ISDA and IHS Markit Launch 2016 Variation Margin Protocol on ISDA Amend


ISDA  –  NEW YORK – The International Swaps and Derivatives Association, Inc. (ISDA) and IHS Markit today announced the launch of the ISDA 2016 Variation Margin Protocol on ISDA Amend, which automates the process for amending existing collateral documents or setting up new agreements in order to comply with new variation margin requirements going into effect on March 1, 2017.

The ISDA Amend platform enables counterparties to electronically share specially designed questionnaires through a centralized online platform, removing the need for bilateral negotiations. Counterparties can make elections under the Protocol, including which regulatory regimes apply and which method they will use to make the required changes to their documentation. ISDA Amend also automates the reconciliation of those questionnaires between counterparties.

The Protocol currently covers margin rules for non-cleared derivatives issued by the US, the European Union, Japan and Canada. ISDA Amend is a free service for buy-side firms and corporates. Over 8,000 buy-side firms and corporates, representing over 65,000 legal entities, are currently subscribed to the service.

“Starting on March 1, the new variation margin rules will apply to a wide universe of financial institutions from various jurisdictions, and these firms will be required to make important changes to their derivatives documentation,” said Katherine Darras, ISDA’s General Counsel. “The launch of the ISDA 2016 Variation Margin Protocol on ISDA Amend will enable counterparties to make those changes quickly and efficiently.”

“The Variation Margin Protocol available on ISDA Amend addresses the multijurisdictional compliance challenges of the non-cleared margin rules,” said Darren Thomas, managing director and head of Counterparty Manager at IHS Markit. “We have closely partnered with ISDA and its working groups to develop a rules-based, electronic solution that supports the major margin regulatory regimes and helps the broader industry meet margin requirements within a compressed time frame.”

The Protocol gives participants three alternative methods for amending existing collateral documentation or setting up new agreements:

  • Amend: Firms apply the necessary changes to existing credit support annexes (CSAs);
  • Replicate and Amend: Users replicate existing CSAs and make the necessary changes to agreements for new trades only; or
  • New CSA: Market participants can put in place a new CSA with limited standardized terms and, if needed, a new ISDA Master Agreement.

Parties using the Protocol will need to decide which method is best suited for them and their counterparties, and match their elections in the questionnaires.

The Protocol was published on August 16, and was supplemented with terms to meet European Union rules on November 17. The text of the Protocol, guidance on the mechanics and a link for adherence, along with answers to frequently asked questions and a list of adherents, are available on the Protocol Management section of ISDA’s website.

ISDA and IHS Markit will host an informational webinar that will outline the new ISDA Amend functionality for the Protocol on Thursday, December 1 at 10am EST. Registration is now open.

The Variation Margin Protocol on ISDA Amend is one of a series of measures to facilitate compliance with the rules on margin for non-cleared derivatives. A list of steps prepared by ISDA on how to get ready for the March 1 variation margin deadline is available here. More information on ISDA’s margin for non-cleared derivatives initiative is available on the ISDA webpage.

Related articles

  1. New Collateral Transformers To Emerge

    Clients can agree collateral on a real-time basis and increase efficiencies.

  2. Margin and collateral are a new use case for bond ETFs.

  3. New Collateral Transformers To Emerge

    Banks want centralisation of their collateral pools and a singular approach to optimisation.

  4. OSCAR reduces the time to set up and negotiate an individual collateral basket from weeks to hours.

  5. Margin Calls Expected to Increase
    Daily Email Feature

    FTX Defends Margin Proposal

    Proposal involves a real-time margining system combined with auto-liquidation.