Initial margin

Taking the Pulse of Our Members

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For much of the past decade, regulation has been the biggest driver of change in the derivatives market, and for good reason. Such has been the scale of the requirements and the frequency of the deadlines that compliance has been the priority for most market participants. But there comes a time when we need to take a broader, more strategic view, rather than only looking to clear the next regulatory hurdle.

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IM- the breakdown (averted)

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As expected, ISDA have communicated a more granular breakdown of
estimates for the likely population of the new IM phases 5 and 6, via relevant
working groups. These have been replicated and published by a number of third
party firms. Although all the numbers are estimated, there seems to both a lack
of mathematical rigour and some confusion between the population and threshold
estimates.

The estimates are as follows:

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When Wikipedia Gets It Wrong

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We all do it. You need to understand something and the first thing you do is google it and invariably one of the first hits you get is Wikipedia. The problem is that Wikipedia isn’t always correct. When it comes to Margin, it can lead to a lot of confusion.   Initial Margin If you google Initial Margin, this is […]

The post When Wikipedia Gets It Wrong appeared first on OpenGamma.

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When Wikipedia Gets It Wrong

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We all do it. You need to understand something and the first thing you do is google it and invariably one of the first hits you get is Wikipedia. The problem is that Wikipedia isn’t always correct. When it comes to Margin, it can lead to a lot of confusion.   Initial Margin If you google Initial Margin, this is […]

The post When Wikipedia Gets It Wrong appeared first on OpenGamma.

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Phase 5 mitigation mitigated

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Trailing in the wake of their northern neighbours, the CFTC have today issued a Staff Advisory confirming that there is no requirement for covered swap entities (CSEs) to put IM documentation and custody arrangements in place before the $50m threshold is reached.  As the conclusion to the Advisory notes:

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Regulatory Certainty is Crucial

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It is said that nothing in this world is certain except for death and taxes. That’s true enough for financial markets, where gains can turn to losses in the blink of an eye. But it should be possible to achieve a level of certainty and consistency in how financial markets regulation is interpreted and applied.

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Trade Life Cycle Events Guide for Non-Cleared Margin

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ISDA working groups developed the Trade Life Cycle Events Guide for Non-Cleared Margin in 2016 in order to assist market participants preparing for non-cleared margin requirements by providing a uniform global approach to the treatment of life cycle events to legacy transactions based on the guidance in the BCBS and IOSCO framework for margin requirements for non-centrally cleared derivatives that genuine amendments to existing derivatives contracts do not qualify as a new derivatives contract.

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ISDA Letter to U.S. Regulators on 50M IM Threshold and Documentation Requirement

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ISDA, SIFMA, GFXD and SIFMA AMG are requesting that U.S. regulators provide clarification that covered swap entities and their counterparties which will become subject to the initial margin requirements of the Margin and Capital Requirements for Covered Swap Entities or the Margin Requirements for Uncleared Swaps for Swap Dealers and Major Swap Participants as of September 1, 2019 (Phase IV) and on or after September 1, 2020 (Phase V) do not have to comply with the documentation requirements described therein unless the bilateral IM amount exceeds $50 million.

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US IM Rules: Start Phase Five Calculations Now

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We know a large number of small, non-systemically important firms will come into scope of initial margin (IM) requirements in September 2020. Less well known is that, under US rules, financial end users potentially subject to the phase-five implementation will need to start running aggregate average notional amount (AANA) calculations from next week to determine if the rules will apply to them.

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