January 31, 2017

ISDA Encourages Regulators to Extend Variation Margin Deadline

ISDA CEO Scott O'Malia warned regulators that there might not be sufficient time for dealers and their clients to meet the March 1, 2017 variation margin deadline for non-cleared derivatives.

Mr. O'Malia explained that firms are experiencing difficulties in meeting the deadline because "the new rules set strict requirements on everything from eligible collateral to settlement timing, and these specifications need to be reflected in counterparties' credit support documentation." He argued:

"Given the variability in terms within existing CSAs, and the potential pricing impact a change in terms might have on a legacy portfolio, this approach is requiring manual intervention, analysis and discussion with each counterparty. And, for the larger dealers, those discussions will have to take place thousands of times, reflecting the size of their client base and the number of CSAs they have outstanding."

Mr. O'Malia highlighted recent extensions of the March 1 deadline that were adopted in Hong Kong, Singapore and Australia and urged other regulators to give the market the "crucial extra months needed to get their documents in line with the requirements."

Mr. O'Malia noted that ISDA is monitoring implementation progress and has provided numerous tools to assist with compliance.

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