On June 26, the SEC and CFTC issued a joint request for comment (RFC) on potential ways to further implement portfolio and cross-margining of securities and derivatives subject to the jurisdiction of either or both agencies. According to the agencies, the request is intended to assist them in evaluating whether greater coordination or alignment in portfolio margining requirements may improve risk management efficiency, reduce unnecessary market fragmentation, and enhance customer protections consistent with each agency’s statutory authorities. The RFC notes that current regulations may in some cases require related positions to be held in separate accounts subject to different margin requirements, a structure that the RFC states may not permit margin computations to recognize offsetting exposures across certain securities and derivatives, potentially leading to capital inefficiencies or increased liquidity demands. The RFC also highlights the agencies’ issuance of conditional exemptive orders in April to facilitate customer cross-margining of U.S. Treasury securities and futures positions. It further references a 2020 joint RFC on portfolio margining of uncleared swaps and security-based swaps as relevant prior background.

The joint RFC seeks input on a range of topics, including: (i) existing portfolio margining models and practices; (ii) customer protection considerations; (iii) cross-margining and cross-product offsets; (iv) capital, segregation, and collateral treatment; (v) risk management and margin methodologies; (vi) clearing agency and derivatives clearing organization considerations; (vii) operational and technical implementation issues; and (viii) potential impacts on market liquidity and competition. Comments are due August 31.