Initial margin – Special report 2020

Buy-side firms in advanced preparations for phases five and six of initial margin IM rules are eager to maintain momentum and put their efforts to the test now that implementation has been delayed by 12 months following disruptions related to the Covid‑19 pandemic.

Implementation has suffered multiple setbacks, with an additional sixth wave added to the planned five-phase schedule and a further 12-month extension for the final two phases – double the six-month delay some felt was sufficient for phase five only. An influential Commodity Futures Trading Commission committee is now pushing for a further six-month compliance grace period. This means phase six firms with aggregate average notional amounts of derivatives between €8 billion and €50 billion might not be caught in the net until March 2023 – two and a half years beyond the original timeline many had been working towards.

“If firms were looking at this in early 2019 and are now looking at possible 2023 implementation, they could have had a project going for four or five years. It sounds crazy they could have invested that amount of time, resource and budget to meet those regulations,” says a margin expert. “People understand why phase five was split and no one could have seen Covid coming, but another six months on top? It feels unnecessary.”

Download the full 2020 Initial margin special report in PDF format