FIA Calls for Progress on Margin Transparency

In a response to a BCBS-CPMI-IOSCO Margin Group Consultation Report, FIA urged further progress on efforts to increase the resilience of global derivatives markets in times of stress. The Consultation focused on 10 policy proposals to improve participants’ understanding of initial margin calculations and potential future margin requirements.

FIA supported recommendations for additional disclosures and simulation tools, stating: "[w]e believe that, if implemented and monitored consistently across jurisdictions, the first 8 proposals will certainly increase transparency and enhance understanding of CCPs margin models, their main components and their responsiveness to changing market conditions." However, FIA called a proposal requiring clearing members to make available a simulation tool to their clients "extremely challenging and perhaps premature."

FIA also criticized a proposal to require additional clearing member disclosures to CCPs, arguing that CMs already provide disclosures as required through CCP due diligence processes. FIA argued that any further standardized disclosures from CMs to CCPs should be strictly limited to the information CCPs require for risk management purposes and should appropriately address confidentiality and commercial concerns. FIA noted that, in some cases, "regulators would be better placed to receive this information given regulators’ role over financial stability."

In addition, FIA outlined "missing elements" under the proposal, including, among others, considering the inclusion of default fund methodologies or standardization of CCP margin outputs. FIA recommended that the Margin Group focus on margin model responsiveness, as "this is fundamental to managing the challenges posed by procyclicality."