Hedge funds and asset managers will win partial relief fromDodd-Frank Act collateral requirements for credit-default swapsunder a policy shift to be announced this week, according to twopeople briefed on the matter.

The U.S. Securities and Exchange Commission is revising a policyreleased in March that required some clients to put up double thecollateral dealers post at Atlanta-based IntercontinentalExchangeInc., according to the people, who requested anonymity because thedecision isn't public. The relief applies to portfolio accountsthat hold credit swaps tied to single securities as well asindexes.

ICE, owner of the world's largest clearinghouse for creditswaps; Citadel LLC; and other firms have spent more than a yearpushing regulators to support the portfolio-margining system forclient trades. The SEC may require banks temporarily to collectfrom clients collateral equivalent to what's required underclearinghouse rules plus the level required by their own models,according to an e-mail note that the Managed Funds Association sentto members on May 31. The relief would last six months, the notesaid.

The change from the March policy may help encourage clearing oftrades under Dodd-Frank, the 2010 regulatory law that called formost swaps to be guaranteed at clearinghouses as a way to reducerisk in the financial system. Mandatory clearing of trades began inMarch, while the second phase of client clearing is scheduled totake effect June 10.

The Commodity Futures Trading Commission and SEC, which shareoversight of the credit-swaps market, have taken steps to reducethe amount of collateral traders must have when they hold swaps inportfolio accounts. Investors have called for the rules to reducethe margin necessary when swaps tied to single securities areoffset by trades tied to indexes.

“A lot of end users and our mutual constituents have been in toinform them how important getting this right is. And I do thinkthat that has had an impact on them to raise the priority on thisissue,” ICE Chief Executive Officer Jeffrey Sprecher told U.S.House lawmakers in May. Regulators need to act before the June 10clearing deadline to make it efficient to use clearinghouses, hesaid.

The SEC's move follows a March 8 letter the agency sent toGoldman Sachs Group Inc., Morgan Stanley, Barclays Plc, and fourother dealers governing how much collateral their clients mustpost. In the letter, the commission told dealers they were requiredto collect at least double the amount of margin from most of theirclients.

Clients could save as much as 80 percent of the amount ofmargin, also known as collateral, necessary to offset index andsingle-name trades once they're held in the same account, accordingto ICE.

“There are very few cost-saving measures in Dodd-Frank; this isone of them,” Scott O'Malia, a Republican CFTC member, saidyesterday. “Portfolio margining provides the buy-side the samecapital efficiencies clearing members have enjoyed.”

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