Read the NFA’s Notice to Swap-Dealers Here

  • Source: nfa.futures.org

Treliant Takeaway:

Treliant provides a comprehensive end-to-end collateral management operating model design and implementation services including client onboarding, CSA client outreach, margin model build, validation, and regulatory approval, governance and control, collateral management processing including eligibility, haircuts, segregation, margin calls processing, technology infrastructure support including vendor selection and outsourcing service provider selection services.

Highlights:

NFA (National Futures Association) has issued Notice I-22-18 which requires Swap Dealers subjected to the CFTC Margin Rules to notify CFTC and NFA of certain events related to NFA-approved IM (initial margin) model. These rules are effective starting September 1, 2022.

Swap Dealers (SD) can submit these NFA’s WinJammer system

SD’s are required to notify the CFTC and NFA in writing 60 days prior to:

  • Extending the use of a previously approved IM model to an additional product type;
  • Making any change to any previously approved IM model that would result in a material change to the SD’s assessment of IM requirements; or
  • Making any material change to modeling assumptions used by the IM model

SD’s are also required to notify CFTC and NFA if the IM (initial margin) model validation process reveals any material problems with the model including describing the remedial actions taken to the SD’s specific portfolio. The notice filing must include:

  • Counterparty and portfolio IDs;
  • When and how the problem was identified, including relevant thresholds and testing results;
  • Detailed description of the model performance issue (e.g., risk factors causing exceedances, sensitivity amounts, market volatility relative to IM model calibration, nonlinear effects, risks-not-in-IM-model);
  • Remediation plan, including associated compensating controls;
  • Identified need for add-ons/multipliers, including amounts/values;
  • Current status of negotiations with the counterparty; and
  • Remediation timeline.

Author

Kishore Ramakrishnan

Kishore Ramakrishnan is Managing Director, Regulatory Change Management for Treliant’s Capital Markets practice. He has over 20 years of global industry and consulting experience across the banking, capital markets, asset, and wealth management businesses. Kishore is a trusted advisor and respected thought leader in the risk, regulation, and compliance domains…