ISDA CEO Criticizes Regulatory Burden of Initial Margin "Phase Five" Implementation
ISDA CEO Scott O'Malia encouraged regulators and policymakers to reduce certain "burdensome" requirements that will be enacted on the forthcoming implementation of initial margin ("IM") "Phase Five."
Mr. O'Malia stated that "Phase Five" will, among other things, harm firms by introducing requirements that will (i) have "no bearing on mitigating systemic risk" and (ii) be "redundant and costly." To address this, Mr. O'Malia urged regulators and policymakers to:
provide relief for counterparty relationships that are less than the $50 million IM exchange threshold, as previously recommended by CFTC Chair J. Christopher Giancarlo;
exclude physically settled foreign exchange ("FX") swaps and forwards from the €8 billion compliance threshold calculation;
remove IM model governance requirements for non-dealer entities that use the ISDA Standard Initial Margin Model; and
grant relief to all legacy swap transactions that may fall under the requirements due to contractual changes caused by either Brexit or benchmark reform.
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