Jurisdictions across the globe have implemented margin requirements for non-cleared derivatives, largely in line with the standards agreed by the Basel Committee on Banking Supervision (BCBS) and the International Organization of Securities Commissions (IOSCO). Since implementation of the first phase of the requirements in 2016, the US, European Union (EU), Japan and others have extended the requirements in line with the phase-in schedule agreed by BCBS/IOSCO.
Consistency in requirements has enabled ISDA to develop and implement industry solutions to aid compliance, including standard initial margin (IM) and variation margin (VM) documentation, the ISDA Standard Initial Margin Model (ISDA SIMMTM) and ISDA Create – IM, an online tool for negotiating and executing IM documents.
Nonetheless, differences in the implementation across jurisdictions still exist in certain key areas – for example, eligible collateral, settlement time frames and treatment of inter-affiliate transactions. These inconsistencies create unnecessary complexity and costs for derivatives users and contribute to market fragmentation.
This paper highlights the main areas of difference in the implementation of margin requirements for non-cleared derivatives across jurisdictions, and makes recommendations on how to resolve them.