Yesterday, the U.S. Commodity Futures Trading Commission’s (CFTC) Division of Swap Dealer and Intermediary Oversight (DSIO) announced the issuance of a time-limited no-action letter stating that, from March 1, 2017 to September 1, 2017, DSIO will not recommend an enforcement action against a swap dealer (SD) for failure to comply with the variation margin requirements for swaps that are subject to a March 1, 2017 compliance date. The DSIO no-action letter does not postpone the March 1, 2017 compliance date for variation margin, rather it allows market participants a grace period to come into compliance.  The alternative investment community should address this letter in conjunction with separately issued CFTC no action letters as well as EMIR’s variation margin requirements which target March 1st. Check with your counsel on “real time” developments that directly affect your portfolio.

The alternative investment community is thrilled given that these new rules require that initial margin be segregated from variation margin which produces opportunity costs to both sides.  Netting allows parties to benefit from heavily in-the-money positions in light of large initial margin amounts due at trading. Another major issue with the variation margin rules is the shorter delivery and resolution period. Are our back offices truly ready and is this rule actually benefiting our community or hurting our bottom line?! Irrespective of the opportunity costs or benefits to tax payers and investors alike, the alternative investment community undoubtedly welcomes the extra time to become compliant.

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Photo of Nanette Aguirre Nanette Aguirre

Nanette Aguirre concentrates on private funds alternative investments with an emphasis on derivatives and structured products and corresponding regulation. Her experience includes negotiating all forms of synthetic trading including international derivative (ISDA), repos, and prime brokerage enhanced leverage arrangements with global institutions. She

Nanette Aguirre concentrates on private funds alternative investments with an emphasis on derivatives and structured products and corresponding regulation. Her experience includes negotiating all forms of synthetic trading including international derivative (ISDA), repos, and prime brokerage enhanced leverage arrangements with global institutions. She works closely with emerging private fund managers to strategize their launch, trading and ongoing compliance. Additionally, she regularly advises on regulatory issues affecting the derivatives market, including without limitation, Dodd-Frank and related cross-border regulation. Nanette works throughout Latin America, in countries like Mexico and Colombia, as well as other emerging regions including Nigeria, advising banks, endowments, clearing organizations, and other financial institutions.

She has structured and negotiated finance and derivative transactions (including Indian and Chinese swaps, and generally, hedging securitization vehicles, credit and fund-linked derivatives, loan, credit default and equity swaps), exchange traded derivative agreements (including SEFs, and Futures and Options), repurchase agreements, securities lending agreements, prime brokerage (Reg T, Portfolio Margining and Enhanced Leverage), clearing (ISDA-FIA, DTCC, ISDA Amend/Markit.com), electronic trading agreements, tri-party and give-up arrangements. She has assembled derivative use plans for corporates, including leading insurance companies.

Nanette is an active member of the alternative investment community. Nanette sits on the board of the Florida Alternative Investment Association (“FLAIA”) and Minorities in Restructuring and Alternative Investments (“MRAI”). She also works closely with other MWBE and emerging manager associations. Prior to Greenberg Traurig, Nanette spent eleven years in the Structured Products and Derivatives department of a major New York law firm serving the financial services sector and working closely with some of the industry’s largest hedge funds, mutual funds and pension plans.