ISDA CEO Urges Firms to Prepare for 2017 Variation Margin Requirements

ISDA CEO Scott O'Malia urged firms to take action to prepare for the March 1, 2017 implementation of variation margin ("VM") requirements for non-cleared derivatives.

Mr. O'Malia warned that the regulatory changes will require derivatives users to modify their existing collateral support agreements. Since the March 1, 2017 deadline applies to a "broad swath of financial institutions," he explained, "thousands of counterparties will need to change or set up thousands of agreements in a very short space of time."

Mr. O'Malia urged firms to:

• understand whether and/or when each trading relationship will be subject to the margin requirements through measures such as ISDA's self-disclosure letter (which was incorporated into the ISDA Amend tool); and

• begin revising and/or setting up new documentation, particularly through ISDA's revised credit support documents and variation margin protocol for the United States, Japan and Canada.

Mr. O'Malia reported that ISDA expects to include EU provisions in the variation margin protocol after the European Union publishes the final European rules on October 4, 2016. Nevertheless, he cautioned, "[e]ven with the protocol available, the variation margin deadline will pose a massive challenge for the industry."