The Division of Swap Dealer and Intermediary Oversight (DSIO) of the Commodity Futures Trading Commission has issued an advisory clarifying that the initial margin documentation requirement for swap dealers does not apply until the initial margin amount exceeds the regulatory posting threshold of $50 million (which is measured on a group basis). More specifically, DSIO’s advisory provides that swap dealers subject to the CFTC’s margin requirements are not required to complete documentation governing the posting, collection and custody of initial margin until the amount of initial margin exchangeable between the swap dealer and a counterparty exceeds $50 million. However, because the CFTC also makes the point that it expects that a swap dealer will take appropriate steps to have the required initial margin documentation fully executed on before the date the initial margin exposure threshold is reached, a dealer faces the practical challenges of estimating when that event will occur and starting the documentation effort well in advance of that estimated date.

More information, including access to CFTC Letter No. 19-16, is available here.