Margin for non-cleared derivatives—industry initiatives
Margin for non-cleared derivatives—industry initiatives

The following Banking & Finance practice note provides comprehensive and up to date legal information covering:

  • Margin for non-cleared derivatives—industry initiatives
  • Background to margin requirements for non-cleared derivatives
  • ISDA SIMM™ documents
  • ISDA Create—IM
  • ISDA 2016 VM Protocol
  • ISDA Regulatory Margin Self-Disclosure Letter
  • ISDA Regulatory Initial Margin AANA Self-Disclosure Letter (October 31, 2019)
  • ISDA credit support documentation and Schedules for VM and IM
  • ISDA factsheet on compliance with IM requirements: step by step guide to IM preparation
  • Trade life cycle events guide for non-cleared margin
  • More...

Margin for non-cleared derivatives—industry initiatives

The introduction of margin requirements for non-cleared derivatives is transforming how firms use derivatives and requires significant changes to infrastructure, processes, models and documentation. This Practice Note provides information on the initiatives of the International Swaps and Derivatives Association (ISDA) and other industry bodies to help firms meet the requirements.

Background to margin requirements for non-cleared derivatives

Following the onset of the financial crisis in 2007, the G20 group of countries agreed that the largely unregulated over-the-counter (OTC) derivatives market presented a major risk to the stability of the financial markets generally. In 2009 the G20 countries initiated a reform programme with four principal elements:

  1. all standardised OTC derivatives should be traded on exchanges or electronic platforms, where appropriate

  2. all standardised OTC derivatives should be cleared through central counterparties (CCPs)

  3. OTC derivatives contracts should be reported to trade repositories, and

  4. non-centrally cleared derivatives contracts should be subject to higher capital requirements

In 2011, the G20 added margin requirements for non-cleared derivatives to the reform programme and requested that the Basel Committee on Banking Supervision (BCBS), part of the Bank of International Settlements (BIS), and the International Organization of Securities Commissions (IOSCO), develop global standards. This resulted in the BCBS-IOSCO Margin requirements for non-centrally cleared derivatives (updated in April 2020 to extend by one year the final two implementation phases of the margin

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