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ISDA Advises Firms on Preparing for Initial Margin "Phase Five" Implementation's picture
Commentary by Nihal Patel

ISDA advised firms on how to prepare for the implementation of initial margin ("IM") "Phase Five."

ISDA recommended that firms prepare by:

  • determining which entities will fall under the scope of IM requirements by calculating the indicative aggregate average notional amount ("AANA");

  • notifying any counterparties if the AANA calculations indicate that the firm's entities may fall under Phase Five; and

  • assessing whether the parties to a relationship may be eligible to delay the IM requirements by calculating the IM amount for the products subject to IM exchange.


The ISDA document is helpful for, among other things, seeing how the requirements differ across various jurisdictions. Market participants trading with counterparties in multiple jurisdictions may need to run different sets of calculations to account for differences in the scope of products that are required to be counted, in the method of counting, and in the time period for counting. Perhaps most notably, for U.S. participants, the U.S. rules contain a different counting period from the vast majority of other jurisdictions. In the United States, the Phase Five counting dates are June-August 2019, whereas other jurisdictions set March-May 2020 as the measuring period.

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