FIA submitted comments to the CFTC today regarding proposed capital requirements for swap dealers and major swap participants. The comments focus on the potential impact that the proposed amendments to Commission Rule 1.17 will have on FCMs and clearing members, whether or not the FCM is registered as a swap dealer.
Requiring an FCM to include its proprietary swaps and security-based swaps positions in its calculation of eight percent of risk margin would create an unnecessary and unacceptable financial burden.
The proposed rule would most dramatically affect less well-capitalized FCMs that are not also registered as broker-dealers. As the Commission noted elsewhere in the Federal Register release, these FCMs “may be more willing to provide swaps markets in commodities to agricultural firms and smaller commercial end users such as farmers and ranchers that might not otherwise be able to use such markets to manage risks in their businesses or might have to pay higher fees to engage in swaps." The Commission’s rules should not have the effect of denying such market participants use of swaps to hedge their business activities.
Similarly, requiring a swap dealer to include eight percent of risk margin required in connection with its cleared proprietary positions in calculating its capital requirement would place an unnecessary and unacceptable financial burden on swap dealers.