CMF: Initial margin challenges loom large, survey shows
10 October 2019 Amsterdam
Image: Shutterstock
Initial margin (IM) document negotiation was ranked as the single biggest challenge associated with implementing margin, according to a survey of delegates at the Fleming Collateral Management Forum.
At the conference, delegates were asked to rank a list of perceived to be the biggest challenge in implementing IM. While some 32 percent cited IM document negotiation, another 14 percent said pointed to standard initial margin model (SIMM) implementation.
Meanwhile, roughly 9 percent voted are most troubled by the increased operational burden of IM, while 5 percent said they were unsure.
However, the largest portion of respondents (41 percent) said all of the mentioned issues were equally concerning.
The Uncleared Margin Rules cover IM requirements for non-centrally cleared derivatives and seek to establish international standards for non-centrally cleared derivatives. The final two phases (wave five and six) of implementation are due to come into force in September 2020 and September 2021.
The Basel Committee on Banking Supervision and the International Organization of Securities Commissions (BCBS-IOSCO) standards recommended a one-year extension on the final implementation phase, which would move the final go-live date to 2021.
In this context, one of the speakers looked at some of the “critical” European Markets Infrastructure Regulation’s responses to BCBS-IOSCO that the International Securities Lending Association collated.
For legacy contracts, statement support is to be confirmed, and it was explained that if amending legacy derivatives contracts solely to address interest rate benchmark reforms, you are not required to apply margin requirements for uncleared margin rules. The panellist added that this position will need to clarified under each relevant jurisdiction.
At the conference, delegates were asked to rank a list of perceived to be the biggest challenge in implementing IM. While some 32 percent cited IM document negotiation, another 14 percent said pointed to standard initial margin model (SIMM) implementation.
Meanwhile, roughly 9 percent voted are most troubled by the increased operational burden of IM, while 5 percent said they were unsure.
However, the largest portion of respondents (41 percent) said all of the mentioned issues were equally concerning.
The Uncleared Margin Rules cover IM requirements for non-centrally cleared derivatives and seek to establish international standards for non-centrally cleared derivatives. The final two phases (wave five and six) of implementation are due to come into force in September 2020 and September 2021.
The Basel Committee on Banking Supervision and the International Organization of Securities Commissions (BCBS-IOSCO) standards recommended a one-year extension on the final implementation phase, which would move the final go-live date to 2021.
In this context, one of the speakers looked at some of the “critical” European Markets Infrastructure Regulation’s responses to BCBS-IOSCO that the International Securities Lending Association collated.
For legacy contracts, statement support is to be confirmed, and it was explained that if amending legacy derivatives contracts solely to address interest rate benchmark reforms, you are not required to apply margin requirements for uncleared margin rules. The panellist added that this position will need to clarified under each relevant jurisdiction.
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