Forex margin definition dubai
More than five years after the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the US Commodity Futures Trading Commission has adopted a final rule regarding margin for uncleared swaps the CFTC margin rule and an interim final rule exempting non-financial and certain other end-users who are eligible for the end-user clearing exception from the scope forex margin definition dubai the CFTC margin rule.
Accordingly, non-financial end-users who rely on the end-user exception are exempt from margining requirements. The margin rules forex margin definition dubai only to uncleared swaps entered into after the applicable compliance date. The margin rules require bilateral margining by both SDs and MSPs and their counterparties who are subject to the margin rules. In addition, SDs and MSPs trading with affiliates that are subject to the bank margin rule must post initial margin as required by that rule.
Variation margin must be posted to and collected from each affiliate that is a SD, MSP or financial end-user. If the covered SD or MSP is not required to post initial margin, it still must calculate daily the amount of initial margin that would have been required if its counterparty was not an affiliate.
Variation margin must be posted and collected to and from each affiliate that is a SD, MSP or financial end-user. Initial margin may be calculated using an approved risk-based model or based on a standardized table that sets minimum gross margin requirements based on product type and trade duration. Initial margin must be held for the duration of the transaction with a qualifying custodian under the applicable custodian rules and may not be offset against variation margin collected from the forex margin definition dubai.
The margin rules specify permissible collateral types for initial and variation margin. Variation margin must be posted in cash in any major currency or a currency of settlement of the swap. The permissible collateral types for initial margin are broader and forex margin definition dubai US Treasuries and other enumerated securities. The margin value of securities posted as collateral must be reduced by haircuts of at least the amounts set forth in the margin rules.
When an SD or MSP enters into uncleared forex margin definition dubai with another SD or MSP or a financial end-user, margin documentation must contain initial and variation margin terms that comply with the requirements of the margin rules. Margin documentation must contain specified forex margin definition dubai, initial margin calculation, and dispute resolution procedures. This requirement would foreclose netting when SDs and MSPs trade with financial end-users organized in jurisdictions in which industry standard legal opinions are not available and with counterparty types where the SD or MSP cannot forex margin definition dubai does not obtain required netting and enforceability opinions.
The margin rules contemplate that swap participants may create separate margining portfolios under a single eligible master netting agreement, with margining occurring on a net basis within each separate margining portfolio. For example, parties could use their existing pre-compliance collateral documentation, if any, to margin or not margin all swaps executed prior to the relevant compliance date, and use post-compliance collateral documentation to margin only a portfolio of post-compliance trades.
However, the margin rules require that each swap under a separate margining portfolio be margined in accordance with the margin rule requirements if at least one swap in the portfolio is a covered by the rule. That is, if separate margining portfolios are not created, then the margin rules will apply to both pre-compliance and post-compliance swaps. The margin rules do not require any variation margin forex margin definition dubai be held with a custodian. However, all initial margin posted and collected under the margin rules must be held with an unaffiliated custodian pursuant to an enforceable custody agreement and may not be rehypothecated.
Forex margin definition dubai, SDs and MSPs will need to obtain enforceability opinions on its custody agreements in the jurisdictions of both the custodian and its counterparty. The compliance dates are as follows:. Find out more about the margin rules and their implications for your business by contacting any of the authors.
Securitization vehicles that fit within any of the enumerated categories are covered. Sovereign entities Multilateral development banks The Bank for International Settlements Captive finance companies whose swaps are exempt from clearing Treasury affiliates whose swaps are exempt from clearing or otherwise exempt from the CFTC margin rule by rule. Inter-affiliate swaps are treated differently under the two margin rules.
The compliance dates are forex margin definition dubai follows: Related sectors Financial Services.
05 0. 01 0. 02 0. 02 Outcome: 2005 top 5 actual user. Baseline model performance ( without morbidity trajectories groups) ??2005 Mean total cost 63 344 95 416 120 946 138 forex margin definition dubai 138 237 ??Trend ratio of total cost 1.
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