On Monday, ISDA launched the ISDA Benchmarks Supplement Protocol. Clients should expect outreach from regulated counterparties in the near future concerning adherence to this protocol. We encourage our clients to review the protocol and to consider their preferred approach to addressing its subject matter.
As you may have seen, ISDA recently published the ISDA 2018 Credit Support Annex for Initial Margin (IM) (Security Interest – New York Law) and the ISDA 2018 Credit Support Deed for Initial Margin (IM) (Security Interest – English Law).
These new 2018 CSA/CSD forms are intended for use by buy and sell-side firms that will be in scope for mandatory initial margin requirements for non-centrally cleared derivatives beginning in September 2019 (Phase 4) or September 2020 (Phase 5).
Planning for Phase 5 Initial Margin Requirements for Uncleared Swaps
Monday, June 3rd, 2019 is the first day in the June, July, August calculation period for determining the average daily aggregate notional amount (AANA) under U.S. uncleared margin rules to assess whether a market participant is in-scope for the Phase 5, September 1, 2020 initial margin compliance date. We encourage clients to begin to calculate their AANA numbers to determine whether any of their trading vehicles exceed the USD 8 billion material swaps exposure threshold across all of their relevant uncleared swaps, security-based swaps, foreign exchange forwards and foreign exchange swaps. We also encourage clients who have not already done so to engage now in dialogue with their regulated counterparties about this process and to review the ISDA published initial margin documentation.
An amendment to FINRA Rule 4210, expanding the Rule’s margin requirements, will become effective on June 25, 2018. As a result, broker-dealers will now have to collect variation and initial margin with respect to certain transactions, including “To Be Announced” (“TBA”) transactions, with certain counterparties.