SEC and CFTC Hold Historic Joint Meeting to Amend the Security Futures Margin Rules

On October 22, the SEC and CFTC held their first-ever joint open meeting to vote on a final rule. Never before in the 45-year history of the CFTC has the CFTC formally voted together with the SEC to adopt a joint rule. The joint final rule adopted by the CFTC and SEC lowers the margin requirements for an unhedged security futures position from 20% to 15% and makes certain technical changes to better align the minimum initial and variation margin required on security futures with other similar financial products.  In addition to adopting the joint final rule, the CFTC and SEC jointly voted to publish a request for comment on all aspects of portfolio margining requirements for uncleared swaps, non-cleared security-based swaps and related positions—including on the merits, benefits and risks of portfolio margining these types of positions, and on any regulatory, legal and operational issues associated with portfolio margin. As noted by CFTC Commissioner Heath Tarbert, “Portfolio margining is of central importance to market participants who are dually-registered with the SEC and the CFTC and have customers who hold positions in separate accounts without the ability to cross-margin the positions.” The CFTC and SEC’s joint amendments to the margin rules for security futures and similar products are intended to jumpstart the market in the U.S. by making regulation more efficient.