ISDA Working to Improve Margining Practices in light of Market Failures

ISDA CEO Scott O’Malia reported that ISDA continues to work with global policymakers to improve margining practices that can mitigate the impact of "extreme" volatility.

In remarks published on ISDA’s website, Mr. O’Malia said that ISDA is working with regulators on key areas including (i) transparency in centrally cleared markets, (ii) market participants’ "liquidity readiness" and (iii) the ability of margin models to address market stress. ISDA said it is working to:

  • revise the ISDA Standard Initial Margin Model by (i) lowering the required threshold to report and address portfolio coverage issues, (ii) shortening the time frame during which firms’ remediation measures must take place and (iii) implementing quarterly assessments on whether margin model recalibration is necessary outside of the annual recalibration cycles; and
  • enhance the "standardization and end-to-end automation in collateral management processes" by using a data standard known as the "Common Domain Model" for financial products and trades and lifecycle events as the base for collateral management use cases.

Mr. O’Malia added that while waiting on a final ruling from the SEC regarding clearing requirements for U.S. Treasuries by central counterparties, ISDA is considering potential criteria for a Treasury clearing model that (i) is risk appropriate, (ii) protects customer margins and (iii) is capital efficient.

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