The presentation summaries the process to implement uncleared margins CFTC and Prudential Regulators rules to collect collateral daily for OTC products for certain banks.

1. Dodd Frank Summary !
U.S. Commodity Futures Trading Commission (CFTC) !
& Prudential Regulators (PR)!
Margin Rules for Uncleared Swaps !
“A Simple Transparent Approach”!
For lawyers and non-lawyers!
Created and Presented by Billy Gopeesingh, Esq.
This presentation is for illustration purpose only and does not constitute legal advice !

2. CFTC and PR Rules for Uncleared Swaps
Summary
5/26/16
Created
and
Presented
by
Billy
Gopeesingh
2
The CFTC and PR margin rules for uncleared swaps (“Final Margin Rules”) apply generally to on and
after the Effective Date, September 1, 2016. The products or asset classes affects commodities,
interest rates, credits and equities—with some exceptions in product lines.
For market participants, the Final Margin Rules apply to Swap Dealers (SD) and Major Swap
Participants (MSP)—collectively, Covered Swap Entities (CSE). The rules impose Initial and Variation
Margin requirements on: (A) trades between a CSE and another CSE; (B) CSEs and Financial End
Users with Material Swap Exposure; (C) CSEs and Financial End Users without Material Swap
Exposures that are not an Inter-Affiliate of the CSE; (D) CSEs and Inter-Affiliates of the CSE; and (E)
CSEs and Financial End Users with Material Swap Exposures that are a Foreign Inter-Affiliate of the
CSE. There are no imposed margin requirements for Commercial End Users, unless such
counterparties pose credit risk, determined by the SD and MSP.
The Final Margin Rules for uncleared swaps require two-way posting and collecting for Initial and
Variation Margins, once certain requirements are satisfied. The forms of Eligible Collateral are U.S.
cash, other major currency, settlement currency of uncleared swaps, and government debt backed
by the full-faith and credit of the U.S. Government.

3. The Final Margin Rules for Uncleared Swaps
5/26/16
Created
and
Presented
by
Billy
Gopeesingh
3
What is the effect of the Final Margin Rules? The CFTC and PR
rules impose margin requirements for uncleared swaps for
registered SDs and MSPs with the CFTC and Prudential
Regulators. !
Element One!
Who are the PR entities? The Prudential Regulators are the Federal
Deposit Insurance Corporation, the Board of Governors of the Federal
Reserve, the Comptroller of the Currency, the Farm Credit
Administration and the Federal Housing Finance Agency.!
Element Two!
Who is regulated and when do the CFTC and PR rules apply?
Both the CFTC and the PR regulate SDs and MSPs (CSE). The
CSE is regulated either by the CFTC or PR—not both. The
CFTC rules triggers regulation of CSE when there is no legal
jurisdiction from the PR. !
Element Three!
What are the issues? The major issues are Initial Margin (IM)
and Variation Margin (VM) requirements, the timing of margin
requirements, calculating IM and VM, custodial arrangements,
inter-affiliate swaps, role of custodian, and eligible collateral.!
Element Five!
What are the differences? The more notable differences
between the CFTC and PR Margin Rules are i) certain treasury
affiliates and inter-affiliates, ii) anti-Invasion definition for
margin-affiliates, iii) calculation of model approval process, and
iv) application of margin and related documents.!
Element Four!
5
Overview of main elements and implications
4
3
2
1

4. 5/26/16
Created
and
Presented
by
Billy
Gopeesingh
4
Road Map
Due Diligence
before Repapering
Step
One
Due Diligence for
Repapering; drafting CSA,
Custodian Agreement and
Eligible Master Netting
Agreement; application of
Business Conduct Rules;
and implementing Policy &
Procedures
Step
Two
Step
Three
The
Law
Due Diligence after
Repapering
Application of
Margin Rules
Impact on
Documentation
Process

5. 5/26/16
Created
and
Presented
by
Billy
Gopeesingh
5
Due Diligence for Repapering
Organizing and analyzing ISDAs
Active Trades!
Client Information!
Manage data for client
contact, signing authority
information and formation
documentation!
Parties legal status entities
with PR and CFTC Rules
classification !
Legal entity status, Financial
End User with or without
Material Swap Exposure,
Inter-affiliate, and exemptions!
Determine active and
inactive trades for repapering!
Collection of all ISDAs!
Inventory of all
ISDAs!
Rank ISDAs by Revenue!
Prioritize ISDAs by
revenues that qualify for
margin requirements !
Ranked by Relationship!
Impact on
Documentation
Process
Step
One
Prioritize ISDA by
relationship !

6. 5/26/16
Created
and
Presented
by
Billy
Gopeesingh
6
Repapering CSAs, Drafting Custodian and Master Netting Agreements
Issues and drafting process for repapering CSA !
!
!
Step
Two
ISSUES IN CSA !
Eligible
Master
NeAng
Agreement
CSA
Dispute
Resolution !
Initial Margin ! Variation Margins !
Calculation!
Minimum Transfer Amount ! Acceptable Collateral !
Fallback Positions !Segregation
Custodian Agreement !
New requirements mandate the CSA to have Custodian and!
Eligible Master Netting Agreements!

7. 5/26/16
Created
and
Presented
by
Billy
Gopeesingh
7
Due Diligence after Repapering CSA
Daily Operation of Trades after Repapering from a CSA Centric View
Step
Three, A
CSA
Risk Data !
Trades
Trade
Bundling
Trade
Calculator
Credit Data!
!
Margin
Rules
Legal and Compliance !
Department:!
Margin Analysis & Explanation !
Margin Calls and Dispute !
Front
Office
Operations !
Collateral Department !

8. 5/26/16
Created
and
Presented
by
Billy
Gopeesingh
8
Due Diligence After Repapering
Daily operation after repapering for a margin rule centric view that reshapes the derivatives OTC business
Step
Three, B
Margin
Rules
For ISDAs negotiated after Effective
Date, Good Faith representation that
Counterparty is in compliance with
classification of Financial End User !
Financial End
User !
Exemption to
Financial End
Users !
Trade Calculator !
Legal and Compliance !
Department:!
Margin Analysis &
Explanation !
Margin Calls and Dispute !
On-boarding !
Operations !
Collateral Department !
Information!
to capture!
ISDA ! Trade !
confirmation!
On
and
ALer
the
EffecNve
Date
Credit!
Risk!

9. 5/26/16
Created
and
Presented
by
Billy
Gopeesingh
9
Application of the Law
Regulators
Federal
Deposit !
Insurance
Corporation !
The Board of
Governors of the
Federal Reserve !
The Comptroller
of the Currency !
The Federal
Housing
Finance Agency !
The Farm Credit
Administration !
Prudential Regulators!
CFTC!
SEC!
Uncleared Swaps!
The
Law

10. 5/26/16
Created
and
Presented
by
Billy
Gopeesingh
10
Jurisdiction
CFTC or PR Margin Rules Apply to Uncleared Swaps
Extensive
transacNon
diligence
is
needed
in
applicaNon
of
Final
Margin
Rules.
PR
Regulators!
CFTC
The CFTC Final Rules cover margin calls for !
only SDs and MSPs with no oversight !
from the PR!
Uncleared swaps !
Rules
ImplicaNon
The PR Final Rules apply to margin calls for only !
SDs and MSPs with no oversight !
from the CFTC !

11. 5/26/16
Created
and
Presented
by
Billy
Gopeesingh
11
(CFTC, PR) and Foreign Regulators:
Margin Rules Apply to Uncleared Swaps
PR
Regulators
CFTC
Uncleared
swaps !
Uncleared
swaps
will
eventually
be
regulated
both
by
U.S.
and
foreign
jurisdicNons
E.U. and
U.K.!
Canada
Japan!
U.S.
REGULATORS
FOREIGN
REGULATORS
–
Currently
DraLing
RegulaNon

12. 5/26/16
Created
and
Presented
by
Billy
Gopeesingh
12
The Margin Rules
The
margin
rules
requires
that
CSE
collect
and
post
IniNal
and
VariaNon
Margins
for
uncleared
swaps
with
certain
counterparNes.
Counterparties!
!
• SDs!
• MSPs !
• Inter-Affiliate
Swaps!
• Financial End
Users!
Collateral !
!
• Different
requirement
for IM and
VM collateral!
!
Custodian
and Eligible
Master
Netting
Agreement!
!
• Ancillary
Documents !
!
Method of
Calculating and
Timing
Obligations of
initial Margin!
!
• Certain
requirements!
Trade
Calculator !
!
• Certain
requirements!
Model
Approval
Process!
!
• All rules,
risk, and
credit
models
must be
integrated
in margin
calculation!
• Approved
model or
Standard
model!
QuesNons
to
implement
uncleared
swaps:
-­‐
Is
the
CSE
supervised
by
a
PrudenNal
Regulator?
-­‐
Who
qualifies
for
a
Financial
End
User?
-­‐
What
enNNes
are
the
exempted
enNNes
of
a
Financial
End
User?
-­‐
How
to
calculate
iniNal
margins?
-­‐
Who
is
an
Affiliate?
Affiliate and!
Inter-Affiliate!
• Rules affect!
aggregate !
notional!
exposure!
Compliance Schedule !
Jurisdiction:!
Either the CFTC or the!
PR—but not both!
!

13. Two way CFTC IM and VM posting – Party B Trading Entity:
Swap Dealer or Major Market Participant !
The CFTC rules: Two-Way Initial Margin Requirement for Swap Dealers and Major Market Participants !
5/26/16
13
Counterparty A !
A
Uncleared Swaps ! Counterparty B !
Counterparty A is a!
Swap Dealer or Major
Market Participant
(Covered Swap Entity
(CSE))!
!
Counterparty B is a!
Swap Dealer or Major
Market Participant
(Covered Swap Entity!
(CSE))!
!
CFTC rules: Party A is required to collect and post,
daily. [17 C.F.R. § 23.152]. IM must be in U.S Dollars,
major currency, currency of settlement, U.S.
Government debt and equities in S&P 500 or S&P
1500 composite. [17 C.F.R. § 23.156(a)(3)(b)]. !
Party A is required to collect and post VM, daily. [17
C.F.R. § 23.153(a)-153]. VM must be in U.S. Dollars,
major currency or the currency of settlement. [17
C.F.R. § 23.156(b)(1)(i)]. !
CFTC rules: Party B is required to collect and post
collateral, daily. [17 C.F.R. § 23.152]. IM must be in
U.S. Dollars, major currency, currency of settlement,
U.S. Government debt and equities in S&P 500 or
S&P 1500 composite. [17 C.F.R. § 23.156(a)(3)(b)]. !
Party B is required to collect and post VM, daily. [17
C.F.R. § 23.153(a)-153; 12 C.F.R. § 237.4(a).] VM
must be in U.S. Dollars, major currency or the
currency of settlement. [17 C.F.R. § 23.156(b)(1)(i)]. !
IM
VM
Application of Rules !
IM Exposure Threshold:
CSE is not required to collect until aggregate of uncleared swaps exposure between Counterparty A and its affiliates and
Counterparty B and its affiliates is at least $50 million [17 C.F.R. § 23.151].
Minimum Transfer Amount:
When the aggregated exposure hits $50 million, the IM and VM Minimum Transfer Amount each needs to exceed $500,000 to
collect and post collateral. [17 C.F.R. § 23.152(b)(3)].
Created
and
Presented
by
Billy
Gopeesingh

14. Two Way CFTC IM and VM posting – Party B Trading Entity: Financial
End User with Material Swap Exposure
The CFTC rules: Two-Way Initial Margin for Swap Dealers and Major Market Participants!
5/26/16
14
Counterparty A !
B
Uncleared Swaps ! Counterparty B !
Counterparty A is a!
Swap Dealer or Major
Market Participant
(Covered Swap Entity
(CSE))!
!
!
Counterparty B Financial End User !
with Material Swap Exposure–
aggregated notional exposure exceeds
$8 billion with its affiliates!
!
Application of Rules !
IM Exposure Threshold:
Parties are not required to collect until aggregate of uncleared swaps exposure between Counterparty A and its affiliates and
Counterparty B and its affiliates is at least $50 million [17 C.F.R. § 23.151].
Minimum Transfer Amount:
When the aggregated exposure hits $50 million, the IM and VM Minimum Transfer Amount each needs to exceed $500,000 to
collect and post collateral. [17 C.F.R. § 23.152(b)(3)].
CFTC rules: Party A is required to collect and post,
daily. [17 C.F.R. § 23.152]. IM must be in U.S. Dollars,
major currency, currency of settlement, U.S.
Government debt and equities in S&P 500 or S&P
1500 composite. [17 C.F.R. § 23.156(a)(3)(b)]. !
Party A is required to collect and post VM, daily. [17
C.F.R. § 23.153(a)-153]. VM must be in U.S. Dollars,
major currency or the currency of settlement. [17
C.F.R. § 23.156(b)(1)(i)]. !
CFTC rules: Party B is required to collect and post
collateral, daily. [17 C.F.R. § 23.152]. IM must be in
cash, major currency, currency of settlement, U.S.
Government debt and equities in S&P 500 or S&P
1500 composite. [17 C.F.R. § 23.156(a)(3)(b)]. !
Party B is required to collect and post VM, daily. [17
C.F.R. § 23.153(a)-153; 12 C.F.R. § 237.4(a).] VM
must be in U.S. Dollars, major currency or the
currency of settlement. [17 C.F.R. § 23.156(b)(1)(i)]. !
IM
VM
Created
and
Presented
by
Billy
Gopeesingh

15. One Way PR IM and Two Way CFTC VM posting – Party B Trading Entity:
Financial End Users without Material Swap Exposure
The CFTC rules: One-Way Initial Margin for Swap Dealers and Financial End User!
!
5/26/16
15
Counterparty A !
C
Uncleared Swaps ! Counterparty B !
Counterparty A is a
Swap Dealer or Major
Market Participant
(Covered Swap Entity
(CSE))!
Counterparty B is
Financial End User
without Material Swap
Exposure and not-inter-
affiliate !
Under CFTC rules, Party A is not required to
collect or post collateral, provided certain
condition are met. [17 C.F.R. § 23.159(a)].
Under PR rules, Party A is required to collect, but
not post Initial Margins. [12 C.F.R. 237.11(a)]. See
pervious pages for eligible collateral.
Under CFTC rules, Party A is required to collect
and post Variation Margins. [17 C.F.R. § 23.159(b)].
See previous pages for eligible collateral.
Under CFTC rules, Party B is not required to
collect or post collateral, provided certain
conditions are met. [17 C.F.R. § 23.159(a)]. !
PR rules, Party B is required to post eligible
collateral, daily but not collect Initial Margin. [12
C.F.R. § 237.3(d) and § 237.4(c).] See pervious
pages for eligible collateral. !
!
Party B is required to collect and post Variation
Margin. 17 C.F.R. § 23.153(a); 12 C.F.R. !
§ 237.4(a).] See previous pages for eligible
collateral.!
IM
VM
Application of Rules !
IM Exposure Threshold:
Parties are not required to collect until aggregate of uncleared swaps exposure between Counterparty A and its affiliates and
Counterparty B and its affiliates is at least $50 million [17 C.F.R. § 23.151].
Minimum Transfer Amount:
When the aggregated exposure hits $50 million, the IM and VM Minimum Transfer Amount each needs to exceed $500,000 to
collect and post collateral. [17 C.F.R. § 23.152(b)(3)].
IM
Created
and
Presented
by
Billy
Gopeesingh

16. One Way PR IM and Two Way CFTC VM posting – Party is a B: Financial End User,
Material Swap Exposure, Inter-Affiliate
The CFTC rules generally preclude Inter-Affiliate transactions for Initial Margin requirements. The PR rules, however, !
establish a one-way Initial Margin requirement for inter-affiliate transactions [12 C.F.R. § 237.11(a)]!
5/26/16
16
Counterparty A !
D
Uncleared Swaps ! Counterparty B !
Counterparty A is a
Swap Dealer or Major
Market Participant
(Covered Swap Entity
(CSE))!
!
Financial End user with
Material Swap Exposure
and is an inter-affiliate
of counterparty A!
!
Under CFTC rules, Party A is not required to
collect or post collateral, provided certain
condition are met. [17 C.F.R. § 23.159(a)].
Under PR rules, Party A is required to collect, but
not post Initial Margins. [12 C.F.R. 237.11(a)] See
previous pages for eligible collateral.
Under CFTC rules, Party A is required to collect
and post Variation Margins. [17 C.F.R. §
23.159(b)]. See previous pages for eligible
collateral.
Under CFTC rules, Party B is not required
and collect or post collateral, provided certain
conditions are met. [17 C.F.R. § 23.159(a)].!
!
Under RP rules, Party B is required to post,
under certain conditions, but not collect Initial
Margins. [12 C.F.R. § 237.11(a)]. See pervious
page for collateral.!
!
Under CFTC rules, Party B is required to
collect and post Variation Margin. [17 C.F.R. §
23.159(b)]. See previous pages for eligible
collateral.!
IM
VM
Application of Rules !
IM Exposure Threshold:
CSE is not required to collect until aggregate of uncleared swaps exposure is at least $20 million. [12 C.F.R. § 237.11(b)(2)].
Minimum Transfer Amount:
When the aggregated exposure hits $20 million, IM and VM Minimum Transfer Amount each needs to exceed $500,000 to collect
and post collateral. [17 C.F.R. § 23.152(b)(3)].!
IM
Created
and
Presented
by
Billy
Gopeesingh

17. Applicable Trading Entity: Financial End User Who are Foreign Affiliates
Under this scenario, this CFTC rule is designed to prevent the potential use of affiliates to avoid collecting IM from third parties…!
because foreign affiliate are currently not subjected to margin requirements and its jurisdiction !
has no regulation of such transaction. [17 C.F.R. § 23.159(c)(2).]!
5/26/16
17
Counterparty A !
E
Uncleared Swaps ! Counterparty B !
Counterparty A is a!
Swap Dealer or Major
Market Participant
(Covered Swap Entity
(CSE))!
!
Financial End user with
Material Swap Exposure
and is an foreign inter-
affiliates of counterparty
A!
!
Under CFTC rules, Party A is not required to
collect or post collateral, provided certain
conditions are met. [17 C.F.R. § 23.159(a)].
Under PR rules, Party A is required to collect,
but not post Initial Margins. [12 C.F.R. 237.11(a)].
Under CFTC rules, Party A is required to collect
and post Variation Margins. [17 C.F.R. §
23.159(b)]. See previous pages for eligible
collateral.
Under CFTC rules , Party B is not required to
collect or post collateral, provided certain
conditions are met. [17 C.F.R. § 23.159(a)]/ !
!
Under RP rules, Party B is required to post but not
collect Initial Margins. [12 C.F.R. § 237.11(a)]/!
!
Under CFTC rules, Party B is required to collect
and post Variation Margin. [17 C.F.R. § 23.159(b)]
See previous pages for eligible collateral.!
IM
VM
Application of Rules !
IM Exposure Threshold:
PR rules establishes threshold amount of is at least $20 million. [12 C.F.R. § 237.11(b)].
Minimum Transfer Amount:
When the aggregated exposure hits $20 million, IM and VM Minimum Transfer Amount each needs to exceed $500,000 to collect
and post collateral. [17 C.F.R. § 23.152(b)].!
Created
and
Presented
by
Billy
Gopeesingh

18. Who are Inter-Affiliates?
Under this scenario, this CFTC rule is designed to preclude the potential use of affiliates to avoid collecting IM from third parties. !
[CFTC Final Rule at 674] … because foreign affiliates are currently not subjected to margin requirements and its jurisdiction !
has no regulation of such transaction—however some jurisdictions are drafting legislation. [17 C.F.R. § 23.159(c)(2)]!
5/26/16
18
Counterparty A !
F
Uncleared Swaps ! Counterparty B !
Counterparty A is a!
Swap Dealer or Major
Market Participant
(Covered Swap Entity
(CSE))!
!
Financial End user with
Material Swap Exposure
and is an foreign inter-
affiliate of counterparty A!
!
Application of Rules!
to determine what entity is an Inter-Affiliate !
• Inter-­‐affiliate
enNty
financial
statement
is
consolidated
with
the
CSE
financial
statement,
prepared
with
GAAP,
IFRS,
or
other
similar
standard;
• Inter-­‐affiliate
enNty
financial
informaNon
is
consolidated
with
the
CSE
and
a
third
company
on
a
financial
statement,
prepared
according
to
GAAP,
IFRS,
or
other
similar
standard;
or
• Inter-­‐affiliate
enNty
is
not
consolidated
with
the
CSE,
but
otherwise
would
be
consolidated
if
the
affiliate
were
subject
to
GAAP,
IFRS,
or
other
similar
standard.
Created
and
Presented
by
Billy
Gopeesingh

19. 5/26/16
Created
and
Presented
by
Billy
Gopeesingh
19
Eligible Collateral – Non Cash
Eligible Collateral!
Asset ! Haircuts!
Cash in same currency as swap obligation ! 0!
Eligible government and related debt (e.g., central bank, multilateral development bank, !
eligible GSE securities) with residual maturity: !
a. !less than one-year ! 0.5!
b. !between one and five years ! 2.0!
b. !Greater than five years ! 4.0!
Eligible corporate debt (including eligible GSE debt securities with residual maturity): !
a. !less than one-year ! 1.0!
b. !between one and five years ! 4.0!
b. !Greater than five years ! 8.0!
Equities included in S&P 500 or related index ! 15.0!
Equities included in the S&P 1500 Composite or related index but not the S&P 500 or related index ! 25.0!
Gold ! 15.0!
!
Additional haircut on asset in which the currency of the swap obligation differs from that of the collateral asset !
8.0!

20. 5/26/16
Created
and
Presented
by
Billy
Gopeesingh
20
Eligible Collateral - CASH
Eligible Collateral, as Cash [the CFTC’s regulation of Off-Exchange Retail Foreign
Exchange Transactions and Intermediaries for this list of major currencies, 75 FR 55410 at 55412
(September 10, 2010)]!
Asset ! Haircuts!
Cash in same currency as swap obligation ! 0!
United States Dollars (USD)!
Euro (EUR)!
Pound Sterling (GBP)!
Canadian Dollar ( CAD)!
Japanese Yen (JPY)!
Swiss Franc ( CHF)!
New Zealand Dollars (NZD)!
Australian Dollar ( AUD)!
Swedish Kroner (SEK)!
Danish Kroner ( DKK)!
Norwegian Krone ( NOK)!
Any other currency as determine by the relevant Agency !

21. Compliance Date! IM Requirement !
Initial Margins is required when both counterparties and its affiliates average daily aggregate notional
amount excluding foreign exchange transaction for March, April and May of the phase-in year exceeds:!
September 1, 2016! $3 trillion!
September 1, 2017! $2.25 trillion!
September 1, 2019! $1.5 trillion!
September 1, 2019! $750 billion!
September 1, 2020! IM is required for any other CSE with any other counterparty!
Variation
Margins
Implementation!
VM Requirements !
September 1, 2016! VM is required where both counterparties and affiliates have an average daily notional amount of
covered swaps and excluded foreign exchange transaction for March, April and May of 2016 that
exceeds $3 trillion !
March 1, 2017! Mandatory VM for CSE !
5/26/16
Created
and
Presented
by
Billy
Gopeesingh
21
Phase in Margin Requirement Over Time

22. 5/26/16
Created
and
Presented
by
Billy
Gopeesingh
22
Who are Financial End Users?
Financial End Users! Financial End Users Definitions [RP Final Rules, 50 to 51]!
!
!
A bank holding company or an affiliate thereof; a saving and loan
holding company!
...a U.S. intermediate holding company established or designated for
purposes of compliance with 12 CFR 252.153; a nonbank financial
institution supervised by the Board of Governors of the Federal Reserve
System under Title I of the Dodd-Frank Wall Street Reform and Consumer
Protection Act (12 U.S.C. 5323).!
!
A depository institution; a foreign bank; a Federal credit union, a
State credit union !
...as defined in section 2 of the Federal Credit Union Act (12 U.S.C. 1752(1)
& (6)); an institution that functions solely in a trust or fiduciary capacity as
described in section 2(c)(2)(D) of the Bank Holding Company Act (12
U.S.C. 1841(c)(2)(D)); an industrial loan company, an industrial bank, or
other similar institution described in section 2(c)(2)(H) of the Bank Holding
Company Act (12 U.S.C. 1841(c)(2)(H)).!
!
An entity that is state-licensed or registered as a credit or lending
entity !
This includes a finance company; money lender; installment lender;
consumer lender or lending company; mortgage lender, broker, or bank;
motor vehicle title pledge lender; payday or deferred deposit lender;
premium finance company; commercial finance or lending!
company; or commercial mortgage company; but excluding entities
registered or licensed solely on account of financing the entity’s direct sales
of goods or services to customers.!
A money services business! This includes a check casher; money transmitter; currency dealer or
exchange; or money order or traveler’s check issuer !
A entity that is regulated under the Federal Housing Enterprise
Financial Safety and Soundness Act of 1992 !
This type of regulated entity as defined in section 1303(20) of the Federal
Housing Enterprises Financial Safety and Soundness Act of 1992 (12
U.S.C. 4502(20)) and any entity for which the Federal Housing Finance
Agency or its successor is the primary federal regulator. !
A farm credit entity ! The
farm
credit
enNty
is
any
insNtuNon
chartered
in
accordance
with
the
Farm
Credit
Act
of
1971,
as
amended,
12
U.S.C.
§
2001
et
seq.
that
is
regulated
by
the
Farm
Credit
AdministraNon.!

23. Financial End Users! Financial End Users Definitions [RP Rules, 50 to 51]!
!
A securities holding company, a broker or dealer, an investment
adviser !
These type of entities as a securities holding company; a broker or dealer;
an investment adviser as defined in section 202(a) of the Investment
Advisers Act of 1940 (15 U.S.C. 80b-2(a)); an investment company
registered with the U.S. Securities and Exchange Commission under the
Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.); or a company
that has elected to be regulated as a business development company
pursuant to section 54(a) of the Investment Company Act of 1940 (15 U.S.C.
80a-53);!
A private fund! A private fund as defined in section 202(a) of the Investment Advisers Act of
1940 (15 U.S.C. 80-b-2(a)); an entity that would be an investment company
under section 3 of the Investment Company Act of 1940 (15 U.S.C. 80a-3)
but for section 3(c)(5)(C); or an entity that is deemed not to be an investment
company under section 3 of the Investment Company Act of 1940 pursuant
to Investment Company Act Rule 3a-7 of the Securities and Exchange
Commission (17 CFR 270.3a-7);!
Commodity pool entities ! A commodity pool, a commodity pool operator, or a commodity trading
advisor as defined in, respectively, sections 1a(10), 1a(11), and 1a(12) of the
Commodity Exchange Act of 1936 (7 U.S.C. 1a (10), 7 U.S.C. 1a(11), 7
U.S.C 1a(12)); a floor broker, a floor trader, or introducing broker as defined,
respectively, in 1a(22), 1a(23) and 1a(31) of the Commodity Exchange Act of
1936 (7 U.S.C. 1a(22), 1a(23), and 1a(31)); or a futures commission
merchant as defined in 1a(28) of the Commodity Exchange Act of 1936 (7
U.S.C. 1a(28))
An employee benefit plan! An employee benefit plan as defined in paragraphs (3) and (32) of section 3
of the Employee Retirement Income and Security Act of 1974 (29 U.S.C.
1002);!
An insurance company! An entity that is organized as an insurance company, primarily engaged in
writing insurance or reinsuring risks underwritten by insurance companies,
or is subject to supervision as such by a State insurance regulator or foreign
insurance regulator !
5/26/16
Created
and
Presented
by
Billy
Gopeesingh
23
Financial End Users Group

24. 5/26/16
Created
and
Presented
by
Billy
Gopeesingh
24
Financial End Users Group
Financial End Users! Financial End Users Definitions [RP Rules, 50 to 51]!
!
An entity or person! An entity, person or arrangement that is, or holds itself out as being, an
entity, person or arrangement that raises money from investors, accepts
money from clients, or uses its own money primarily for the purpose of
investing or trading or facilitating the investing or trading in loans,
securities, swaps, funds or other assets for resale or other disposition or
otherwise trading in loans, securities, swaps, funds or other assets.!
Catch Provision - Financial end user or swap entity ! An entity that is or would be a financial end user or swap entity, if it were
organized under the laws of the United States or any State.!
!

25. 5/26/16
Created
and
Presented
by
Billy
Gopeesingh
25
What Entities are Excluded from Financial End Users Group ?
Financial End Users that trigger
Margin requirements!
Financial End Users’ Definitions [RP Final Rules, 50 to 51]!
!
A sovereign entity ! Sovereign entity is defined to mean a central government (including the
U.S. government) or an agency, department, or central bank of a central
government. A sovereign entity would include the European Central Bank
for purposes of this exclusion.!
A multilateral development bank ! Multilateral development bank is defined to mean the International Bank for
Reconstruction and Development, the Multilateral Investment Guarantee
Agency, the International Finance Corporation, the Inter-American
Development Bank, the Asian Development Bank, the African Development
Bank, the European Bank for Reconstruction and Development, the
European Investment Bank, the European Investment Fund, the Nordic
Investment Bank, the Caribbean Development Bank, the Islamic
Development Bank, the Council of Europe Development Bank, and any
other entity that provides financing for national or regional development in
which the U.S. government is a shareholder or contributing member or
which the relevant Agency determines poses comparable credit risk. !
The Bank for International Settlements !
A captive finance company! A captive finance company that qualifies for the exemption from clearing
under section 2(h)(7)(C)(iii) of the Commodity Exchange Act of 1936 and
implementing regulations !
A person that qualifies for affiliate exemption! A person that qualifies for the affiliate exemption from clearing pursuant to
section 2(h)(7)(D) of the Commodity Exchange Act of 1936 or section 3C(g)
(4) of the Securities Exchange Act of 1934 and implementing regulations !
Eligible centralized treasury unit [of H.R.!
2029, an omnibus appropriations package, amended and clarified
CEA Section 2(h)(7)(D) that allow centralized treasury units
(CTU) to take advantage of the clearing exception, 17 C.F.R. §
23.151(2)(vi).] !
The PR Agencies intend to align the exclusion from the definition of
financial end user as much as possible with the statutory exceptions as
well as exclusions implemented by the CFTC by rule. There if the CFTC
acts to exempt such an entities fro the clearing by rule, the the PR would
do the same. [PR Final Rules page 60]!

26. 5/26/16
Created
and
Presented
by
Billy
Gopeesingh
26
Derivatives Products
Asset Class
Asset Class that are includes in
the definition !
Asset Class that are excluded from the definition of swaps ( but is
still included in the exposure calculation. !
!
Commodities, Interest Rates, Credit and Equity! The Secretary of Treasury made a determination that Foreign Exchange
Swaps and Foreign Exchange Forwards are not included from the definition
of swap, however, are included the exposure calculation. [See
Determination of Foreign Exchange Swaps and Foreign Exchange
Forwards Under the Commodity Exchange Act, 77 Fed. Reg. 69694
(Nov. 20, 2012)]!
Foreign Exchange products that are fixed, physically settled and cross-
currency swaps are not subject included in the definition of swap and are
not included in the Final Margin Rules, however, are included the
exposure calculation. [17 C.F.R. § 23.154(b)(2)(iv)] !

27. Initial Margins Implementation!
To qualify for the exemption, the CSE must not transact
with small banks and savings associations, Farm Credit
System Institutions, or credit unions with total assets
exceeding $10,000,000,000. 7 U.S.C § 2(h)(7)(C)(ii).!
!
CEA Section 2(h)(7)(A) exempts certain entities from clearing requirements
when uncleared swaps are intended for hedging or other risk mitigation. As
a natural outflow of the recognition of this clearing exemption, the CFTC
and Prudential Regulators have also exempted these transactions from the
Final Margin Requirements. The broadest of the three TRIPRA exemptions,
CSEs transacting with counterparties that qualify for the CEA Section 2(h)
(7)(A) clearing exception--such as non-financial end users, small banks and
savings associations, Farm Credit System Institutions, credit unions, and
captive finance companies--will not be subject to margin requirements
under the Final Margin Requirements !
!
The CFTC under its CEA Section 4(c)(1) powers exempts certain
cooperative financial entities from clearing requirements when
they (1) enter into uncleared swaps in connection with originating
loans for their members or (2) hedge or mitigate commercial risks
related to loans to members or swaps with non-financial entity
members. [17 C.F.R. § 50.51 ]!
[CEA Section 2(h)(7)(D) was recently amended by Title VII of
the Consolidated Appropriations Act, 2016 and, exempts
affiliates of an entity that otherwise qualifies for the clearing
requirement under CEA Section 2(h)(7)(A) when certain
conditions are met. [7 U.S.C. § 2(h)(7)(D)(ii); 15 U.S.C. § 78c-3(g)
(4)(B)]!
5/26/16
Created
and
Presented
by
Billy
Gopeesingh
27
Terrorism Risk Insurance Program Reauthorization Act of 2015
(TRIPRA) Exempts Certain End Users !

28. 5/26/16
Created
and
Presented
by
Billy
Gopeesingh
28
Calculation Compliance Process
The
margin
rules
requires
that
enhance
collecNon
process
• Decision to use
Regulator Model,!
Third Party Model!
or Proprietary Model!
What
Model?
• Ensure all rules and
internal requirement
are built in the
algorithms for Model!
Rules and
algorithms ! Monitoring Regulator
• Enhance Calculation Department
to develop controls, processes !
• Develop processes to ensure
i) ongoing compliance
ii) Periodical audits
iii) Escalation
iv) Internal and regulator reporting!
Regulators approval!
Internal Model Third Party
Model:
SIMM
Regulator Model