In a joint request for comment, the SEC and CFTC solicited feedback on possible methods for implementing portfolio margining of SEC- and CFTC-regulated products (including swaps, security-based swaps, securities and futures). The joint request for comment seeks input from market participants on all facets of portfolio margining including (i) the risks of margining uncleared swaps and security-based swaps positions, and (ii) the regulatory and operational issues that are posed by such margining.

Commissioner Statements

CFTC Chair Heath P. Tarbert stressed the "central importance" of portfolio margining to dually-registered market participants that have customers holding positions in separate accounts without the possibility of cross-margining such positions. Mr. Tarbert also emphasized that the request for comment is a result of the efforts of SEC Chair Jay Clayton and Mr. Tarbert's predecessor, former CFTC Chair J. Christopher Giancarlo.

Commissioner Brian D. Quintenz noted that that the request for comment "marks the beginning of the agencies' consideration of ways to implement a portfolio margining regime for uncleared swaps and non-cleared security-based swaps."

Commissioner Rostin Behnam stated that the comment request is an "important first step" in reconciling the realities of margining for uncleared swaps and non-cleared security-based swaps. He said that portfolio margining is where the SEC's and CFTC's "two sets of margin rules intersect."

Commentary

The descriptive portion of the request for comment focuses on Title VII instruments (i.e., swaps and security-based swaps), but the particular questions address a broad array of financial products, including cash market securities, OTC securities options, futures and security futures. In addition to reconciling the differing margin requirements across various regulatory regimes, a tricky aspect of implementing a portfolio margining program across these products will be addressing the insolvency issues. Statutory changes could be necessary to achieve true cross-margining across all CFTC- and SEC-regulated financial products.

Primary Sources

  1. SEC Press Release: At Joint Open Meeting, SEC and CFTC Approve Final Rule on Security Futures Margin and Request for Comment on Portfolio Margining
  2. CFTC Press Release: CFTC and SEC to Hold a Joint Open Meeting on October 22
  3. CFTC and SEC Request for Comment: Portfolio Margining of Uncleared Swaps and Non-Cleared Security-Based Swaps
  4. CFTC Statement, Heath P. Tarbert: Opening Statement before Historic Joint SEC-CFTC Open Meeting
  5. CFTC Statement, Brian Quintenz: Opening Statement before the SEC and CFTC Joint Open Meeting on October 22, 2020
  6. CFTC Statement, Rostin Behnam: Statement before Joint Open Meeting of the CFTC and SEC
  7. SEC Statement, Jay Clayton: Joint Open Meeting with CFTC - Customer Margin Rules for Security Futures and Request for Comment on Uncleared Swaps and Non-Cleared Security-Based Swaps
  8. SEC Statement, Hester Peirce: CFTC-SEC Joint Meeting

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