The Securities and Exchange Commission and the Commodity Futures Trading Commission, at their first joint open meeting to vote on rulemaking initiatives, approved: (1) a joint final rule to harmonize the minimum margin level for security futures held in a futures account with the minimum margin level for security futures held in a securities portfolio margin account, and (2) the issuance of a joint request for comment on the portfolio margining of uncleared swaps and non-cleared security-based swaps.
The joint final rule and request for comment are two components of the Commissions’ ongoing efforts to further harmonize their regulatory regimes to better serve the markets and investors.
Highlights of the action
In 2002, the Commissions adopted rules establishing margin levels for unhedged security futures at 20%. In light of the asymmetry in margin requirements resulting from the 15% margin level that has been established for security futures and comparable financial products held in a securities portfolio margin account, the Commissions are adopting the proposed margin requirement to set the required margin level for each long or short unhedged position in a security future at 15 percent of its current market value.
At this time, there are no security futures contracts listed for trading on US exchanges. The final rule amendments, however, would set a 15% level for security futures if an existing exchange were to resume operations or another exchange were to launch security futures contracts.
CFTC chair Heath Tarbert said in a statement: “Today’s final rule represents an important example of our long history of cooperation regarding the joint regulation of security futures. I am pleased that the Commissions will continue this collaboration to examine potential ways to implement the portfolio margining of uncleared swaps and non-cleared security-based swaps.”