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ARTICLE · 02 AUGUST 2023

CFTC Proposes To Broaden Scope Of Eligible Collateral For Initial Margin

K&L Gates
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On July 26, 2023, the Commodity Futures Trading Commission ("CFTC") proposed an amendment ("Proposal") to, among other things, expand the universe of eligible collateral for the

United StatesFinance and Banking
K&L Gates
K&L Gates
Gustavo De La Cruz Reynozo
Gustavo De La Cruz Reynozo

On July 26, 2023, the Commodity Futures Trading Commission ("CFTC") proposed an amendment ("Proposal") to, among other things, expand the universe of eligible collateral for the CFTC's initial margin ("IM") requirements for uncleared swaps. The Proposal would result in swap dealers that are not subject to prudential regulation being able to use a broader range of money market funds ("MMFs") and similar funds as collateral to meet their uncleared swap IM requirements under CFTC Regulation 23.156(a)(1)(ix).

Under existing rules, securities issued by MMFs cannot be used as eligible IM if the MMF engages in transferring assets through securities lending, securities borrowing, repurchase agreements, reverse repurchase agreements, and similar arrangements. By eliminating this restriction, securities issued by MMFs that use repurchase or similar arrangements would qualify as IM collateral.

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