Moody's Investor Services argued that new over-the-counter (OTC) derivative margin rules set under the European Market Infrastructure Regulation (EMIR) would increase operational costs for fund managers and would likely prompt them to alter their investment strategies.
Moody's conceded that the conclusions made by the Basel Committee on Banking Supervision (BCBS) and the International Organisation of Securities Commissions (IOSCO) in February this year over requirements for non-cleared trades could provide "significant relief" for smaller fund managers.
However, Moody's stressed that initial margin requirements would become standard practice in the future for both cleared and uncleared OTC derivatives and could therefore lead to a drag on investment returns for many funds.
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