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Initial margin for cleared Swaps

Federal banking regulators (the Prudential Regulators) and the Commodity Futures Trading Commission (the CFTC) have separately proposed regulations to require certain dealers and major participants in the swap and security-based swap markets to collect initial and variation margin for uncleared swaps. The express purpose driving both sets of proposals is to establish “margin requirements for uncleared swaps that are at least as stringent as those for cleared swaps” because uncleared swaps are riskier than cleared swaps.

The proposals go far beyond current over-the-counter (OTC) collateral practices by:

1. imposing initial margin for all uncleared swaps exposure except for certain low-risk counterparties (compared to the relatively infrequent use of the corresponding “independent amounts” concept in International Swaps and Derivatives Association (ISDA) and other master agreements);

2. restricting margin to cash, U.S. Treasuries and, for initial margin only, government agency securities (compared to today’s broader acceptance of collateral such as letters of credit, equity pledges and asset pledges);

3. requiring significantly larger amounts of margin than for cleared contracts; and

4. requiring initial margin posted by most dealers and major participants to be held by independent, third-party custodians with restrictions on rehypothecation and reinvestment.

The Prudential Regulators’ proposal would apply to all dealers and major participants (Covered Swap Entities or CSEs) that are regulated by a Prudential Regulator (PR CSEs). The CFTC proposal would apply to swap dealers and major swap participants that are not PR CSEs (CFTC CSEs). A number of CSEs who initially are subject to the Prudential Regulator uncleared swaps margin requirements may, over the next few years, become subject instead to the CFTC requirements as a result of the Dodd-Frank “pushout” provision.

A. Basic Questions About Uncleared Margin

1. What will be considered an “uncleared swap”? The proposals would apply to swaps that are not cleared by a derivatives clearing organization registered with the CFTC (DCO) or a clearing agency registered with the Securities and Exchange Commission (SEC).

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Shipping by airmail from UK: items normally reach US addresses within a few days but can take longer THE STOCK EXCHANGE: The clearing House. London, antique print c1880
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  • Caption below print: The clearing house
  • Condition: Good; suitable for framing. However, please note: Verso text quite apparent in margin; The image shown may have been taken from a different example of...
  • Size: 14.0 x 14.0cm, 5.5 x 5.5 inches (Small)
  • Type & Age: Year printed c1880. Antique wood engraved print
  • Verso: There are images and/or text printed on the reverse side of the picture which are likely to show through the page to some extent because the paper is quite...
Shipping by airmail from UK: items normally reach US addresses within a few days but can take longer LONDON: Clearing House, Lombard St, antique print, 1847
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  • Caption below print: The Clearing-House, in Lombard-Street
  • Condition: Good; suitable for framing. Please check the scan for any blemishes prior to making your purchase.
  • Size: 14.5 x 23.5cm, 5.75 x 9.25 inches (Medium)
  • Type & Age: Year printed 1847. Antique wood engraved print
  • Verso: There are images and/or text printed on the reverse side of the picture. In some cases this may be visible on the picture itself (please check the scan prior...

Popular Q&A

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Where can I find margin requirements of CME?

I need to know margin requirements of gold and silver futures in CME, Thus I need official link to the list of margin requirements. I searched the web and CME website, but I could not find it. Please help

This list is about 39 pages, so it's easier to click on "Download Data" then do a search (Ctrl-F) for what you want in Excel.
PRODUCT NAME INITIAL MAINT.
E-MINI SILVER FUTURES 3375.00 2500.00
COMEX MINY GOLD FUTURES 4556.00 3375.00
Your broker will have their own set of margin requirements.

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