Statement of Chairman J. Christopher Giancarlo on the Final Rule Amending Regulations on Segregation of Assets Held as Collateral in Uncleared Swap Transactions (23.700-704)

March 28, 2019

This final rule is another Project KISS proposal simplifying and reducing burdens by revisiting our rules based on staff implementation experience and public comment.  Today’s amendments will remove overly burdensome and prescriptive conditions for providing notice to counterparties of their right to segregate initial margin for uncleared swaps and the commercial arrangement between the parties regarding the investment of segregated initial margin.

Staff experience shows that counterparties rarely elect to segregate initial margin, even though the option to do so was provided for in the Commodity Exchange Act and in the CFTC’s Regulations 23.700-704.  Enabling the election of segregation is a bipartisan goal, starting with a unanimous Commission rulemaking by a previous commission.  By reducing the burdens and prescriptiveness of these rules, and providing additional flexibility for the parties to engage in written segregation arrangements to fit their needs, as the final rule does here, more counterparties may opt to use this provision and avail themselves of any benefits of doing so.