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CFTC Initial Margin Segregation Fact Sheet


The Northern Trust Company ("Northern Trust") is providing certain counterparties ("you") the following general information, which should not be relied upon as legal advice. You should consult with your legal and compliance advisors when evaluating the matters presented herein. The following is only intended for those parties from whom we collect initial margin.

1. What are the CFTC Initial Margin Segregation Regulations?
Swap dealers and major swap participants are required to notify counterparties of their right to require segregation of initial margin (“IM”) for uncleared swap transactions pursuant to CFTC Regulations 23.700-23.704 (the “IM Segregation Rules”). Each swap dealer must obtain their counterparty’s election regarding whether the counterparty requires segregation of IM in accordance with the IM Segregation Rules.

2. What right does the regulation give to counterparties that post IM?
Swap counterparties that post IM to Northern Trust have the right to segregate the IM they post to Northern Trust with a third-party custodian in the event they enter into an uncleared swap transaction. For foreign exchange transactions entered into with Northern Trust, the IM Segregation Rules only apply to non-deliverable forwards.

3. Which custodians may hold the segregated IM?
The custodian must be a creditworthy non-affiliate and must be a legal entity independent of Northern Trust and the counterparty.

4. What is the cost of segregation?
Cost will be as agreed by the parties in writing. Custodian fees and charges may vary based on a number of factors, including but not limited to the nature and extent of the Counterparty relationship with a custodian, the nature of custodial assets to be held, the nature and extent of custodial and reporting services required, the expected frequency of collateral transfers, etc.

5. What actions do counterparties need to perform?
You will need to provide your election by delivering the CFTC IM Segregation Election Letter (available at: CFTC IM Segregation Election Notice) to Northern Trust. Please deliver your response as soon as possible.

6. What are the implications of electing to require IM segregation?
If you elect to require IM segregation, it will be necessary to execute a triparty custodial agreement prior to entering into any further uncleared swaps with Northern Trust. This agreement must be compliant with the IM Segregation Rules and you will be responsible for establishing any communication channels and data exchange capabilities with the selected custodian. In order to avoid trading disruptions, counterparties wishing to enter into uncleared swap transactions immediately should carefully consider their election. Your existing credit support annex or credit support documentation may need to be amended.

7. What are the implications of electing to not require IM segregation?
Your existing contractual arrangements with respect to IM will be preserved. Any future negotiations with respect to IM segregation will not be impacted by such election, as you may opt to change your election at any point; however, such change in election will only be applied to uncleared swap transactions entered into after such change in election occurs and the appropriate documentation is agreed. Additionally, you will receive a quarterly report that our back office procedures relating to margin and collateral requirements are in compliance with the agreement of the parties.

8. What are the implications of not responding?
The regulation requires Northern Trust to obtain your election whether or not you require IM segregation. Failure to respond within ten (10) business days will be deemed to constitute an election not to require the segregation of IM.

9. What is the chosen communication method of notification and response?
ISDA and Markit have developed tools on ISDA Amend to assist in this process. We therefore expect our counterparties to avail themselves of ISDA Amend for this purpose. The tools are available to you at no cost. The ISDA Amend tool kit can be found at

10. Who should I contact with any questions?
You may contact the Swaps Compliance Team at