US derivatives regulator, the Commodity Futures Trading Commission (CFTC), approved targeted changes to its uncleared-swaps margin rules on Monday.
The final rule covers swap dealers and major swap participants that do not have a prudential regulator, and it amends Regulations 23.150 through 23.161.
Seeded funds receive three-year treatment
A qualifying sponsor-capitalized fund can be treated as having no margin affiliates for specified initial-margin calculations for up to three years from its trading inception date.
The fund must be a separate legal entity with independent management, a written investment strategy, a plan to reduce sponsor ownership and no sponsor support for its obligations. Variation margin continues to apply, while individual initial-margin requirements can arise if the fund exceeds applicable exposure and credit thresholds.
Money-market collateral pool expands
The rule also removes a restriction that disqualified securities from qualifying money-market and similar funds when their assets were used in repo, reverse repo, securities lending or borrowing arrangements.
Eligible funds remain limited to those investing in US Treasury or comparable sovereign assets. Prime money-market funds holding short-term corporate securities remain excluded.
Haircuts will reflect the weighted-average discount on a fund’s holdings at the previous month-end. According to the CFTC announcement, the changes aim to improve efficiency while retaining risk controls.
The rule becomes effective 30 days following publication in the Federal Register.
