December 7, 2020

Submitted Electronically

Mr. Christopher J. Kirkpatrick
Secretary of the Commodity Futures Trading Commission
Three Lafayette Centre
1155 21st Street, N.W.
Washington, DC 20581

Ms. Vanessa Countryman
Secretary of the Securities and Exchange Commission
100 F Street, N.E.
Washington, DC 20549

Re: Request for Comment for Portfolio Margining of Uncleared Swaps and NonCleared Security-Based Swaps (RINs 3038-AF07, 3235-AM64)1

Dear Mr. Kirkpatrick and Ms. Countryman:

The International Swaps and Derivatives Association, Inc. (“ISDA”)2 and the Securities Industry and Financial Markets Association (“SIFMA”)3 (together, the “Associations”) appreciate the opportunity to provide comments to the U.S. Commodity Futures Trading Commission (the “CFTC”) and the U.S. Securities and Exchange Commission (the “SEC” and together with the CFTC, the (Commissions”) on potential ways to implement portfolio margining of uncleared swaps and non-cleared security-based swaps (“SBS”).

As the registration compliance date for security-based swap dealers (“SBSDs”) approaches, non-bank4  swap dealers (“SDs”) that anticipate dually registering as SBSDs (“SD-SBSDs”) face the prospect of conflicting margin and segregation requirements for their customers’ swaps, SBS, and securities positions. In the absence of relief, these conflicts will substantially limit the ability of a non-bank SD-SBSD to recognize the risk-reducing effect of cross-product hedges, which will have a negative impact on customers, non-bank SD-SBSDs, and systemic risk generally. Specifically, customers will face increased hedging and trading costs and reduced incentives to execute effective hedging strategies. Non-bank SD-SBSDs, in turn, will be at a competitive disadvantage to bank and foreign SD-SBSDs, which are able to offer customers the ability to margin a wider range of related products under a consistent regulatory framework. And the market as a whole will experience increased liquidity, settlement, and operational risks as a result of the need for non-bank SD-SBSDs to exchange and custody margin separately for swaps, SBS, and securities positions.