Additional Thoughts on Margin Practices

The International Swaps and Derivatives Association (ISDA), together with the Institute of International Finance (IIF) responded last year to the consultative paper on margin practices (the Response). Back then there were some issues that we acknowledged but could not develop further in the time available.

This paper provides some additional thoughts on these topics. In addition, we also address some discussions within industry over the last year.

In summary, we cover:

  • Intraday variation margin (VM) collection practices: We consider the potential costs and benefits of CCPs paying out intraday margin, and note that there are pros and cons that need to be discussed with participants in each market.
  • Measurement of procyclicality: To support comparability between models, measurement of procyclicality should be easy to implement and to understand.
  • Governance considerations around anti-procyclicality (APC) tools: We flag the importance of governance of anti-procyclicality (APC) tools.
  • Notice for margin rate increases: We consider whether CCPs can provide advance notice of margin rate changes, especially if the use VaR models.
  • Forward-looking margin transparency: We propose simple scenarios as a basis for forward-looking margin simulators.

Documents (1) for Additional Thoughts on Margin Practices

Paper on Proposal 6 on Margin Transparency

On November 16, ISDA published a document that looked at proposal 6 in the final Basel Committee on Banking Supervision (BCBS), Committee on Payments and Market Infrastructures (CPMI) and International Organization of Securities Commissions (IOSCO) report on margin transparency. Proposal...

Tender Issued for DC Administrator Role

ISDA and the Credit Derivatives Governance Committee have issued an invitation to tender for an independent regulated entity to serve as the administrator for the Credit Derivatives Determinations Committees (DCs), which includes assuming the role of DC secretary. The DC...

ISDA SIMM: The Standard for IM Calculations

The ISDA Standard Initial Margin Model (ISDA SIMM) plays an important role in ensuring margin calculations are consistent, transparent and aligned with global best practices and regulatory requirements. Since its launch in 2016, the model has been rigorously tested, regularly...