ISDA WGMR Implementation Initiative

Creating a New CSA under New York Law and English Law: ISDA and IHS Markit Tutorial Series

aosphere and ISDA webinar on new Collateral Provider and Collateral Taker Insolvency Opinions

ISDA Video Now Available: Preparing for the Variation Margin Rules

ISDA Amend December 1 Webcast Now Available: Launch of the Variation Margin Protocol 

In September 2013, the Working Group on Margin Requirements (WGMR), an initiative jointly run by the Basel Committee on Banking Supervision (BCBS) and the International Organization of Securities Commissions (IOSCO), issued the final margin policy framework for non-cleared, bilateral derivatives. Individual regulatory authorities across jurisdictions have since started to develop their own margin rules consistent with the final framework.

ISDA initiated a WGMR Implementation Program to facilitate the implementation of the margin rules across jurisdictions.

SIMM
A key component of the WGMR Implementation Program is the Standard Initial Margin Model (SIMM)TM project, which is focused on developing a common initial margin (IM) methodology that can be used by market participants globally.  Unlike the calculation of variation margin, which is based on day-to-day valuation changes that are often directly observable, initial margin calculations very much depend on the choice of model and the assumptions used. Under the framework set by the WGMR, firms can use their own internal models to calculate initial margin, as long as they meet certain criteria and obtain regulatory approval. These models have the potential to differ significantly, raising the possibility that counterparties will arrive at a different initial margin figure for the same trade. The result would be a surge in the number of disputes – and no obvious way currently in place to quickly resolve them. The SIMM provides an open, transparent, standard methodology that will be available to all.

In addition to the SIMM workstream, several ISDA WGMR implementation workstreams were formed to address all areas necessary for broad market compliance with new rules for both IM and variation margin (VM), including portfolio integrity, collateral management process changes, data, dispute resolution, and new legal documentation to govern collateral and segregation relationships.  The ISDA WGMR Oversight Committee coordinates the work of all the above workstreams.

Contacts:

WGMR Margin & Collateral Processing/Portfolio Integrity   (J. Pucciarelli)

WGMR Data Sources  (T. Kruse/E. Hsu)

WGMR Legal & Documentation  (K. Darras)

ISDA SIMM Governance Forum  (T. Kruse)


DateTitle / DescriptionDocuments
July 1, 2015
ISDA Begins Tender Process for an ISDA SIMM™ Crowdsourcing Utility
Press Release
ISDA launches tender for crowdsourcing FINAL.pdf
May 15, 2015
ISDA letter to global regulators on the use of a broad product set for purposes of margin calculation
The scope of products subject to the proposed margin requirements is not consistent across the EU, Japan and the US. The inconsistency in the margin product set raises problems for both VM and IM calculation, in addition to other cross-border situations. ISDA respectfully advises the regulators that for any counterparty pair, ISDA members intend to mitigate this issue by choosing whether to use a broader product set rather than the set required by any specific regulation, in order to ensure the parties capture all in scope products.
ISDABroadProdSet051515.pdf
March 31, 2015
ISDA Minimum Considerations for Uncleared Margin-Future State Workflow (MCD 2.0)
The document puts forth considerations for the end to end process changes needed from an Operations, Technology and Business perspective to support the implementation of the WGMR final framework. The MCD 2.0 compliments the earlier version published on November 7th and is inclusive of proposed CFTC and US PR rules.
ISDA WGMR MCPWG Minimum Considerations Document_FINAL 20150331 (2).pdf
February 11, 2015
ISDA Webcast: Preparing for WGMR Implementation
This webcast outlines the scope of the new requirements and describes the ISDA initiatives that are under way to prepare for the rules. This includes progress on developing a standard initial margin model (SIMM) and adaptations to collateral documentation.

ISDA Webcast: Preparing for WGMR Implementation
ISDA WGMR webcast FINAL slides.pdf
November 25, 2014
ISDA letter to the CFTC on margin requirements for uncleared swaps for swap dealers and major swap participants
ISDA provides comments regarding the recently released notice of proposed rules and advance notice of proposed rulemaking ("CFTC Margin Proposal") concerning margin requirements for non-cleared swaps and the implementation of the related statutory provisions enacted by Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"). Our analysis of the proposed rules and response to the proposed rulemaking addresses three critical themes: providing for implementation without excessive disruption; addressing systemic risk in an appropriate manner; and developing a workable cross-border framework.
ISDA_-_CFTC_Proposed_Margin_Rules_Letter 112414.pdf
November 25, 2014
ISDA letter to the PRs on margin and capital requirements for covered swap entities
ISDA provides comments to the Prudential Regulators (the "PRs") regarding the recently released notice of proposed rulemaking and request for comments ("PR Margin Proposal") concerning margin and capital requirements for non-cleared swaps and non-cleared security-based swaps and the implementation of the related statutory provisions enacted by Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"). Our analysis of the proposed rules addresses three critical themes: providing for implementation without excessive disruption; addressing systemic risk in an appropriate manner; and developing a workable cross-border framework.
ISDA_-_PR_Proposed_Margin_Rules_Letter 112414.pdf
November 7, 2014
ISDA Minimum Standards Document for the Future State Margin Workflow (MSD V1.0)
The purpose of the “MSD for the Future State Margin Workflow” is to define recommended business and technology standards associated with implementation of the new margin rules which are scheduled to come into effect in December 2015 for certain counterparties. The document has been categorized based on five main components: 1) counterparty setup and client on-boarding, 2) trade execution, 3) initial margin (IM) & variation margin (VM) calculations, composite margin notifications & settlement provisions, 4) collateral eligibility, and 5) segregation
ISDA WGMR MCPWG Consolidated Minimum Standards Version 1 Final (3).pdf
August 22, 2014
ISDA letter to the ESAs on Estimates of numbers of accounts affected by IM segregation requirements, to demonstrate operational challenges
The margin rules proposed by the European Supervisory Authorities (the ESAs) require IM to be segregated from proprietary assets on the books and records of a third party holder or custodian, or via other legally effective arrangements. In addition, the rules require cash IM to be segregated individually, unless other legally effective arrangements are in place to segregate it from proprietary assets. Several additional clarifications and issues are described in the letter sent by ISDA to the ESAs in July 2014. As proposed, we illustrate the unintended consequences arising from the IM segregation requirements.
Aug 22-ESAs Deliverable_IA Seg Estimates_ 08222014v2 (2).pdf
August 22, 2014
ISDA letter to the ESAs on Proposed Margin Rules
ISDA is concerned about the practical consequences of certain provisions of the margin requirements under the Draft RTS on risk-mitigation techniques. These concerns were raised in brief in the letter we sent to the ESAs on July 14 commenting generally on the Draft RTS (the “July Letter”). This letter is intended to provide further detail and we would welcome the opportunity to discuss this further with the ESAs.
Aug 22 (2) ICM-_20179443-v8-ISDA_Letter_-_Margin_RTS (2).pdf
August 18, 2014
ISDA letter to BCBS/IOSCO on timing issues for margin rules for uncleared derivatives
ISDA member firms participating in the industry-led WGMR implementation initiative are concerned about the market’s ability to meet an implementation date of December 2015. This concern is based not only on the significant infrastructural changes required of market participants but also due to the significant coordination effort required of global regulators. In summary, ISDA proposed that rules become effective two years after rules are clarified and finalized in Europe, Japan, and USA. ISDA also proposed a phase-in schedule for upcoming Variation Margin (VM) requirements and urged regulators to avoid imposition of implementation dates during the year end code freeze periods. Based on the above, the practical start date of the WGMR requirements would be April 2017.
Aug 18 - WGMR MarginTiming final 18082014 (2).pdf