The ISDA Margin Survey looks at the impact of regulatory and other changes on collateral practices, and analyzes the amount and type of initial margin (IM) and variation margin (VM) posted for non-cleared derivatives, and the IM posted for cleared transactions.
London and New York – March 20th, 2019 – Cassini Systems, the leading provider of pre and post trade margin analytics for buy side derivatives trading, today announced its partnership with SmartStream Technologies, the financial Transaction Lifecycle Management (TLM®) solutions provider, to help financial institutions comply with BCBS-IOSCO margin requirements for uncleared OTC derivatives.
Derivatives trading and processing are becoming more automated, but the legal documents that back these trades are still reliant on paper and wet signatures. This slows down the time it takes to negotiate a document, and creates inefficiencies throughout the whole process.
In response to the global financial crisis of 2008-2009, the G20 agreed to a financial regulatory reform agenda covering the over-the-counter derivatives markets and market participants, among them recommendations for the implementation of margin requirements for non-centrally cleared derivatives.
Bill: The PDF provided on the ISDA website examines refinements to the way IM is calculated for uncleared business. It links market size and liquidity to portfolio size and closeout timing to make the amount of IM more proportional to the size and risk in a given portfolio. According to Risk magazine this paper bypassed the ISDA WGMR causing some concern. At the moment the paper is purely academic and isn't a change to SIMM but more a discussion paper for global regulators.
The September 2019 Uncleared Margin deadline (and the 2020 date) will bring many more firms in-scope for exchanging IM. Both ISDA with LinkLaters, A&O with Markit and SmartDX are in the process of launching platforms to dramatically simplify the process of negotiating and implementing the necessary agreements. The A&O platform was announced in April here, we now have a high level description of the ISDA platform in the attached PDF and description below.
There is mounting pressure to revisit a fundamental aspect of the IM calculation methodology. The BCBS-IOSCO 2015 framework mandates an IM determination based on a 99% VAR over a fixed 10 day liquidation horizon. ISDA have published a paper by Professor Rama Cont, Chair of Mathematical Finance at Imperial College London, which advocates for a […]
The blog post at DRS comments on the paper from the CFTC that fundamentally revisits how risk is measured and managed in the uncleared market. Worth a read, Bill.
Each September until 2020, increasing numbers of entities will be required to meet initial margin regulations as the threshold level for compliance reduces. Preparation for meeting these requirements will take significant time, and will involve intensive work to ensure systems, processes and documentation are in place.
Bill: The announcement below seems to mean the AcadiaSoft platform now goes beyond it's original purpose of providing messaging for margin calls, into being an actual platform for the management of margin agreements. Yet the platform already contains Protocoll (ex Omgeo) which provides such a platform. I'm confused then, where does this new platform fit in? - write in with your answers please. Nothing on the home page to explain, nor a handy diagram to show how it all integrates.
The FCA have today issued their response to the ESAs 24 November FFX announcement. It is brief and is worth reading in full as a masterclass in ironic prevarication and understatement. Highlights below (emboldening is ours): “The amendments to the RTS should become increasingly clear over time and we would expect firms to make their […]
An interesting viewpoint from staff at the Bank of England on the implications of margin on un-cleared portfolios and why achieving risk reduction benefits is all in the details.