On October 3, 2022, ISDA, the Investment Company Institute (ICI), the Institutional Money Market Funds Association (IMMFA), the asset management group of the Securities Industry and Financial Markets Association (SIFMA AMG) and UK Finance responded jointly to the UK Prudential Regulatory Authority (PRA) and Financial Conduct Authority (FCA) consultation on margin requirements for non-centrally cleared derivatives.

In the response, the associations welcome the UK proposals to extend the list of eligible collateral to include qualifying non-UK funds. The associations also support introducing transitional provisions where counterparties become subject to margin requirements for the first time due to a change in status of a counterparty or change in netting status of a relevant jurisdiction. However, there are significant differences between counterparties coming into scope due to a change in counterparty status and an entire jurisdiction having to comply, so we urge the PRA/FCA to distinguish between these two scenarios. Depending on the period used for the average aggregate notional amount calculation period, the proposed transitional period of six months will not be sufficient if counterparties become subject to margin requirements for the first time as a result of a change in netting status of a relevant jurisdiction. In that scenario, counterparties will need about 18 months from the change in netting status of a jurisdiction to put in place arrangements for the exchange of initial margin.