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Initial Margin Regulations Update

26 September 2019

By Simon Millington, Head of Product Development, CloudMargin
A version of this blog was originally published by CloudMargin on 30 July 2019.

What's changed?

  • Basel Committee on Banking Supervision (BCBS), International Organization of Securities Commissions (IOSCO) plus others have granted a one-time, one-year extension to Phase 5 for UMR
  • Originally all firms with an Aggregate Average Notional Amount (AANA) for uncleared derivatives of greater than €8bn with a €50mn initial margin threshold were due to exchange IM by 1 September 2020*
  • Now, only firms with an AANA of greater than €50bn will need to be compliant by 1 September 2020*
    1 September 2020: €750bn becomes €50bn
    1 September 2021: €50bn becomes €8bn
  • Read the press release and view the timeline below for further details

ISDA Scope and Timeline*

What should you do?

For those of you with an AANA of greater than €50bn, there is no change. You need to push on towards compliance by 1 September 2020.

For those of you with an AANA between €50bn - €8bn, you have three options:

  • One, sit back and relax, you have another year, right?
  • Two, you've started your project, so you might as well finish for 1 September 2020 (or close to it).
  • Three, use the time wisely. You have the opportunity to think strategically for the long term and not a tactical short-term fix.

As the vast majority of firms are predicted to be in the newly created Phase 6, there will still be a rush to implement. Therefore, option one isn't an option. Whether you've started or not, the extra time will allow you to approach a solution more strategically, potentially saving you money, time and precious human resources.

What's the solution?

Approaching this strategically means you need to focus on what people, process and technology changes need to be put in place to minimize cost, implementation and onboarding time, and time spent maintaining and updating for future regulations or industry shifts. Choosing the right partner can help minimize the impact to your firm.

If you're still searching for answers about how your firm should address the initial margin changes, set up a free Health Check with our partners, IM experts, MarginTonic. If you're not ready to chat, we also have a ton of free IM resources for you to view at your own pace. Check them out here.

Note from IHS Markit: We believe that firms should view collateral as an asset rather than a cost and should strive for an accurate bird's eye view of what the regulations mean for them. This strategic view will allow them to explore how collateral can be monetized as an asset, with best practices in place to address challenges across the margin and collateral eco-system. IHS Markit has solutions to support our clients at each phase of their requirements, including threshold monitoring, management of collateral workflow, performance of initial margin calculations and back-testing. We will continue to maintain close engagement with regulators to ensure our solutions remain fully in line with regulatory expectations. Please contact us to learn more.

* notional values (€) referenced in this post can be translated into these other values in other jurisdictions (source: ISDA):

IHS Markit provides industry-leading data, software and technology platforms and managed services to tackle some of the most difficult challenges in financial markets. We help our customers better understand complicated markets, reduce risk, operate more efficiently and comply with financial regulation.

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