Creating a New CSA under New York Law and English Law: ISDA and IHS Markit Tutorial Series

aosphere and ISDA webinar on new Collateral Provider and Collateral Taker Insolvency Opinions

ISDA Video Now Available: Preparing for the Variation Margin Rules

ISDA Amend December 1 Webcast Now Available: Launch of the Variation Margin Protocol 

In September 2013, the Working Group on Margin Requirements (WGMR), an initiative jointly run by the Basel Committee on Banking Supervision (BCBS) and the International Organization of Securities Commissions (IOSCO), issued the final margin policy framework for non-cleared, bilateral derivatives. Individual regulatory authorities across jurisdictions have since started to develop their own margin rules consistent with the final framework.

ISDA initiated a WGMR Implementation Program to facilitate the implementation of the margin rules across jurisdictions.

SIMM
A key component of the WGMR Implementation Program is the Standard Initial Margin Model (SIMM)^TM project, which is focused on developing a common initial margin (IM) methodology that can be used by market participants globally.  Unlike the calculation of variation margin, which is based on day-to-day valuation changes that are often directly observable, initial margin calculations very much depend on the choice of model and the assumptions used. Under the framework set by the WGMR, firms can use their own internal models to calculate initial margin, as long as they meet certain criteria and obtain regulatory approval. These models have the potential to differ significantly, raising the possibility that counterparties will arrive at a different initial margin figure for the same trade. The result would be a surge in the number of disputes – and no obvious way currently in place to quickly resolve them. The SIMM provides an open, transparent, standard methodology that will be available to all.

In addition to the SIMM workstream, several ISDA WGMR implementation workstreams were formed to address all areas necessary for broad market compliance with new rules for both IM and variation margin (VM), including portfolio integrity, collateral management process changes, data, dispute resolution, and new legal documentation to govern collateral and segregation relationships.  The ISDA WGMR Oversight Committee coordinates the work of all the above workstreams.

Contacts:

WGMR Margin & Collateral Processing/Portfolio Integrity   (J. Pucciarelli)

WGMR Data Sources  (T. Kruse/E. Hsu)

WGMR Legal & Documentation  (K. Darras)

ISDA SIMM Governance Forum  (T. Kruse)