Opening Statement on the Thirteenth Series of Proposed Rulemakings under the Dodd-Frank Act Margin Requirements for Uncleared Swaps for Swap Dealers and Major Swap Participants

Commissioner Jill E. Sommers

    April 12, 2011

Thank you Chairman Gensler. Today we are considering one of the centerpieces of the new regulatory structure under the Dodd-Frank Act. The Act requires the CFTC, the SEC, and the prudential banking regulators to establish comparable initial and variation margin requirements for uncleared swaps “to the maximum extent practicable.” The importance of achieving consistency is a theme that runs throughout the Act and is something that I believe is critical, not only with respect to the rules being promulgated by our fellow domestic regulators, but internationally as well. We should not be creating opportunities for regulatory arbitrage, and I appreciate the efforts of the staff in attempting to carry out this directive.

I am mindful that substantive differences between the approach to margin for uncleared swaps that we are considering today and the approach being considered by the EU as part of the European Market Infrastructure Regulation (EMIR) could have far-reaching effects. My understanding is that EMIR currently does not contemplate a two-way exchange of initial margin. While I am supportive of today’s proposal on margin requirements for uncleared swaps for swap dealers and major swap participants, I believe we must continue to work to harmonize our rules internationally.

Likewise, although the margin proposal before us today is broadly consistent with the proposal being considered by the prudential regulators, there are some important differences, particularly with respect to commercial end-users. I believe that the CFTC staff recommendation is consistent with Congressional intent that commercial end-users be given the flexibility to continue to do business as before. However, I think all regulators must be mindful of the potential negative economic consequences as we continue to overlook the increased costs that these regulations are imposing on hedgers and risk management tools. I want to thank this team for all of their hard work and efforts to coordinate with others on this proposal. I look forward to the public comment on this particular issue and other aspects of the proposal.

Last Updated: April 12, 2011