The Commodity Futures Trading Commission (CFTC) approved a proposed rule to amend the margin requirements for uncleared swaps applicable to swap dealers (SDs) and major swap participants (MSPs) for which there is no prudential regulator.
Among the amendments, the CFTC is proposing to eliminate a provision disqualifying the securities issued by certain pooled investment funds (money market and similar funds) that transfer their assets through securities lending, securities borrowing, repurchase agreements, reverse repurchase agreements, and similar arrangements from being used as eligible IM collateral, thereby expanding the scope of assets that qualify as eligible collateral.
The proposed rule makes reference to a report from the CFTC’s Margin Subcommittee, which noted that nearly all money market funds (MMFs) engage in some form of repurchase or similar arrangements, and cited research that found that, given the asset transfer restriction, the securities of only four MMFs, would qualify as eligible collateral.
“…the Commission preliminarily believes that the current restriction on the use of securities of money market and similar funds that transfer their assets through repurchase and similar arrangements should be removed.”