While the US gears up for compliance with uncleared swap margin rules, cross-border application of the CFTC rules remains unclear.

The US Commodity Futures Trading Commission (the CFTC) finalized its margin requirements for uncleared swap transactions on December 16, 2015 (the CFTC Margin Rules). The CFTC’s adoption of the final rules comes on the tails of the Prudential Regulators, who jointly finalized their uncleared swap margin rules in October 2015 (the PR Margin Rules). Compliance with both sets of rules will be phased in over a period of time beginning in September 2016. The CFTC Margin Rules apply to swap dealers and major swap participants that are not subject to supervision by the Prudential Regulators (collectively referred to herein as CFTC Covered Swap Entities). The CFTC Margin Rules largely track the PR Margin Rules, except with respect to the treatment of certain affiliate-related issues, the proprietary margin model approval process and the calculation of variation margin. Though the finalization of the CFTC Margin Rules is a key piece of the puzzle with respect to the margin framework for uncleared swaps, market participants are still waiting for (i) the CFTC to finalize the rules addressing the cross-border application of the CFTC Margin Rules and (ii) European regulators and the US Securities and Exchange Commission (the SEC) to finalize their respective rules for uncleared derivative transactions.