CPMI-IOSCO launch consultation on VM processes in cleared markets
14 February 2024 Switzerland
Image: AdobeStock/William
CPMI and IOSCO have opened a public consultation on steps to enhance variation margin practices in centrally cleared markets.
The consultation report, entitled Streamlining Variation Margin in Centrally Cleared Markets: Examples of Effective Practices, was published today and outlines eight effective practices for promoting effective variation margin (VM) processes and transparency between central counterparties (CCPs), clearing members and their clients.
These eight practices build on the Principles for Financial Market Infrastructures (PFMI) and the CCP resilience guidance by providing examples of how these standards can be met.
These include examples relating to the scheduling, frequency and timing of intraday VM calls and how counterparties can offset VM call requirements against their other obligations and exposures.
They also address the pass-through of VM by CCPs, use of excess collateral to meet VM obligations, and steps to encourage transparency across CCP and clearing members in VM requirements and processes.
Industry participants have been asked to send their feedback on the consultation proposals by 14 April.
The consultation paper builds on content of the Review of Margining Practices discussion paper released in 2022 by the Basel Committee on Banking Supervision (BCBS), the BIS Committee on Payments and Infrastructures (CPMI) and the International Organisation of Securities Commissions (IOSCO).
These organisations have also released two other reports during January 2024. The first is named Transparency and Responsiveness of Initial Margin in Centrally Cleared Markets — Review and Policy Proposals.
The second, authored by BCBS-IOSCO, is named Streamlining VM Processes and IM Responsiveness of Margin Models in non-Centrally Cleared Markets.
The Financial Stability Board (FSB) is coordinating a wider project to develop cross-sectoral policy proposals on the ability of non-bank market participants to access the liquidity that they require to meet margin and collateral calls. It aims to release a consultative report on this subject during the first six months of 2024.
The consultation report, entitled Streamlining Variation Margin in Centrally Cleared Markets: Examples of Effective Practices, was published today and outlines eight effective practices for promoting effective variation margin (VM) processes and transparency between central counterparties (CCPs), clearing members and their clients.
These eight practices build on the Principles for Financial Market Infrastructures (PFMI) and the CCP resilience guidance by providing examples of how these standards can be met.
These include examples relating to the scheduling, frequency and timing of intraday VM calls and how counterparties can offset VM call requirements against their other obligations and exposures.
They also address the pass-through of VM by CCPs, use of excess collateral to meet VM obligations, and steps to encourage transparency across CCP and clearing members in VM requirements and processes.
Industry participants have been asked to send their feedback on the consultation proposals by 14 April.
The consultation paper builds on content of the Review of Margining Practices discussion paper released in 2022 by the Basel Committee on Banking Supervision (BCBS), the BIS Committee on Payments and Infrastructures (CPMI) and the International Organisation of Securities Commissions (IOSCO).
These organisations have also released two other reports during January 2024. The first is named Transparency and Responsiveness of Initial Margin in Centrally Cleared Markets — Review and Policy Proposals.
The second, authored by BCBS-IOSCO, is named Streamlining VM Processes and IM Responsiveness of Margin Models in non-Centrally Cleared Markets.
The Financial Stability Board (FSB) is coordinating a wider project to develop cross-sectoral policy proposals on the ability of non-bank market participants to access the liquidity that they require to meet margin and collateral calls. It aims to release a consultative report on this subject during the first six months of 2024.
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