Public Statements & Remarks

Statement of Commissioner Caroline D. Pham in Support of Notice of Proposed Rulemaking on Margin Requirements for Uncleared Swaps for Swap Dealers and Major Swap Participants

July 26, 2023

I support the notice of proposed rulemaking on margin requirements for uncleared swaps for swap dealers and major swap participants (Seeded Funds and MMFs Proposal) because it provides a solution for seeded funds, and it supports greater liquidity by providing more flexibility for money market and similar funds that use repos, among other things.  I thank the team in the Market Participants Division for their dedication to ensuring the Commission’s uncleared swaps rules do not unduly burden market participants, and for proposing workable solutions to challenges that arose during an implementation period.  I specifically commend Amanda Olear, Tom Smith, Warren Gorlick, Rafael Martinez, and Liliya Bozhanova for their work on the proposal.

This Seeded Funds and MMFs Proposal, looking at the big picture, actually benefits the end investors who will be able to more efficiently deploy capital, access liquidity, and provide investment returns at less cost to funds, such as pension plans that manage Americans’ hard-earned savings.  The key public interest here is providing more liquidity to markets.  We have seen over the past several years many recent market stresses, which seem to occur with greater and greater frequency and high volatility, low liquidity market conditions.  Where there is shallow depth of liquidity, costs for end users, customers, and investors go up, and access to markets is restricted. When there is not enough liquidity, risks to financial stability increase.  The most significant and systemic financial crises in recent years, including the 2008 financial crisis, were caused by a critical lack of liquidity in markets, and our post-crisis reforms have traded less credit risk for more liquidity risk.

Simply put, less liquidity means higher costs and more risk. And risk to not only financial stability, but also systemic risk.  In light of ongoing capital reforms, it is incumbent upon me to remind everyone that of course markets are interconnected, and that’s why we need to take a holistic approach to market structure with a full understanding of the impact of various regulatory regimes, particularly the impact of prudential requirements on the ability of markets to function well, and especially the ability for market participants to access markets for the benefit of American savers.

As an advocate for good policy that enables growth, progress, and access to markets, I strongly support workable solutions to any problems with our rules. While regulations play a critical role in safeguarding our markets, we must acknowledge that issues—ranging from technical[1] to policy—must be continuously evaluated for regulations to remain both effective and relevant in an ever-changing landscape.

The first step in evaluating our regulations is to conduct thorough assessments and identify areas for improvement.  Collaboration and open dialogue are key to formulating well-rounded solutions that consider the interests of all impacted.  That is why I am grateful for the efforts of former Commissioner Dawn Stump, who, as sponsor of the Global Markets Advisory Committee (GMAC), established the GMAC’s Subcommittee on Margin Requirements for Non-Cleared Swaps to evaluate the CFTC’s uncleared margin rules.[2]  The subcommittee’s thorough assessment, engagement with stakeholders, and practical, flexible recommendations have given staff a comprehensive roadmap to follow in implementing fixes that minimize adverse impacts on market participants.  I appreciate that staff is continuing[3] to try to adopt the recommendations that came out of the GMAC subcommittee.

The adoption of margin requirements for uncleared swaps was a key pillar of the 2008 financial crisis reform.[4]  Today, we continue to appreciate that the requirements help ensure the exchange of margin between large, systemic, and interconnected financial institutions for their uncleared swap transactions.

Consistent with the G20 commitments, the Commodity Exchange Act (CEA or Act)[5] requires that the Commission adopt rules establishing margin requirements for all uncleared swaps that are entered into by a swap dealer or major swap participant for which there is no prudential regulator.  These requirements help ensure the safety and soundness of the swap dealer or major swap participant. In 2016, the Commission adopted Regulations 23.150 through 23.161 to implement section 4s(e).[6]

Currently, a fund with material swaps exposure will fall within the scope of the initial margin requirements if it undertakes an uncleared swap with a covered swap entity.  The covered swap entity and the fund will not be required to post and collect initial margin for their uncleared swaps until the initial margin threshold amount of $50 million has been exceeded.  The initial margin threshold amount will be calculated based on the credit exposure from uncleared swaps between the covered swap entity and its margin affiliates on the one hand, and the fund and its margin affiliates on the other.[7]  As discussed above, this requirement has unduly burdened certain funds.

Initial margin requirements may be satisfied with only certain types of collateral.[8] Under Regulation 23.156(a)(1)(ix), the securities of money market and similar funds[9] may qualify as eligible collateral if the investments of the fund are limited to securities that are issued by, or unconditionally guaranteed as to the timely payment of principal and interest by, the U.S. Department of Treasury, and immediately-available cash denominated in U.S. dollars;[10] or to securities denominated in a common currency and issued by, or fully guaranteed as to the payment of principal and interest by, the European Central Bank, or a sovereign entity that is assigned no higher than a 20 percent risk weight under the capital rules applicable to swap dealers subject to regulation by a prudential regulator, and immediately-available cash denominated in the same currency.[11]  Also, the asset managers of the money market and similar fund may not transfer the assets of the fund through securities lending, securities borrowing, repurchase agreements, or any other means that involve the fund having rights to acquire the same or similar assets from the transferee.[12]  As discussed above, this requirement has unintentionally restricted funds.

Of course, compliance with significant reforms necessarily entails significant resource expenditure by regulated entities.  Because of the vast number of counterparties impacted by the uncleared margin rules, swap dealers and major swap participants have been forced to engage in significant operational and technological development to avoid disruptions which would limit their options for taking on and hedging risk.[13]  As I have stated in the past, it is imperative that the Commission continuously—or at least periodically—evaluate its rules to ensure they are functioning as intended, and propose workable solutions to any challenges discovered to ensure that firms are able to effectively comply with our rules.[14]

I encourage the public to comment on whether the Commission’s proposal sufficiently addresses the practical and operational issues, and whether it gives sufficient time for firms to implement and comply with a final rule.  Thank you.

[1] Statement of Commissioner Caroline D. Pham on Staff Letter Regarding ADM Investor Services, Inc., U.S. Commodity Futures Trading Commission (June 16, 2023),

[2] CFTC Commissioner Stump Announces New GMAC Subcommittee on Margin Requirements for Non-Cleared Swaps, U.S. Commodity Futures Trading Commission (Oct. 28, 2019),

[3] In 2020, the Commission adopted rules that addressed different GMAC recommendations on the uncleared margin rules. See Statement of Commissioner Dawn D. Stump in Support of Final Uncleared Margin Rules Based on Recommendations of Global Markets Advisory Committee, U.S. Commodity Futures Trading Commission (Dec. 8, 2020), Commissioner Mersinger has advocated for adopting additional recommendations. See Dissenting Statement of Commissioner Summer K. Mersinger Regarding CFTC’s Regulatory Agenda, U.S. Commodity Futures Trading Commission (Jan. 9, 2023), Commissioner Pham now sponsors the GMAC. See Commissioner Pham Announces CFTC Global Markets Advisory Committee Meeting on July 17, U.S. Commodity Futures Trading Commission (July 17, 2023),

[4] G20 Pittsburgh Summit (Sept. 24-25, 2009).

[5] 7 U.S.C. § 6s(e) (capital and margin requirements).

[6] See Margin Requirements for Uncleared Swaps for Swap Dealers and Major Swap Participants, 81 FR 636 (Jan. 6, 2016) (effective April 1, 2016 and codified in part 23 of the Commission’s regulations). 17 C.F.R. §§ 23.150 - 23.159, and 23.161. In May 2016, the Commission added Regulation 23.160 (17 C.F.R. § 23.160), providing rules on its cross-border application. See Margin Requirements for Uncleared Swaps for Swap Dealers and Major Swap Participants—Cross-Border Application of the Margin Requirements, 81 FR 34818 (May 31, 2016).

[7] Commission Regulation 23.151 defines the term “IM threshold amount” to mean an aggregate credit exposure of $50 million resulting from all uncleared swaps between an SD and its margin affiliates (or an MSP and its margin affiliates) on the one hand, and the SD’s (or MSP’s) counterparty and its margin affiliates on the other.  See 17 C.F.R. § 23.151.

[8] Commission Regulation 23.156(a)(1) sets forth the types of collateral that CSEs can post or collect as IM with covered counterparties, including cash funds, certain securities issued by the U.S. government or other sovereign entities, certain publicly traded debt or equity securities, securities issued by money market and similar funds, and gold. 17 C.F.R. § 23.156(a)(1).

[9] Although the scope of the eligible pooled investment funds described in Commission Regulation 23.156(a)(1)(ix) does not fully coincide with the regulatory definition of money market funds in Rule 2a-7 under the Investment Company Act (17 CFR 270.2a-7), for simplicity purposes, these funds will be referred to as “money market and similar funds.”

[10] 17 C.F.R. § 23.156(a)(1)(ix)(A).

[11] 17 C.F.R. § 23.156(a)(1)(ix)(B).

[12] 17 C.F.R. § 23.156(a)(1)(ix)(C).

[13] Joint ISDA-SIFMA Report, Initial Margin for Non-Centrally Cleared Derivatives: Issues for 2019 and 2020, 3-4 (July 2018),

[14] See, e.g.¸ Statement of Commissioner Caroline D. Pham Regarding Reporting and Information Requirements for Derivatives Clearing Organizations, U.S. Commodity Futures Trading Commission (Nov. 10, 2022),