Hedge Funds Face Increased Margin Requirements Under Final Swap Rules

On October 22, 2015, five federal agencies adopted a joint final rule establishing minimum initial and variation margin requirements for non-cleared swaps entered into by a registered swap dealer, major swap participant, securitybased swap dealer or major security-based swap participant. The U.S. prudential regulators – the FDIC Board of Directors, the Office of the Comptroller of the Currency, the Federal Reserve Board, the Farm Credit Administration and the Federal Housing Finance Agency – adopted this final rule (PR final rule) [1] shortly before the U.S. Commodity Futures and Trading Commission (CFTC) adopted a substantially similar final rule on December 16, 2016, for margin requirements for non-cleared swaps entered into by a registered swap dealer or major swap participant that is not regulated by a U.S. prudential regulator (including non-bank subsidiaries of a bank holding company) (CFTC final rule[2] and, collectively with the PR final rule, the final rules).