Initial Margin for Non-Centrally Cleared Derivatives: Issues for 2019 and 2020

In response to the global financial crisis of 2008-2009, the Group of 20 nations agreed to a financial regulatory reform agenda covering the over-the-counter derivatives markets and market participants, among them recommendations for the implementation of margin requirements for non-centrally cleared derivatives. The Basel Committee on Bank Supervision and International Organization of Securities Commissions subsequently developed and finalized their Final Framework on Margin Requirements for Non-Centrally Cleared Derivatives, which sought to establish international standards for such requirements, to be phased in over time. 

As agreed in the revised implementation timeline to the final framework, the uncleared margin rules (UMR) began to be phased-in on September 1, 2016 for the largest market participants.  Broader implementation of variation margin (VM) requirements occurred in March 2017, while initial margin (IM) requirements continue to phase-in annually through 2020.

The final phases of the UMR will occur on September 1 of 2019 and 2020, when a large number of additional counterparties will be brought into scope for IM requirements. The fundamental challenges for market participants during the final phases of IM implementation are distinct from and more intense than those experienced in previous phases, and therefore likely to result in broader systemic impact. 

In this paper, ISDA and the Securities Industry and Financial Markets Association (SIFMA) seek to highlight the significant challenges market participants will encounter during the final phases of IM implementation and identify the key tasks and resulting hurdles that must be overcome to ensure an orderly implementation that avoids disruption to the functioning of the derivatives market. 

 

Documents (1) for Initial Margin for Non-Centrally Cleared Derivatives: Issues for 2019 and 2020

Remove Bureaucracy from Cross-margin Approvals

Cross-margining programs play a critical role in financial markets. By ensuring margin requirements more closely reflect the actual risk of a portfolio of products, they reduce liquidity strain and improve market efficiency, both of which will become even more important...

Joint Response on CCP Resolution

On September 7, ISDA and FIA responded to a Bank of England (BOE) discussion paper on central counterparty (CCP) resolution. The associations support greater clarity on valuation capabilities prior to a crisis scenario and the boundary between recovery and resolution,...