In March 2012, the European Parliament agreed to a temporary exemption for pension funds from the EMIR framework. The exemption runs for three years, or at least until central counterparties develop a "suitable technical solution" for the transfer of non-cash collateral for variation margin. Brussels has suggested that the exemption period could be extended by another two to three years, subject to "proper justification", but many consultants have recommended pension funds prepare for central clearing requirements now by appointing clearing members and getting their legal documentation in order.
While variation margin represents collateral exchanged by counterparties to reflect current exposures, which can change the value of the transaction made, initial margin is provided to cover potential future exposures that can arise between the last exchange of margins and the liquidation of the relevant positions.
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