Shearman & Sterling LLP | FinReg | US Commodity Futures Trading Commission Provides Margin Relief for Legacy Swaps
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  • US Commodity Futures Trading Commission Provides Margin Relief for Legacy Swaps
    06/06/2019
    In response to a request from the International Swaps and Derivatives Association, the Commodity Futures Trading Commission's Division of Swap Dealer and Intermediary Oversight issued no-action relief that will permit swap dealers to make certain amendments to so-called "legacy swaps" without such swaps losing their legacy status for purposes of the CFTC's uncleared swap margin rule. Legacy swaps are exempt from the CFTC's uncleared swap margin rule because they were entered into prior to the relevant compliance date for that rule. The relief provides clarity that certain amendments to legacy swaps will not bring them within scope of the rule.

    The relief will permit swap dealers to continue to treat the following as legacy swaps:
    • legacy swaps that are amended in an immaterial manner (defined as amendments that would not affect the economic obligations of the parties or the valuation of the swap);
    • a swap resulting from the exercise of a swaption that is itself a legacy swap;
    • the remaining portion of a swap following a partial termination of such legacy swap;
    • the remaining portion of a swap following a partial novation of such legacy swap; and
    • new swaps resulting from a multilateral compression exercise consisting solely of legacy swaps.

    View the No-Action letter.

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    TOPIC: Derivatives