After more than four years of administering the final rules in subpart L of Part 23 (Commission Regulations 23.700-704), CFTC staff have observed that the detailed requirements of these regulations have been difficult and burdensome for swap dealers to satisfy. The requirements have also caused some confusion by end user counterparties who rely on our markets to hedge commercial risk. These observations were supported by comments made in response to the Commission’s Project KISS initiative.
Congress mandated that counterparties of swap dealers be given a choice regarding whether or not they elect the protections that come from segregation of initial margin collateral, which I support. Part of this important decision is protected by making sure the counterparty clearly, and easily, understand its rights. It appears that very few swap counterparties have exercised their right to make that choice. Part of the reluctance may be because that choice is accompanied by a range of overly complicated regulatory requirements and obligations.