A bilaterally executed swap that is not cleared and settled through a clearing organization. An uncleared swap is not, directly or indirectly, submitted by its counterparties to, and cleared by, a derivatives clearing organization registered with an exchange commission. It is an over-the-counter (OTC) agreement that is not eligible to be cleared by the clearing organization.

Uncleared swaps are, nevertheless, subject to minimum margin requirements- as reflected in the variation margin. Variation margin is calculated as the cumulative mark-to-market change in value of the swap to the swap entity (measured from the date the swap is established), minus the aggregate value of variation margin previously received by the swap entity, plus the aggregate value of variation margin previously posted with respect to such swap by the swap entity. The swap entity collects this amount if it is positive, and post this amount if it is negative.