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With everything else going on, it’s tempting to shove something with a September 2020 deadline to the back of the line. That’s not an option when it comes to initial margin (IM) requirements. With over 1,100 small firms expected to come into scope, each needing to put IM documentation and systems in place, an early start on compliance efforts will be critical. Even then, the industry faces a very real capacity challenge. That’s why we’re leveraging our 30-year track record in providing the global standard for legal documentation by launching ISDA Create – IM, a new digital platform that automates the negotiation and execution of IM documents.
The service allows firms to deliver IM documentation to multiple counterparties simultaneously and then negotiate and execute those documents online. This will massively reduce the time and resources it takes to negotiate margin documentation. Importantly, it also allows firms to capture and store structured legal data – essential as the derivatives market moves to new technologies to drive efficiencies.
Nonetheless, even if the €8 billion threshold is recalibrated to a more appropriate level, the September 2020 deadline will still capture a large number of firms, far in excess of those that would have had to comply with the rules up until that point. That’s why ISDA Create – IM is so important. The negotiation of new IM documentation can be complex and laborious, and the whole process has to be repeated for each and every counterparty. Enabling firms to negotiate with multiple counterparties simultaneously through a digital platform will make the process much quicker and more efficient, helping to reduce the potential for bottlenecks. Importantly, sales and trading desks will also be able to pull information from the platform in real time to check which relationships have regulatory compliant documentation in place.