The SIFMA Asset Management Group ("SIFMA AMG") and the Investment Adviser Association ("IAA" and, collectively, the "Associations") submitted a request to U.S., Japanese and European regulators (the "agencies") for (i) transitional relief from the March 1, 2017 compliance date for variation margin requirements and (ii) an additional transition period for FX clients, whose trading historically has been uncollateralized. The six-month transitional relief was requested originally by SIFMA in a December 16, 2016 letter.
In the current letter, the Associations cite data indicating that asset managers have completed "roughly 8%" of the necessary regulation-compliant documentation, and that "thousands" of client accounts have yet to be documented. The Associations also cite the following reasons, among others, for the "slow" progress: (i) varying terms needed for clients due to jurisdictional differences, (ii) issues with non-netting accounts, (iii) new credit reviews for existing clients, (iv) a lack of substantive responses due to bandwidth and time constraints placed on dealer counterparties, and (iv) difficulties with putting account control agreements in place.
In addition to requesting the delay, the Associations also asked the agencies to re-examine cross-border policies that have resulted in regulatory complexity.
Commentary
At least one U.S. regulator has indicated his openness to the Associations' request. Recently named Acting Chair of the CFTC J. Christopher Giancarlo said last week that the March 1 deadline is "unrealistic," and commented that the six-month transition periods adopted in Singapore, Hong Kong and Australia are "well considered."
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