ISDA has released their ‘Margin Survey Year-End 2019’ which highlights key analyses regarding the amount and type of posted initial margin (IM) and variation margin (VM) for non-cleared OTC Derivatives. This year, the firms who participated included: all 20 phase-one firms, four phase-two (out of six in-scope) and three phase-three firms (out of eight in-scope of the non-cleared margin requirements).
The report also provides a valuable summary within table 7 on page 15, highlighting the key compliance dates over the years, including the Average Aggregate Notional Amounts (AANA) thresholds for non-cleared margin requirements (commonly referred to as Uncleared Margin Rules (UMR), where margin collected and posted under UMR is referred to as the “regulatory margin”).
The Margin Survey Year-End 2019 highlights the following:
Key IM Headline Figures
- Regulatory IM has been increasing due to an increase in regulation in addition to UMR capturing an increasing number of firms – namely the extension of UMR to phase-four firms which became subject to the IM requirements in September 2019;
- The 27 firms within the survey collected: USD 183.7 bn of IM and USD 944.7 bn of VM (excluding margin posted for inter-affiliate transactions);
- Total IM collected by phase-one firms for their non-cleared derivatives increased by 10% this year to USD 173.2 bn, from USD 157.9bn year-end 2018. This comprised of USD 105.2 bn in regulatory IM, originating from phase-two, three and four in-scope firms; subsequently representing a 25% increase from the 2018 year-end regulatory IM (USD 83.8 bn).
Key VM Headline Figures
- VM received/posted was split between regulatory IM and discretionary IM this year – which was not available for 2018 year-end;
- Regulatory VM received by phase-one firms amounted to 897.3, and increase of 4.5 – 5% from year-end 2018, representing (USD 441.5 bn) and (USD 455.8 bn) for regulatory and discretionary VM, respectively.
- Regulatory VM posted by phase-one firms amounted to USD 690.2 bn, an increase of 18% from year-end 2018, representing (USD 348.7 bn) and (USD 341.5 bn) for regulatory and discretionary VM, respectively.
As mentioned in our previous regulatory update, the Basel Committee on Banking Supervision (BCBS) and the International Organization of Securities Commissions (IOSCO) released a statementissuing a delay to the implementation of phase 5 and 6 UMR following the impact of COVID-19 on the global economy.
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