ABA, Groups Seek Forbearance on Variation Margin Rule

With a March 1 compliance deadline looming for when swap dealers and major swap participants must exchange variation margin for swaps not cleared through a central counterparty, the ABA Securities Association and several other trade groups have urged regulators to provide a transition period to facilitate compliance.

“While the systemic risk implications of granting forbearance are low, it is clear to the associations that the documentation and operational challenges that are necessary to comply with the VM regulations by March 1 are high, despite concerted and continuing effort by our members and other market participants,” the groups said.

They warned that without a transition period, many market participants might have to significantly curtail their derivatives trading activities — resulting in disruption and market fragmentation. “[R]egulatory forbearance with respect to the VM regulations strikes an appropriate balance between upholding the integrity of the regulations while preserving an open and stable derivatives market,” they said. For more information, contact ABA’s Cecelia Calaby.