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08 March 2016

ESAs publish final draft technical standards on margin requirements for non-centrally cleared derivatives

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These RTS cover the risk mitigation techniques related to the exchange of collateral to cover exposures arising from non-centrally cleared over-the-counter derivatives.

The European Supervisory Authorities published the final draft Regulatory Technical Standards outlining the framework of the European Market Infrastructure Regulation.

The draft RTS contain the following provisions:

  1. For OTC derivatives not clear by a Central Counterparty (CCP), the draft RTS prescribe that counterparties have to exchange both initial and variation margins. This will reduce counterparty credit risk, mitigate any potential systemic risk and ensure alignment with international standards.
  2. The draft RTS outline the list of eligible collateral for the exchange of margins, the criteria to ensure the collateral is sufficiently diversified and not subject to wrong-way risk, as well as the methods to determine appropriate collateral haircuts.
  3. The draft RTS lay down the operational procedures related to documentation, legal assessments of the enforceability of the agreements and the timing of the collateral exchange.
  4. The draft RTS cover the procedures for counterparties and competent authorities related to the treatment of intragroup derivative contracts.

The RTS will be applied in a proportionate manner to allow counterparties to phase in the requirements.

Full press release



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