The International Swaps and Derivatives Association (ISDA), together with the Institute of International Finance (IIF) responded last year to the consultative paper on margin practices (the Response). Back then there were some issues that we acknowledged but could not develop further in the time available.
This paper provides some additional thoughts on these topics. In addition, we also address some discussions within industry over the last year.
In summary, we cover:
- Intraday variation margin (VM) collection practices: We consider the potential costs and benefits of CCPs paying out intraday margin, and note that there are pros and cons that need to be discussed with participants in each market.
- Measurement of procyclicality: To support comparability between models, measurement of procyclicality should be easy to implement and to understand.
- Governance considerations around anti-procyclicality (APC) tools: We flag the importance of governance of anti-procyclicality (APC) tools.
- Notice for margin rate increases: We consider whether CCPs can provide advance notice of margin rate changes, especially if the use VaR models.
- Forward-looking margin transparency: We propose simple scenarios as a basis for forward-looking margin simulators.
Documents (1) for Additional Thoughts on Margin Practices
Latest
Joint Response to FCA and HMT Consultations
On January 16, ISDA and UK Finance responded to both the consultation on streamlining the UK European Market Infrastructure Regulation (UK EMIR) intragroup regime by the Financial Conduct Authority’s (FCA) and the draft statutory instrument from His Majesty’s Treasury (HMT)....
Key Trends in OTC Derivatives Market H1 2025
The latest data from the Bank for International Settlements (BIS) over-the-counter (OTC) derivatives statistics shows an increase in notional outstanding of OTC derivatives during the first half of 2025 compared to the first half of 2024. Notional outstanding rose across...
Credit Derivatives Trading Activity Q3 2025
This report analyzes credit derivatives trading activity reported in Europe. The analysis shows European credit derivatives transactions based on the location of reporting venues (EU versus UK) and product type. The report also compares European-reported credit derivatives trading activity to...
Striking a Balance on EU Market Risk Capital
With US prudential regulators poised to publish a revised Basel III endgame proposal this year, and EU and UK regulators moving to finalize their own rules, ISDA is maintaining a laser focus on achieving a risk-appropriate capital framework that is...
