McDermott Will & Schulte, a global law firm

On Oct. 22, 2015 a group of five banking regulators (the “prudential regulators”) adopted a Final Rule establishing minimum margin and capital requirements for non-cleared swaps and non-cleared security-based swaps. The Final Rule, which does not begin phasing in until September 2016, applies to swaps executed by swap dealers, major swap participants, security-based swap dealers and major security-based swap participants for which one of the federal agencies is the prudential regulator. Although most investment managers and other buy-side firms are already margining non-cleared swaps under ISDA master agreements and credit support annexes, the Final Rule imposes material obligations on swap dealers that diverge from current industry practice. This likely will require amendments to current trading documentation and result in increased costs for many market participants.