ISDA requests UMR delay
27 March 2020 New York
Image: Shutterstock
The International Swaps and Derivatives Association (ISDA) is calling for the implementation timeline of initial margin under the Uncleared Margin Rules (UMR) to be suspended, amid widespread market disruption.
The industry body has written to the Basel Committee on Banking Supervision (BCBS), and the International Organization of Securities Commissions (IOSCO), along with other global regulators, requesting a delay to allow market participants to focus their already stretched resources on ensuring continued access to the derivatives market.
ISDA says it has submitted its request on behalf of 21 other industry associations, whose members do not believe it is possible to meet the documentation and operational requirements under the current timeline.
The association is asking for BCBS/IOSCO to issue an immediate, public recommendation to global regulators to suspend the compliance dates for phase five (1 September 2020) and phase six (1 September 2021).
ISDA’s letter comes after, the International Capital Market Association and the International Securities Lending Association sent a joint request to European Securities and Markets Authority (ESMA) for the first phase of the Securities Financing Transactions Regulation (SFTR) to be pushed back from April to October.
At the time there was hope that the development teams working on SFTR could then shift onto their UMR projects. But, in the end, ESMA only offered a delay to July meaning that these resources did not become available.
Shaun Murray, managing director and CEO at Margin Reform, tells SLT: “The knock-on effect of COVID-19 on market volatility will happen for an undefined period, causing stress and stretch to teams in front office, risk, legal and operations, which are all key for UMR purposes.
Murray also adds that the “SIMM model governance under EMIR Refit remains undefined and unclear to all”.
The overall view of Margin Reform would be that “a delay of X months for phase five, should then delay phase six by the same period so that the market is not overburdened or burnt out.”
The industry body has written to the Basel Committee on Banking Supervision (BCBS), and the International Organization of Securities Commissions (IOSCO), along with other global regulators, requesting a delay to allow market participants to focus their already stretched resources on ensuring continued access to the derivatives market.
ISDA says it has submitted its request on behalf of 21 other industry associations, whose members do not believe it is possible to meet the documentation and operational requirements under the current timeline.
The association is asking for BCBS/IOSCO to issue an immediate, public recommendation to global regulators to suspend the compliance dates for phase five (1 September 2020) and phase six (1 September 2021).
ISDA’s letter comes after, the International Capital Market Association and the International Securities Lending Association sent a joint request to European Securities and Markets Authority (ESMA) for the first phase of the Securities Financing Transactions Regulation (SFTR) to be pushed back from April to October.
At the time there was hope that the development teams working on SFTR could then shift onto their UMR projects. But, in the end, ESMA only offered a delay to July meaning that these resources did not become available.
Shaun Murray, managing director and CEO at Margin Reform, tells SLT: “The knock-on effect of COVID-19 on market volatility will happen for an undefined period, causing stress and stretch to teams in front office, risk, legal and operations, which are all key for UMR purposes.
Murray also adds that the “SIMM model governance under EMIR Refit remains undefined and unclear to all”.
The overall view of Margin Reform would be that “a delay of X months for phase five, should then delay phase six by the same period so that the market is not overburdened or burnt out.”
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