BACKGROUND: The US banking regulators and the Commodity Futures Trading Commission (CFTC) have each recently re-proposed margin rules for non-cleared swaps (the "Proposed Rules") that are virtually identical in substance and are generally consistent with the international standards for non-cleared swap margins published by the Basel Committee on Banking Supervision and the Board of the International Organization of Securities Commissions in September 2013 (the "International Standards").[1] (A bank engaging in swap activity will be subject to the margin rules set by the banking regulators. A nonbank whose swap activity is regulated by the CFTC will be subject to the CFTC margin rules.) The comment period for the Proposed Rules is open until November 24 for the proposal from the banking regulators and December 2 for the CFTC proposal.

Under the Proposed Rules from the banking regulators (which cover banks that are registered as dealers and major participants with the CFTC and/or the Securities and Exchange Commission (SEC) (each, a "swap entity")), the extent to which a particular party to a swap must post initial margin ("IM"), variation margin ("VM"), or both, will be determined by the regulatory status of that party viewed in conjunction with the regulatory status of its counterparty. There are four categories of regulatory status for this purpose: 1) swap entities; 2) Financial End Users (as defined in Exhibit B) with material swaps exposure (each, a "Financial End User+", or "FEU+"); 3) financial end users without material swaps exposure (each, a "Financial End User –", or "FEU-"); and 4) all other counterparties of swap entities (each, a "Non-financial End User").