(a) Netting arrangements.
(1) For purposes of
calculating and complying with the initial margin requirements of
section 237.3 using an initial margin model as described in section
237.8, or with the variation margin requirements of section 237.4,
a covered swap entity may net non-cleared swaps or non-cleared security-based
swaps in accordance with this subsection.
(2) To the extent that one or more non-cleared
swaps or non-cleared security-based swaps are executed pursuant to
an eligible master netting agreement between a covered swap entity
and its counterparty that is a swap entity or financial end user,
a covered swap entity may calculate and comply with the applicable
requirements of this subpart on an aggregate net basis with respect
to all non-cleared swaps and non-cleared security-based swaps governed
by such agreement, subject to paragraph (a)(3) of this section.
(3) (i) Except
as permitted in paragraph (a)(3)(ii) of this section, if an eligible
master netting agreement covers non-cleared swaps and non-cleared
security-based swaps entered into on or after the applicable compliance
date set forth in section 237.1(e) or (g), all the non-cleared swaps
and non-cleared security-based swaps covered by that agreement are
subject to the requirements of this subpart and included in the aggregate
netting portfolio for the purposes of calculating and complying with
the margin requirements of this subpart.
(ii) An eligible master netting agreement
may identify one or more separate netting portfolios that independently
meet the requirements in paragraph (1) of the definition of “Eligible
master netting agreement” in section 237.2 and to which collection
and posting of margin applies on an aggregate net basis separate from
and exclusive of any other non-cleared swaps or non-cleared security-based
swaps covered by the eligible master netting agreement. Any such netting
portfolio that contains any non-cleared swap or non-cleared security-based
swap entered into on or after the applicable compliance date set forth
in section 237.1(e) or (g) is subject to the requirements of this
subpart. Any such netting portfolio that contains only non-cleared
swaps or non-cleared security-based swaps entered into before the
applicable compliance date is not subject to the requirements of this
subpart.
(4) If a covered
swap entity cannot conclude after sufficient legal review with a well-founded
basis that the netting agreement described in this section meets the
definition of eligible master netting agreement set forth in section
237.2, the covered swap entity must treat the non-cleared swaps and
non-cleared security based swaps covered by the agreement on a gross
basis for the purposes of calculating and complying with the requirements
of this subpart to collect margin, but the covered swap entity may
net those non-cleared swaps and non-cleared security-based swaps in
accordance with paragraphs (a)(1) through (3) of this section for
the purposes of calculating and complying with the requirements of
this subpart to post margin.
(b) Minimum transfer amount. Notwithstanding
section 237.3 or section 237.4, a covered swap entity is not required
to collect or post margin pursuant to this subpart with respect to
a particular counterparty unless and until the combined amount of
initial margin and variation margin that is required pursuant to this
subpart to be collected or posted and that has not yet been collected
or posted with respect to the counterparty is greater than $500,000.
(c) Satisfaction of collecting and
posting requirements. A covered swap entity shall not be deemed
to have violated its obligation to collect or post margin from or
to a counterparty under section 237.3, section 237.4, or section 237.6(e)
if:
(1) The counterparty
has refused or otherwise failed to provide or accept the required
margin to or from the covered swap entity; and
(2) The covered swap entity has:
(i) Made the necessary efforts to
collect or post the required margin, including the timely initiation
and continued pursuit of formal dispute resolution mechanisms, or
has otherwise demonstrated upon request to the satisfaction of the
Board that it has made appropriate efforts to collect or post the
required margin; or
(ii) Commenced
termination of the non-cleared swap or non-cleared security-based
swap with the counterparty promptly following the applicable cure
period and notification requirements.
