Voglio sapere a riguardo di…

jbell on DSKJLSW7X2PROD with RULES

Federal Register / Vol. 86, No. 2 / Tuesday, January 5, 2021 / Rules and Regulations AANA could result in an AANA
calculation that is not representative of a market participants participation in the swaps markets. As previously discussed, an AANA calculation based on month-end AANA may result in the exclusion or undercounting of certain financial contracts that are required to be included in the calculation e.g., uncleared swaps, uncleared securitybased swaps, foreign exchange forwards, or foreign exchange swaps because of certain combinations of tenure and time of execution, such as those often present in some intra-month natural gas and electricity swaps.155 The Commission also notes the potential that market participants might window dress their exposures to avoid MSE status and compliance with the CFTCs margin requirements. At the same time, it is possible that the month-end methodology, which uses only three data points, could result in some entities having an AANA calculation on the three end-of-month dates that is uncharacteristically high relative to their typical positions.
If products are excluded from the AANA calculation, or if exposures are window dressed, the month-end calculation may have the effect of deferring the time by which market participants meet the MSE classification resulting in additional swaps between market participants and CSEs being deemed legacy swaps that are not subject to the IM requirements.156 This may increase the level of counterparty credit risk to the financial system. While potentially meaningful, this risk will be mitigated because the legacy swap portfolios will be entered into with FEUs that engage in lower levels of notional trading.
In addition, many larger SDs are under the jurisdiction of the U.S.
prudential regulators, and these entities and their counterparties will apparently be required to continue to use the current AANA calculation methodology.
Entities that trade with both SDs that are under the jurisdiction of the U.S.
prudential regulators and CSEs that are under the CFTCs jurisdiction will be required to undertake separate AANA
calculations using different calculation periods, varying according to the regulator of their swap counterparty.
Hence, entities that trade in other jurisdictions and that trade with SDs subject to the prudential regulators jurisdiction will be required to continue to undertake separate AANA
calculations using different calculation 155 See 156 For
supra note 59.
explanation of legacy swaps, see supra
note 49.

VerDate Sep<11>2014

16:32 Jan 04, 2021

Jkt 253001

periods and two separate compliance timings. In fact, an entity that only trades in the U.S. will now be required to conduct separate AANA calculations using different calculation periods and timings. While we received no quantification of the number of such entities, SDs regulated by U.S.
prudential regulators represent a sizable share of swap trading.
Recognizing the potential for costs to increase for this reason, all of the comments received by the Commission noted the benefits of alignment with the BCBS/IOSCO Framework, and none mentioned the costs associated with any potential misalignment with the U.S.
prudential regulators. Further, some commenters stated that the CFTC
should proceed with the amendments even if the prudential regulators do not make corresponding changes to their margin rules.157
In addition, the Commission notes that, in the aforementioned OCE
exercise utilizing a sample of days, the OCE estimated that calculations based on end-of-month AANA would yield fairly similar results as the calculations based on the current daily average AANA approach setting aside the window dressing issue. Based on 2020
swap data, the OCE estimated that approximately 492 entities of the 514
entities that would have come into scope in the last phase of the phased compliance schedule, based on the existing methodology, would also come into scope based on the methodology being adopted under the Final Rule. Put differently, all but 22 of the entities that would be above MSE under the existing methodology would also be above MSE
under the Final Rules methodology. In addition, there are 20 entities that would be in scope under the Final Rules methodology, but would not have been under the existing methodology, so that the aggregate number of entities differs only by two. In aggregate, the two methodologies capture quite similar sets of entities. In addition, the entities that fall out of scope when one changes methodology tend to be among the smallest of entities coming into scope in the last phase of compliance. That is, entities that would have been in-scope under the current methodology but not the Final Rules methodology average $6.95 billion in AANA, compared to $20
billion for all entities coming into scope in the last phase of compliance.158
Taking account of the relatively small percentage of aggregate AANA
represented by FEUs that will have MSE
157 SIFMA AMG 10/22/2020 Letter at 3; Working Group 10/22/2020 Letter at 2.
158 See supra note 60.

PO 00000

Frm 00021

Fmt 4700

Sfmt 4700

243

for the first time in the near future, and thus be subject to the Commissions IM
requirements under the Final Rule, the Commission believes that the potential exclusion of certain financial products in determining MSE will have a limited impact on the effectiveness of the CFTC
Margin Rule. In addition, with respect to the potential that a market participant might window dress its exposure, the Commission believes that the antievasion language being incorporated into the rule text by this Final Rule, discussed in more detail above, would reduce the risk that swap exposures or positions might be manipulated to evade the CFTCs IM requirements. The Commission also notes that it has authority, including anti-fraud authority under section 4b of the CEA,159 to take appropriate enforcement actions against any market participant that may engage in deceptive conduct with respect to the AANA calculation, and that CSEs, under the Commissions regulations, must have written policies and procedures in place to prevent evasion or the facilitation of an evasion by an FEU counterparty.160
Roughly 514 entities, as estimated by the OCE, will come into the scope of the IM requirements beginning on September 1, 2022, and will be affected by the Final Rule. In advance of the September 1, 2022 compliance date, many of these entities may have engaged in planning and preparations relating to the exchange of regulatory IM. With the revision of the AANA
method of calculation, these entities may need to adjust their systems to reflect changes in the calculation and update related financial infrastructure arrangements. However, the Commission believes that the resulting increased costs will be negligible, and the amendments being adopted will likely be cost-reducing for those impacted firms.
Regarding the amendment to Regulation 23.154a, there may be associated costs, as CSEs will be able to rely on the risk-based model calculation of IM computed by a swap entity counterparty. The safeguard provided by the requirement that both the CSE
and its SD counterparty maintain a riskbased IM model for any swap transaction for which they do not use the table-based method to calculate IM
will be eliminated. A CSE that relies on a counterpartys risk-based model calculations may forgo the adoption of a risk-based model and thus avoid the rigorous Commission requirements 159 7

U.S.C. 6b.
17 CFR 23.402aii.

160 See
E:FRFM05JAR1.SGM

05JAR1