As the phase-in of global initial and variation margin requirements approaches for non-cleared derivatives, ISDA® is working to ensure that the infrastructure to support the implementation of margin requirements for non-centrally cleared derivatives trades is ready by September 1, 2016 (see Legal Update, Global Regulators Delay Uncleared Derivatives Margin Rules). In order to allow for infrastructure build-out, ISDA is now working to finalize the following prior to that date:

Market participants face a challenge due to the difference in US and EU draft regulations from the guidelines set out by the Basel Committee on Banking Supervision (Basel) and the International Organization of Securities Commissions (IOSCO). Even in the US, there is a difference between the draft rules issued by the CFTC and prudential bank regulators (see Practice Note, The Dodd-Frank Act: Margin Posting and Collection Rules for Uncleared Swaps and Legal Update, CFTC Re-proposes Corollary Dodd-Frank Margin Rules for Uncleared Swaps), and the SEC has yet to publish its proposed uncleared security-based swap (SBS) margin regulations. Japan has released proposed rules which closely follow the Basel/IOSCO guidelines, and Australia, Hong Kong and Singapore are expected to issue similar regulations. The industry is hoping that the rules will be harmonized across the jurisdictions since differences in initial margin model calibrations, threshold amounts and eligible collateral criteria could cause problems for cross-border transactions.

When used to calculate initial margin, the ISDA SIMM is designed to: