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WASHINGTON The U.S. derivatives regulator on
Monday gave swaps dealers a six-month grace period to comply
with a variation margin rule that becomes effective March 1,
saying most companies are unprepared for the change.
The Commodity Futures Trading Commission said it will not
take an enforcement action against a swap dealer for failing to
comply with the rule until Sept. 1, in what is known as a “no-action letter.”
This six-month period will give the dealers time to bring
their systems in line with the new rule requirements, and the
CFTC has provided similar grace periods for previous rules,
according to an agency spokesman.
The acting CFTC chairman, J. Christopher Giancarlo said that
the letter “does not change the scheduled time of arrival for
the agreed margin implementation. It just foams the runway to
ensure a safe landing.”
He also said 90 percent of the companies and funds that
hedge risk with swaps are not ready to meet the new requirements
despite their best efforts.
Asset managers last month had pleaded with regulators around
the globe to delay their rules on variation margin, the
collateral posted for swaps.
The U.S. rule, part of the Dodd-Frank reform law passed in
2010, is intended to require adequate collateral for covering
positions in swaps that are not cleared by a third party. It
sets limits on what can be used as variation, or daily, margin
and who must post it.
The CFTC is sensitive about creating upheaval in its
implementation of new rules. It stirred up derivatives markets
around the world in September when it brought a different set of
margin requirements for uncleared swaps online while other
countries delayed implementing their rules. The agency then had
to push back the compliance date for a month.
Giancarlo, who is often mentioned as a possible pick by
President Donald Trump to become the permanent chair of the
commission, has previously said that the regulator needs to
coordinate better with international counterparts.
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