On August 6, ISDA responded to the Bank of England’s (BoE) consultation paper on the extension of settlement hours for RTGS and CHAPS, the UK’s high-value payment system. ISDA supports the BoE’s plan to extend RTGS and CHAPS settlement hours and the response focuses on the relevance of the shift towards longer settlement hours for market participants relying on RTGS for settlement of cash variation margin and initial margin in the context of derivatives clearing. In that regard, extending settlement hours is a welcome development. As it stands today, if a clearing member receives an intraday cash margin call outside RTGS hours, the only solution is to meet the margin call by shifting to US dollar, given that waiting until the next day when the sterling settlement window re-opens would not be compliant with the central counterparty’s (CCP) rulebook. ISDA notes that weekend settlement could be required in the future if 24/7 trading or generally extended trading hours become more widely used. ISDA also highlights the implications of extended settlement windows for firms’ risk management and business day considerations and CCP default management procedures.
Documents (1) for ISDA Responds to Bank of England Consultation on Extension of Settlement Hours
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