Interpretive Notices

9081 - FINANCIAL REQUIREMENTS SECTION 17: INITIAL MARGIN MODEL ONGOING MONITORING REPORTS

(Board of Directors, August 19, 2021. Effective October 6, 2021.)

INTERPRETIVE NOTICE

Swap Dealer and Major Swap Participant (collectively, SD) Members that are subject to the CFTC's initial margin (IM) requirements under CFTC Regulation 23.154 may calculate IM using a standardized table based method or an internal risk based IM model that has been approved by the CFTC or NFA. In 2016, NFA established an IM model approval program and subsequently established an IM model oversight program to ensure that SD Members using an approved IM model could demonstrate that the model complied with CFTC Regulation 23.154 (incorporated by reference in NFA Compliance Rule 2-49) on an ongoing basis.

SD Members using NFA approved IM models are required to submit certain information on IM model performance to NFA on a periodic basis. This Interpretive Notice specifically identifies the required filings.

SD Members using an approved IM model must submit the following information to NFA in the noted time frames:^[1]

Quarterly (due by the last day of the following month):

• AcadiaSoft IM portfolio reconciliation reports for each of the three month ends in the quarter;
• A listing of the top five backtesting and benchmarking shortfalls; and
• An analysis of exceedances that breached the firm's internal thresholds and a description of remedial actions on the IM amount.

Annually (due by January 31 each year):

• The annual internal audit report required by CFTC Regulation 23.154(b)(5)(iv); and
• NFA's IM Model monitoring questionnaire.

NFA may also request other information from SD Members using approved IM models. SD Members must submit any additional information to NFA in the required time frame.

¹In the instance the due date does not fall on a business day, the information must be filed with NFA the immediate business day prior.