On July 20, ISDA responded to a consultation paper from the Clearing Corporation of India Ltd (CCIL) on a proposal to introduce stress loss margin (SLM).

ISDA members are supportive of the introduction of SLM for the derivatives segment as it collects higher margins from members, driving stress losses beyond a certain limit, and reduces loss mutualization among members by limiting their default fund requirements, moving towards a defaulter pay model. This is a positive development aligning CCIL’s risk management practices with that of global CCPs such as LCH and Eurex.

ISDA also highlights some suggestions to help members adapt to the SLM requirements, addressing procyclicality of SLM to ensure adequacy of the default fund, as well as introducing SLM in the non-derivatives segment. Comments also included a clarification on the impact of threshold parameters and a request to accept government bond securities as one of the resources accepted to settle SLM.