ISDA Analyzes Swap Margin Requirements and Market Fragmentation
ISDA identified differences in the jurisdictional implementations of margin requirements for non-cleared derivatives that may have caused market fragmentation. ISDA considered regulations in the following jurisdictions: the United States, the European Union, the United Kingdom, Japan, Singapore, Hong Kong, Australia, Switzerland and Canada.
In its paper, ISDA urged national regulators to prioritize harmonizing margin requirements to avoid further market fragmentation. According to ISDA, the major issues that regulators must address include:
inconsistent initial margin ("IM") collateral eligibility requirements;
different IM settlement timeframes;
varying IM treatment for inter-affiliate transactions;
differing IM model-testing requirements;
misaligned IM product scope requirements; and
duplicative margin documentation requirements.
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