ISDA SIMM: The Trusted Standard for Initial Margin 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 reviewed by global regulators and adopted by buy- and sell-side firms around the globe. To date, 426 groups of entities are now licensed to use the ISDA SIMM, while 65 vendors are licensed to provide ISDA SIMM services.

This paper summarizes the reasons why the ISDA SIMM has become the trusted industry standard for calculating risk-sensitive IM to satisfy margin rules for non-cleared derivatives.

  • Satisfies Regulatory Standards: The ISDA SIMM satisfies the requirement for IM to cover changes in the value of a portfolio over a 10-day period with 99% confidence, resulting in IM amounts that are robust and conversative.
  • Subject to Global Regulatory Review: ISDA shares detailed documents on ISDA SIMM calibration, annual backtesting and ongoing monitoring with a community of global regulators. ISDA also engages in regular discussions with regulators on ISDA SIMM development and maintenance processes.
  • Transparent Methodology: The methodology is published so it can be replicated by anyone and is based on the sensitivity-based approach under the Fundamental Review of the Trading Book (FRTB-SBA), which is designed by regulators.
  • Semiannual calibration: The ISDA SIMM is now calibrated twice a year to ensure it remains responsive to market moves.
  • Uses Portfolio Risk Sensitivities (Greeks): The ISDA SIMM uses delta and vega risk sensitivities as its inputs – standard sensitivities used across the industry, which makes adoption easier.
  • Global Model Governance: An ISDA SIMM Governance Forum coordinates the industry-wide governance process for the development and ongoing maintenance of the model.
  • Independent Model Validation Every Three Years: ISDA SIMM is subject to independent model validation by an external auditor every three years, with the latest independent validation
    exercise performed in 2025.

Critically, use of a single, standardized model across the industry reduces the risk of disputes, ensuring margin amounts can be agreed and posted quickly, reducing delays and mitigating counterparty credit risk.

Click on the attached PDF to read the full report.

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