Initial margin – Special report 2022
Six years after the first batch of dealers was forced to post initial margin (IM) on bilateral swaps, the final cohort will be swept into the global uncleared margin rules regime on September 1 this year.
The compliance process has been improved over the years, but this final hurdle represents new challenges. The estimated 775 firms set to breach the threshold – €8 billion average aggregate notional amount (AANA) of bilateral swaps – is more than the previous five phases combined. The cohort breaks down to a whopping 5,400 counterparty relationships according to the International Swaps and Derivatives Association, which estimates at least 1,000 of these require renewing and custody accounts set up. Some fear a repeat of the bottlenecks that plagued phases one and five.
While the buy side dominated the 300 or so firms caught in phase five, a drop in the AANA threshold from €50 billion to just €8 billion spreads the requirements across a broader assemblage of derivatives users.
This Risk.net special report comprises a series of articles that explore the latest developments and key issues emerging in phases five and six, and charts the changing strategies for firms in meeting their IM responsibilities.
Download the 2022 Initial margin special report in PDF format
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Initial margin: the final act
Practice makes perfect, the saying goes. When it comes to the final wave of implementation for uncleared margin rules, however, this may not hold true
Ucits’ clash with IM rules could cause collateral damage
Strict collateral reuse guidelines may restrict popular investment vehicles’ hedging capabilities
Avoid the rush: don’t let UMR implementation for phase six catch you off–guard
With firms soon to be subjected to phase six of the uncleared margin rules (UMR), the implementation of phase five has taught a series of valuable lessons. Firms must grasp the complexity of the processes and ensure they are prepared in time for…
Banks, CCPs protest Esma’s ‘prescriptive’ procyclicality rules
Dealers welcome model transparency push, but call for greater say on methods to combat spikes
Collateral resilience is more than just understanding initial margin
New regulations and extreme global events are seeing initial margin (IM) requirements rise in prominence, with investment managers needing to focus on more than just their regulatory and operational compliance
Energy firms call for central bank support to cover margin spikes
EFET warns energy market participants risk being unable to meet “unprecedented margin requirements”
CCPs urged to widen collateral net as commodities spike
Broader acceptance of emissions certificates and letters of credit could relieve margin pressure
Automate today to prepare for initial margin compliance
Neil Murphy, business manager, TriOptima, at OSTTRA explores how automation can increase efficiency and maximise time savings across margin activities, delivering collateral cost reductions and allowing firms to focus their attentions on higher-value…
Lessons from UMR phase five
Sponsored Q&A
Don’t impose blanket margin model rules, say BoE advisers
Focus instead on outcomes and costs and factor in different clearing membership, say Murphy and Vause
Banks offer crypto clearing but, shhh, don’t tell
Top dealers clear crypto futures for select clients despite smorgasbord of risks
It’s complicated: why backtesting is so challenging, but so important
Hiroshi Tanase, executive director of product analysis and design at S&P Global Market Intelligence, explores why, with the implementation of phase five of uncleared margin rules (UMR) last September and with the phase six roll-out just around the corner…
EU’s IM model validation rules may put Simm in jeopardy
Draft RTS creates validation hurdles and cross-border conflicts, industry warns
Margin rules lead to rise in Asian NDF clearing volumes
LCH and Eurex position themselves for NDF clearing uptick ahead of next UMR phase
SA-CCR brings little succour for FX dealers and clients
Spreads on swaps and forwards likely to widen as banks adjust to capital-intensive regime