Basel and IOSCO Agree Extension To Margin Rules07.23.2019
The Basel Committee on Banking Supervision and the International Organization of Securities Commissions (IOSCO) acknowledge the progress that has been made to implement the framework for margin requirements for non-centrally cleared derivatives. In the final phase of implementation, initial margin requirements are scheduled to apply to a large number of entities for the first time. In March 2019, the Basel Committee and IOSCO published a statement noting that the framework does not specify documentation, custodial or operational requirements if a covered entity’s bilateral initial margin amount does not exceed the framework’s €50 million initial margin threshold.
#BaselCommittee and IOSCO agree to one-year extension for final implementation phase (Phase 5) of margin requirements for non centrally cleared derivatives #MarginRequirements #Derivatives @IOSCOPress https://t.co/j6iVYTwtAS pic.twitter.com/Cnsz688a70
— Bank for International Settlements (@BIS_org) July 23, 2019
Further, the Basel Committee and IOSCO have agreed to extend by one year the final implementation of the margin requirements. With this extension, the final implementation phase will take place on 1 September 2021, at which point covered entities with an aggregate average notional amount (AANA) of non-centrally cleared derivatives greater than €8 billion will be subject to the requirements. To facilitate this extension, the Basel Committee and IOSCO also will introduce an additional implementation phase whereby as of 1 September 2020 covered entities with an AANA of non-centrally cleared derivatives greater than €50 billion will be subject to the requirements.
The Basel Committee and IOSCO have agreed to this extended timeline in the interest of supporting the smooth and orderly implementation of the margin requirements which is consistent and harmonised across their member jurisdictions and helps avoid market fragmentation that could otherwise ensue. The Basel Committee and IOSCO expect that covered entities will act diligently to comply with the requirements by this revised timeline and strongly encourage market participants to make all relevant arrangements on a timely basis.
The Basel Committee and IOSCO have published on their websites a revised version of the margin requirements to reflect this limited revision to extend the implementation timeline by one year. The revised publication features no other substantive changes to the margin requirements framework.
Consistent with their mandate, the Basel Committee and IOSCO will continue to monitor progress in implementation to ensure consistent implementation across products, jurisdictions and market participants.
The decision by @baselcommittee and @IOSCOPress to split the phase-five
implementation over two years will reduce the risk of a compliance bottleneck
in September 2020, and will help ensure smaller firms will have longer to get
the necessary systems and processes in place
— ISDA (@ISDA) July 23, 2019
Clients can agree collateral on a real-time basis and increase efficiencies.
Margin and collateral are a new use case for bond ETFs.
Banks want centralisation of their collateral pools and a singular approach to optimisation.
OSCAR reduces the time to set up and negotiate an individual collateral basket from weeks to hours.
Proposal involves a real-time margining system combined with auto-liquidation.