18 March 2015

Basel Committee/IOSCO: Revisions to implementation of margin requirements for non-centrally cleared derivatives

The Basel Committee on Banking Supervision and the International Organization of Securities Commissions (IOSCO) released revisions to the framework for margin requirements for non-centrally cleared derivatives.

Recognising the complexity of implementing the framework, the Basel Committee and IOSCO have agreed to (i) delay the implementation of requirements to exchange both initial margin and variation margin by nine months; and (ii) adopt a phase-in arrangement for the requirement to exchange variation margin.

Relative to the 2013 framework, the revisions published delay the beginning of the phase-in period for collecting and posting initial margin on non-centrally cleared trades from 1 December 2015 to 1 September 2016. The full phase-in schedule has been adjusted to reflect this nine-month delay. The revisions also institute a six-month phase-in of the requirement to exchange variation margin, beginning 1 September 2016. These changes are summarised in the table below.

Consistent with their mandate, the Basel Committee and IOSCO will continue to monitor progress in implementation to ensure consistent implementation across products, jurisdictions and market participants. This includes monitoring domestic rule-making as well as considering guidance on the validation and backtesting of models for margining.

The Basel Committee and IOSCO will also liaise with industry as market participants continue their work to develop initial margin models that will be required to comply with the margin requirements. This engagement will help ensure that emerging quantitative initial margin models are consistent with the framework but will not provide an explicit review or approval of any initial margin model.

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