On September 8, ISDA responded to a consultation by the European Securities and Markets Authority (ESMA) on a draft regulatory technical standard under the European Market Infrastructure Regulation (EMIR 3.0) on margin transparency requirements. ISDA’s members are supportive of margin transparency but believe transparency can be achieved in a more efficient manner. EMIR 3.0 and the proposed ESMA rules set an architecture under which central counterparties (CCPs) provide model transparency and simulators to clearing service providers, clearing members and clients providing clearing services, and these clearing service providers provide transparency and simulations to clients. ISDA proposes a more direct approach whereby CCPs make model documentation and simulators available directly to clients.

A sample of seven ISDA members that provide clearing services in the EU showed that only 7% of clients on average pay a margin multiplier or any form of additional margin requirements higher than CCP margin requirements. Access to CCP simulators should therefore suffice for most clients. Additionally, clearing service providers could share worked hypothetical examples of how these factors could apply in practice by providing examples of ‘If X occurs, then Y multiplier may be applied’. When a client is charged a client-specific add-on, then clearing service providers can provide further information on the multiplier upon request or provide historical illustrative examples.