As Phases 4 and 5 of Initial Margin are fast approaching it is imperative that in scope firms begin preparations to meet requirements. The mandatory exchange of initial margin takes time and involves significant effort to ensure systems, processes and documentation are in place. Download a copy of the latest report by Head of Risk at Celent, Neil Katkov, "Crunch Time for Initial Margin: Challenges and Solutions for the Uncleared Margin Rules." to learn how best to prepare for Initial Margin.

Report Executive Summary

Initial margin (IM) requirements are a global regulatory regime intended to limit systemic contagion by offsetting losses if an OTC derivatives counterparty defaults. IM has significant implications for market participants’ risk and collateral management operations, as well as their technology systems.

IM Phase 5, scheduled for September 2020, will see a 10-fold increase in the number of market participants subject to IM regulation from 100 in 2019 to the 1,100 in-scope firms estimated by ISDA.

  • Custodians and large dealers will need to accommodate many newly in-phase counterparties. A Phase 1 dealer with 100 IM counterparties from Phases 1 to 3 may have more than 1,000 counterparties after Phase 5 rollout.
  • IM is expected to encompass 15 regulatory regimes in 2019. While regulation is consistent across jurisdictions at a high level, regional variation in in-scope firms and assets, calculations, and netting rules present numerous complexities for firms operating — or even transacting — internationally.
  • Internal models for IM help reduce margin costs and improve risk management, but present significant operational and technology challenges. This will drive many firms opting for internal models to seek support from vendors for calculations, backtesting, model validation, and other processes.

Industry advocates have called for various forms of relief to reduce the burden placed on firms by IM regulation. While some measure of relief may be warranted, a surer path to successful Phase 4 and Phase 5 implementation is automation, STP, and digitized documentation, supported by technology and platform partners.


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