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‘The advent of margining rules for non-cleared derivatives is a major milestone in the derivatives reform initiative agreed by the Group-of-20 nations. Implementing the new margining requirements will be challenging, and ISDA has worked tirelessly to help smooth this process by addressing the legal, documentation and modelling issues faced by our members and the wider market,” said Scott O’Malia, ISDA’s Chief Executive.
“ISDA’s legal working groups have focused on amending collateral documentation to comply with new margining requirements for the past two years. The recent publication of final rules by some national regulators has enabled the group to finalize the first document, allowing market participants to make the necessary changes ahead of implementation,” said Katherine Darras, ISDA’s acting General Counsel.
The margining framework for non-cleared derivatives was developed by the Basel Committee on Banking Supervision and the International Organization of Securities Commissions, and will become effective for the largest derivatives users from September 1, 2016. For other entities within the scope of the regulations, initial margin requirements will be phased in over a four-year period, but variation margin obligations will come into force from March 1, 2017.
US prudential regulators published their final version of the margining rules last October, followed by the Commodity Futures Trading Commission in December. European and Japanese regulators released their final standards in March 2016.
The New York law variation margin credit support annex (CSA) represents the first in what will be a series of documentation releases to help firms implement the non-cleared derivatives margin rules. ISDA will publish further documents in the coming months, including an English and Japanese law version of the variation margin document, CSAs for initial margin, and a Protocol to facilitate the amendment of existing contracts to comply with the new requirements.