The Managed Funds Association (MFA) has submitted comments to the Commodity Futures Trading Commission (CFTC) in response to proposed amendments to margin requirements for uncleared swaps applicable to swap dealers (SDs) and major swap participants (MSPs). MFA expresses full support for the proposal, which aims to align the CFTC’s margin rules with international standards and reduce regulatory burdens. MFA endorses two key aspects of the proposal:
Seeded Funds Proposal: MFA applauds the proposed amendment that revises the definition of “margin affiliate” to provide relief for certain collective investment vehicles known as “seeded funds.” These funds, which receive their startup capital from a sponsor entity, would be exempt from initial margin (IM) requirements for uncleared swaps for three years from the fund’s trading inception date. MFA views this as a necessary step toward harmonizing domestic and global regulations, ensuring a level playing field for seeded funds and reducing disparate treatment among them.
Money Market Funds Proposal: MFA also supports the proposal to eliminate a provision that disqualified certain pooled investment funds, particularly money market funds (MMFs), from being used as eligible IM collateral. Removing this restriction would broaden the range of assets that qualify as eligible collateral under the uncleared margin requirements. MFA emphasizes that this change is crucial to avoiding disruption in the financial markets and preventing concentration risks in the use of MMFs as collateral. The proposal aligns with market practices and ensures greater efficiency and flexibility in collateral usage.
MFA commends the CFTC for its efforts to update margin rules and urges the commission to continue exploring regulatory initiatives that address challenges faced by market participants in complying with margin requirements for non-cleared swaps. MFA believes that the proposed amendments will lead to greater consistency, efficiency, and competitiveness in the derivatives market.