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News: CFTC’s Office of the Chief Economist Issues Report on Initial Margin Phase 5

01 November 2018 | Bill Hodgson

Washington, DC — The Office of the Chief Economist (OCE) of the Commodity Futures Trading Commission (CFTC) today issued, “Initial Margin Phase 5,” (and attached below) a report about uncleared margin rules, which goes into effect on September 1, 2020. 

On that date, swaps market participants with between $8 and $750 billion of swaps notional amount must begin to post and collect initial margin on all trades that have at least one swap-dealer counterparty. The market is currently in Phase 3, in which counterparties with $1.5 trillion or more of swaps notional amount are subject to the rules. The OCE paper released today was written to assist regulators in responding to requests for relief from industry participants.

“The findings of this study are broadly consistent with a number of claims made by market participants,” said CFTC Chief Economist Bruce Tuckman, one of the authors of the report. “In particular, Phase 5 is likely to capture a large number of relatively small swaps market participants. And excluding physically-settled FX swaps — which are actually exempt from initial margin — will significantly reduce the number of relatively small counterparties brought into scope by Phase 5.”

“Initial Margin Phase 5 implementation for uncleared swaps may present major challenges. Regulators need to coordinate globally and make adjustments soon to avoid market disruption before September 2020,” said Matthew Kulkin, CFTC Director of the Division of Swap Dealer and Intermediary Oversight. “The OCE paper issued today provides important analysis and insight to assist in the formulation of fact-driven policy recommendations. The data in this paper will help the Commission and the Working Group on Margin Requirements in making informed decisions to avoid unnecessary disruption to global capital markets.”


  • The number of entities in phase 5 would be reduced by 30% if physical FX were excluded (these are included in the AANA calculation but not for IM itself)
  • The regulation will oblige relatively small firms to implement the capability to exchange IM but may never actually do so
  • Around 700 new entities and 7000 relationships may come into scope in Phase 5

https://www.cftc.gov/PressRoom/PressReleases/7834-18

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