30, 2015 Prudential Margin Rule. The Prudential Margin Rule is substantially similar to the CFTC Margin Rule, including with respect to the CFTCs phasing-in of margin requirements.
4 CEA section 4se1B, 7 U.S.C. 6se1B. SDs and MSPs for which there is a prudential regulator must meet the margin requirements for uncleared swaps established by the applicable prudential regulator. CEA section 4se1A, 7 U.S.C.
6se1A.
5 CEA section 4se2Bii, 7 U.S.C.
6se2Bii. In Regulation 23.151, the Commission further defined this statutory language to mean all swaps that are not cleared by a registered derivatives clearing organization or a derivatives clearing organization that the Commission has exempted from registration as provided under the CEA. 17 CFR 23.151.
6 CEA section 1a49, 7 U.S.C. 1a49 swap dealer definition; Regulation 1.3 further definition of swap dealer.
7 CEA section 1a32, 7 U.S.C. 1a32 major swap participant definition; Regulation 1.3 further definition of major swap participant.
8 CEA section 4se3A, 7 U.S.C. 6se3A.
2 CEA

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