Washington, D.C. — The Commodity Futures Trading Commission’s Market Participants Division (MPD) today issued an advisory to swap dealers clarifying the use of internal models in calculating minimum capital requirements.

The advisory clarifies that an entity dually-registered as a futures commission merchant and swap dealer (FCM/SD) or registered solely as a swap dealer (standalone SD) is not required to obtain CFTC or National Futures Association (NFA) approval to use a model to calculate the initial margin on uncleared swaps for purposes of determining the FCM/SD’s or standalone SD’s minimum capital requirement under CFTC regulations. 

Additionally, MPD clarifies that an FCM/SD or standalone SD may use an initial margin model other than the Standardized Initial Margin Model developed by the International Swaps and Derivatives Association (ISDA) for the purposes of computing the uncleared swap margin amount.

The advisory was issued in response to several inquiries MPD received from swap dealers in their effort to comply with newly adopted swap dealer capital and financial reporting requirements, which have a compliance date beginning on October 6, 2021.