(a) Non-cleared
swaps and non-cleared security-based swaps with a swap entity. For a non-cleared swap or non-cleared security-based swap with a
swap entity, a covered swap entity shall collect initial margin and
variation margin required pursuant to this subpart solely in the form
of the following types of collateral:
(1) Immediately available cash funds that
are denominated in:
(i) U.S. dollars or another major currency; or
(ii) The currency of settlement for
the non-cleared swap or non-cleared security-based swap;
(2) With respect to initial margin
only:
(i) A security
that is issued by, or unconditionally guaranteed as to the timely
payment of principal and interest by, the U.S. Department of the Treasury;
(ii) A security that is issued
by, or unconditionally guaranteed as to the timely payment of principal
and interest by, a U.S. government agency (other than the U.S. Department
of Treasury) whose obligations are fully guaranteed by the full faith
and credit of the United States government;
(iii) A security that is issued by,
or fully guaranteed as to the payment of principal and interest by,
the European Central Bank or a sovereign entity that is assigned no
higher than a 20 percent risk weight under the capital rules applicable
to the covered swap entity as set forth in section 237.12;
(iv) A publicly traded debt security
issued by, or an asset-backed security fully guaranteed as to the
payment of principal and interest by, a U.S. government-sponsored
enterprise that is operating with capital support or another form
of direct financial assistance received from the U.S. government that
enables the repayments of the U.S. government-sponsored enterprise’s
eligible securities;
(v) A publicly
traded debt security that meets the terms of 12 CFR 1.2(d) and is
issued by a U.S. government-sponsored enterprise not operating with
capital support or another form of direct financial assistance from
the U.S. government, and is not an asset-backed security;
(vi) A security that is issued by, or
fully guaranteed as to the payment of principal and interest by, the
Bank for International Settlements, the International Monetary Fund,
or a multilateral development bank;
(vii) A security solely in the form of:
(A) Publicly traded debt not otherwise described
in paragraph (a)(2) of this section that meets the terms of 12 CFR
1.2(d) and is not an asset-backed security;
(B) Publicly traded common equity that is
included in:
(1) The Standard & Poor’s Composite
1500 Index or any other similar index of liquid and readily marketable
equity securities as determined by the Board; or
(2) An index that a covered swap entity’s
supervisor in a foreign jurisdiction recognizes for purposes of including
publicly traded common equity as initial margin under applicable regulatory
policy, if held in that foreign jurisdiction;
(viii) Securities in the form of
redeemable securities in a pooled investment fund representing the
security-holder’s proportional interest in the fund’s net assets and
that are issued and redeemed only on the basis of the market value
of the fund’s net assets prepared each business day after the security-holder
makes its investment commitment or redemption request to the fund,
if:
(A) The fund’s investments
are limited to the following:
(1)
Securities that are issued by, or unconditionally guaranteed as to
the timely payment of principal and interest by, the U.S. Department
of the Treasury, and immediately-available cash funds denominated
in U.S. dollars; or
(2) Securities
denominated in a common currency and issued by, or fully guaranteed
as to the payment of principal and interest by, the European Central
Bank or a sovereign entity that is assigned no higher than a 20 percent
risk weight under the capital rules applicable to the covered swap
entity as set forth in section 237.12, and immediately-available cash
funds denominated in the same currency; and
(B) Assets of the fund may not be transferred
through securities lending, securities borrowing, repurchase agreements,
reverse repurchase agreements, or other means that involve the fund
having rights to acquire the same or similar assets from the transferee;
or
(ix) Gold.
(b) Non-cleared
swaps and non-cleared security-based swaps with a financial end user. For a non-cleared swap or non-cleared security-based swap with a
financial end user, a covered swap entity shall collect and post initial
margin and variation margin required pursuant to this subpart solely
in the form of the following types of collateral:
(1) Immediately available cash funds that
are denominated in:
(i) U.S. dollars or another major currency; or
(ii) The currency of settlement for
the non-cleared swap or non-cleared security-based swap;
(2) A security that is issued by, or
unconditionally guaranteed as to the timely payment of principal and
interest by, the U.S. Department of the Treasury;
(3) A security that is issued by, or unconditionally
guaranteed as to the timely payment of principal and interest by,
a U.S. government agency (other than the U.S. Department of Treasury)
whose obligations are fully guaranteed by the full faith and credit
of the United States government;
(4) A security that is issued by, or fully guaranteed as to the payment
of principal and interest by, the European Central Bank or a sovereign
entity that is assigned no higher than a 20 percent risk weight under
the capital rules applicable to the covered swap entity as set forth
in section 237.12;
(5) A publicly
traded debt security issued by, or an asset-backed security fully
guaranteed as to the payment of principal and interest by, a U.S.
government-sponsored enterprise that is operating with capital support
or another form of direct financial assistance received from the U.S.
government that enables the repayments of the U.S. government-sponsored
enterprise’s eligible securities;
(6) A publicly traded debt security that meets the terms of 12 CFR
1.2(d) and is issued by a U.S. government-sponsored enterprise not
operating with capital support or another form of direct financial
assistance from the U.S. government, and is not an asset-backed security;
(7) A security that is issued by,
or fully guaranteed as to the payment of principal and interest by,
the Bank for International Settlements, the International Monetary
Fund, or a multilateral development bank;
(8) A security solely in the form of:
(i) Publicly traded
debt not otherwise described in this paragraph (b) that meets the
terms of 12 CFR 1.2(d) and is not an asset-backed security;
(ii) Publicly traded common equity that
is included in:
(A) The
Standard & Poor’s Composite 1500 Index or any other similar
index of liquid and readily marketable equity securities as determined
by the Board; or
(B) An index that
a covered swap entity’s supervisor in a foreign jurisdiction recognizes
for purposes of including publicly traded common equity as initial
margin under applicable regulatory policy, if held in that foreign
jurisdiction;
(9) Securities in the form of redeemable
securities in a pooled investment fund representing the security-holder’s
proportional interest in the fund’s net assets and that are issued
and redeemed only on the basis of the market value of the fund’s net
assets prepared each business day after the security-holder makes
its investment commitment or redemption request to the fund, if:
(i) The fund’s investments
are limited to the following:
(A) Securities that are issued by, or unconditionally
guaranteed as to the timely payment of principal and interest by,
the U.S. Department of the Treasury, and immediately-available cash
funds denominated in U.S. dollars; or
(B) Securities denominated in a common currency and issued by, or
fully guaranteed as to the payment of principal and interest by, the
European Central Bank or a sovereign entity that is assigned no higher
than a 20 percent risk weight under the capital rules applicable to
the covered swap entity as set forth in section 237.12, and immediately-available
cash funds denominated in the same currency; and
(ii) Assets of the fund may not
be transferred through securities lending, securities borrowing, repurchase
agreements, reverse repurchase agreements, or other means that involve
the fund having rights to acquire the same or similar assets from
the transferee; or
(10) Gold.
(c) (1) The value of any eligible collateral collected or posted
to satisfy margin requirements pursuant to this subpart is subject
to the sum of the following discounts, as applicable:
(i) An 8 percent discount for variation
margin collateral denominated in a currency that is not the currency
of settlement for the non-cleared swap or non-cleared security-based
swap, except for immediately available cash funds denominated in U.S.
dollars or another major currency;
(ii) An 8 percent discount for initial margin collateral denominated
in a currency that is not the currency of settlement for the non-cleared
swap or non-cleared security-based swap, except for eligible types
of collateral denominated in a single termination currency designated
as payable to the non-posting counterparty as part of the eligible
master netting agreement; and
(iii) For variation and initial margin non-cash collateral, the discounts
described in appendix B of this subpart.
(2) The value of variation margin or initial
margin collateral is computed as the product of the cash or market
value of the eligible collateral asset times one minus the applicable
discounts pursuant to paragraph (c)(1) of this section expressed in
percentage terms. The total value of all variation margin or initial
margin collateral is calculated as the sum of those values for each
eligible collateral asset.
(d) Notwithstanding paragraphs
(a) and (b) of this section, eligible collateral for initial margin
and variation margin required by this subpart does not include a security
issued by:
(1) The party
or an affiliate of the party pledging such collateral;
(2) A bank holding company, a savings and
loan holding company, a U.S. intermediate holding company established
or designated for purposes of compliance with 12 CFR 252.153, a foreign
bank, a depository institution, a market intermediary, a company that
would be any of the foregoing if it were organized under the laws
of the United States or any State, or an affiliate of any of the foregoing
institutions; or
(3) A nonbank financial
institution supervised by the Board of Governors of the Federal
Reserve System under title I of the Dodd-Frank Wall Street Reform
and Consumer Protection Act (12 U.S.C. 5323).
(e)
A covered swap entity shall monitor the market value and eligibility
of all collateral collected and posted to satisfy the minimum initial
margin and minimum variation margin requirements of this subpart.
To the extent that the market value of such collateral has declined,
the covered swap entity shall promptly collect or post such additional
eligible collateral as is necessary to maintain compliance with the
margin requirements of this subpart. To the extent that the collateral
is no longer eligible, the covered swap entity shall promptly collect
or post sufficient eligible replacement collateral to comply with
the margin requirements of this subpart.
(f) A covered swap
entity may collect or post initial margin and variation margin that
is required by section 237.3(d) or section 237.4(c) or that is not
required pursuant to this subpart in any form of collateral.
