ISDA Mints Margin Variation Protocol


Preparing for the ‘big bang’ implementation of new margin variation rules slated to go live in March 2017, the International Swaps and Derivatives Association has released a new protocol that’s meant to aid market participants in complying with the new regulations.

Scott O'Malia, ISDA

Scott O’Malia, ISDA

“The new margin rules for non-cleared derivatives represent a huge change for the market, and will require firms to make important changes to their derivatives documentation to ensure they comply with the requirements in each jurisdiction,” ISDA CEO Scott O’Malia said in a prepared statement. “That could involve hundreds, if not thousands, of collateral agreements for large derivatives users. The ISDA 2016 Variation Margin Protocol is intended to allow those firms captured by the rules to make those changes as efficiently as possible.”

The new protocol enables counterparties to put contractual documentation in place with multiple counterparties to meet the new requirements or make changes to existing collateral agreements to bring them into compliance, according to ISDA officials.

Financial firms with the largest derivatives portfolio globally will be the first to feel the bite of the new regulatory regime and will need to exchange initial and variation margin on their non-cleared derivative trades starting on September 1.

The subsequent compliance deadlines will be phased in over the next four years in a schedule developed by the Basel Committee on Banking Supervision and the International Organization of Securities Commissions.

To prepare for the upcoming mandates using the new protocol, ISDA members and non-members will need to exchange questionnaires under the terms of the protocol.

ISDA has posted the text of the protocol to its website along with a list of adherents and a frequently asked questions section for additional guidance.


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