Article: The Collateral Cliff Edge – Variation Margin on the Brink31 May 2017 | Phil Langton
The new Variation Margin regulations impact all financial entities as well as systemically important non-financial entities that deal in uncleared OTC trades. This means that from March onwards, all new trades will need to be captured under a collateral agreement and margined daily with collateral posted to cover the MTM movements. Whilst this may sound simple in principle to achieve, entering into a collateral agreement is no simple task.
With the implementation date of 1st March looming ever closer, it would appear that banks and clients still have some way to go to be ready in time. SIFMA AMG recently wrote to regulators to advise that only 8% of the regulatory-compliant CSAs needed had been executed by their members so far and hence they have asked for a six month transition period to be put in place. This would allow trading to continue with existing broker / dealer relationships post 1st March rather than see clients blocked from