- 2 -limited exceptions) and zero thresholds; implementation of appropriate capitalrequirements, and mandatory clearing of liquid standardized security-based swaps("
Quantitative Impact Study ("
"). Before finalizing its margin rules, if the SECdetermines that IM is necessary, it should conduct a QIS to determine the effect of imposing IM requirements.
Consistency. Because the SEC is one of the leading global regulators, the SEC'smargin rules should be coordinated and consistent with those of other regulators,domestic and foreign. In particular, the SEC should ensure that margin rules forSBS are compatible with rules issued by the Commodity Futures TradingCommission (the "
") for swaps. Because of the interplay between the swapand SBS markets, certain entities will be registered as both a securities-basedswap dealer ("
") and swap dealer ("
") and inconsistent margin rules willbe extremely difficult to implement and will create an unlevel playing field.
International coordination. The SEC and other U.S. regulators should continuetheir efforts to coordinate the development of margin rules on a global basis. U.S.regulators should not establish margin requirements in advance of positions beingtaken by regulators in other jurisdictions.
The SEC should re-propose its rules onmargin after it has had the opportunity to review and consider the final findings of the BCBS/IOSCO Working Group on Margining Requirements
Phase-In/Clearing. When the rules first become effective, proprietary modelsused by SBSDs (that are eligible to use models) should be deemed provisionallyapproved for calculation of IM. SBSDs should not be required to use thestandardized approach until final approval is granted. Compliance with themargin requirements should be phased-in over time. The effective date for marginrequirements for a given asset class should follow the implementation of mandatory clearing for that asset class.
End-Users. We support the exclusion of commercial end-users from marginrequirements.
SPVs and government entities. We recommend that special purpose vehicles("
") and state and municipal government entities be excluded from themargin requirements.
The Basel Committee on Banking Supervision ("
") and the International Organization of SecuritiesCommissions ("
") formed the Working Group on Margining Requirements ("
") to propose rulescovering margin for uncleared swaps. WGMR also commissioned a Quantitative Impact Study ("
") on theimpact of such proposals.