The Commodity Futures Trading Commission’s (CFTC’s) Market Participants Division issued an interpretation to clarify the types of assets that qualify as eligible margin collateral for certain uncleared swap transactions under CFTC regulations.
The regulation, which includes “redeemable securities in a pooled investment fund” as eligible initial margin (IM) collateral, aims to identify assets that are liquid and will hold their value in times of financial stress.
The interpretation clarifies the division’s view that shares of certain US Treasury exchange-traded funds (ETFs) may be considered redeemable securities in a pooled investment fund and may qualify as eligible IM and VM collateral. Swap dealers, therefore, may post and collect shares of certain UST ETFs as IM collateral for uncleared swap transactions with any covered counterparty. Swap dealers may also post and collect such UST ETF shares as variation margin (VM) for uncleared swap transactions with financial end users.