ISDA, the Alternative Investment Management Association (AIMA), the European Fund and Asset Management Association (EFAMA) and the Securities Industry and Financial Markets Association’s asset management group (SIFMA AMG) have submitted a letter to the European supervisory authorities (ESAs) and the European Commission on initial margin (IM) model approval requirements set out in the European Market Infrastructure Regulation (EMIR 3.0). The letter highlights challenges posed by the three-month period granted to the European Banking Authority and national competent authorities (NCAs) to validate changes to an IM model and describes how the ISDA Standard Initial Margin Model (ISDA SIMM) schedule can be amended to address these issues.

The letter also recommends that phase five and six firms should be able to meet the IM model approval requirement by notifying their NCA that they will be using a pro-forma IM model (such as the ISDA SIMM). NCAs may request further information or block a firm’s use of a model, but these entities should be able to use the pro-forma IM model once they have notified their NCA, assuming no express disapproval.