Final CFTC Rules on Protection of Collateral for Uncleared Swaps and Cleared Swap Account in Bankruptcy‬

8 November 2013
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  • The CFTC has adopted final rules requiring swap dealers and major swap participants (1) to notify their counterparties to uncleared swaps, prior to execution, of their right to require segregation of their initial margin, (2) to identify an acceptable custodian or custodians for such initial margin and (3) to provide information to the counterparty regarding the price of segregation (to the extent available).
  • Additionally, the final rules require that the custodian be independent of both counterparties and that the segregated initial margin be held in an account designated for and on behalf of the counterparty.
  • The final rules set two different compliance dates: (1) May 5, 2014, where no agreement exists between the parties concerning uncleared swaps as of January 6, 2014, the effective date of the final rules and (2) November 3, 2014 where such an agreement does exist on such date. The final rules do not apply to swaps entered into prior to January 6, 2014.