Covered entities must exchange initial and variation margin appropriate to its counterparty risk when engaging in non-centrally cleared derivatives transactions. Calculations of baseline initial margin and variation margin collected from a counterparty should be consistent across covered entities, reflecting potential future exposure (initial margin) and current exposure (variation margin) under the transaction, and should ensure that all counterparty risk exposures are fully covered with a high degree of confidence. The initial margin should satisfy a "one-tailed 99% confidence interval" over a ten day period with significant financial stress and may be determined with either a quantitative portfolio margin model or a standardized margin schedule. Counterparties must exchange variation margin in an amount sufficient to fully collateralize the mark-to-market exposure of their derivative transaction.

Derivatives transactions that are not cleared by "Central Clearing Parties" (derivatives clearinghouses) should have margin posted appropriately.

Exempted from initial margin requirements are:

While initial margin is not required for these derivatives, variation margin is required to cover counterparty exposures under those transactions

National regulators may subject initial margin requirements to a floor (which may not exceed €50 million), below which no margin collateral is required to be posted under the transaction and may set a de-minimis minimum transfer amount (which may not exceed €500,000), below which margin collateral need not be transferred between the parties. Variation margin must be posted on all transactions and cannot be subject to a floor. After the final phase-in date (see below), entities with less than €8 billion in gross notional outstanding uncleared swaps need not follow these margin requirements.

Unlike under margin collateral collection rules proposed by US bank regulators under Title VII of the Dodd-Frank Act (see Practice Note, The Dodd-Frank Act: Derivatives Margin Collateral Rules: Dodd-Frank Margin Collateral Collection Proposals), non-systemically significant non-financial entities (commercial end users) are not covered entities and therefore need not collect or post margin under these guidelines. Sovereigns, central banks, multilateral development banks and the Bank for International Settlements are also exempt from initial margin posting.

The assets collected as collateral for initial and variation margin (eligible collateral) must be liquid enough to generate proceeds sufficient to protect the collecting entity from losses on non-centrally cleared derivatives in a reasonable amount of time if a counterparty defaults. The collateral posted must be able to hold its value in a time of financial stress, taking into account required haircuts. Eligible collateral mentioned in the final guidelines includes:

National regulators will be charged with compiling their own lists of eligible collateral. However this is a more permissive eligible collateral guideline than had been previously proposed, which may be an attempt to maintain liquidity in collateral markets that many fear may be jeopardized by the aspects of these margin collateral rules that require large amounts of initial margin to be posted between certain parties to certain transactions. Covered entities will, in many cases, need to stockpile these eligible assets to use as collateral for derivatives trades under these rules.

Initial margin should be exchanged by both parties on a gross basis and held to ensure that:

As part of ensuring the availability of posted margin, an entity that collects initial margin from a counterparty must segregate or provide other adequate protection for the posted initial margin and may only rehypothecate the posted margin one time. The guidelines require the adoption of strict national regulations that ensure that posted margin may only be rehypothecated one time, prohibiting the third party to which the margin has been rehypothecated from any further rehypothecation.

An entity that collects initial margin may only rehypothecate the collected margin if, among other things:

Transactions between a firm and its affiliates should be subject to appropriate regulation in a manner consistent with each jurisdiction's legal and regulatory framework.

Regulatory regimes should interact to foster consistency and eliminate duplicity across jurisdictions for margin requirements.

Regulators should phase in margin requirements over an appropriate period of time to ensure that the transition costs associated with the new framework can be appropriately managed. Margin requirements only apply to swaps entered into after the applicable phase-in date and do not apply to derivatives contracts that existed prior to the applicable phase-in date. The phase-in periods must provide for the exchange of variation margin on December 1, 2015 and the exchange of initial margin after: