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EU non-cleared fog begins to clear

On 28 July 2016 the EC published a letter to the Joint Committee of the European Supervisory Authorities (ESAs), stating that it will endorse a revised text [1] of the RTS on risk mitigation techniques for non-cleared OTC derivatives Article 11(15) of EMIR. The market has been on tenterhooks since 9 June 2016 when the Commission announced that it would […]

ISDA Publishes WGMR Compliant VM CSAs

Introduction On 14 April 2016 ISDA published the New York law “2016 Credit Support Annex for Variation Margin (VM)” (the “NY-law VM CSA”).  Subsequently, on 29 April 2016 it published the English law “2016 VM Credit Support Annex for Variation Margin (VM)” (the “English-law VM CSA” and together with the NY-law VM CSA, the “VM […]

VM NY CSA has landed

ISDA has yesterday published its long-awaited 2016 Credit Support Annex for Variation Margin for use with New York law. The VM security-interest CSA is the first in a series of new market-standard documentation and will be joined by VM CSAs under English and Japanese law, IM CSAs and a protocol to assist amendment of legacy documents. […]

CFTC final non-cleared margin rules

Commissioners yesterday voted 2-to-1 to pass margin rules for uncleared swaps. The rules are broadly in line with those passed by the Prudential Regulators on 30 October 2015. Initial margin (IM) will be exchanged between covered swap entities (CSEs) and SDs, MSPs and financial end-users, subject to the $8bn gross notional exposure. IM may be […]

Cross-currency collateral ousted from SCSA 2

On 6 November 2014, ISDA released the 2014 “Standard” Credit Support Annex, available as always under English law or New York law. This new CSA is meant to coexist with the legacy 1994 CSA and the already out-of-fashion 2013 CSA published only a year ago. What was presented as a tour de force in the […]

Barnier on pension funds- Not my problem any more…

In line with last month’s speculation, Risk magazine reports an interview with Michel Barnier, the EC’s head of internal markets, in which he implies that his successor will extend the clearing exemption for pension funds- “I don’t think all the conditions have been met yet to ensure a smooth transition to clearing for pension funds.” […]

US lightens and tightens

The five leading US regulatory agencies, collectively referred to as the “prudential regulators”[1], met yesterday to finalise the US iteration of the Basel III Liquidity Coverage Ratio, to adopt a supplementary leverage ratio rule and to propose new margin requirements for uncleared swaps. Liquidity Coverage Ratio– a deleveraging rule to protect financial institutions from temporary […]

EMIR: The Devil in the Detail

An interesting article from Risk magazine noting one of the inconsistencies thrown up by the EU’s interpretation of the rules on the margining of non-cleared derivatives trades, published on 14 April 2014 (see this blog post for more detail). The draft EU rules require “EU entities to collect margin…regardless of whether they are facing EU […]

An Outbreak of Realism Over CCP Loss Allocation?

Risk Magazine is reporting a welcome development in the conversation over CCP Loss Allocation.  Prominent buy-side firms Blackrock and Citadel have accepted that clients of clearing members, and not just the clearing members themselves, should share the pain in the event of a CCP insolvency.  This would help ensure that all market participants are incentivised […]

Collateral Managers Weep, Lawyers Rejoice: EU Consults on non-cleared OTC derivatives

On 14 April 2014, the Joint Committee of the European Supervisory Authorities (ESAs)[1] published a consultation paper on draft regulatory technical standards (RTS) on risk-mitigation techniques for OTC derivative contracts not cleared by a CCP under Article 11(15) of EMIR.  The consultation paper represents the beginning of the EU’s legislative process to implement the Basel […]

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