Federal banking regulators (the Prudential Regulators) have re-proposed regulations to require certain dealers and major participants in the swap and security-based swap markets to collect initial and variation margin for noncleared swaps (the 2014 Proposal). In April 2011, the Prudential Regulators first issued proposed rules addressing non-cleared swaps margin (the 2011 Proposal). Following the 2011 Proposal, the Basel Committee on Banking Supervision and the International Organization of Securities Commissions released a global framework for margin requirements on non-centrally cleared derivatives (the International Framework). As a result, the Prudential Regulators released the 2014 Proposal to incorporate the International Framework and to address comments received on the 2011 Proposal.

The CFTC this week voted to issue a similar re-proposal.

The 2014 Proposal would apply to all “swap entities” that are regulated by a Prudential Regulator (CSEs). The 2014 Proposal makes several significant changes to the 2011 Proposal by:

1. requiring CSEs to post margin in addition to collecting margin;

2. restricting the acceptable collateral for variation margin to cash while expanding the collateral that can be used as initial margin; and

3. adopting a substituted compliance approach that would allow certain CSEs to comply with a foreign regulatory framework in lieu of the Prudential Regulators’ requirements.