Regulatory bodies publish final reports on margin in cleared markets
16 January 2025 Global
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Global standard-setting bodies have published three final reports proposing practices aimed at improving transparency, streamlining margin processes, and increasing the predictability of margin requirements across cleared markets.
The reports are part of a holistic work programme bringing together the Basel Committee on Banking Supervision (BCBS), the Bank for International Settlements’ Committee on Payments and Market Infrastructures (BIS CPMI), and the International Organization of Â鶹´«Ã½ Commissions (IOSCO).
The Bank of England (BoE) and the Commodity Futures Trading Commission (CFTC) co-chaired international work on increasing the transparency and evaluating the responsiveness of initial margins in centrally cleared markets, which resulted in the reports’ publication.
Sasha Mills, executive director, financial market infrastructure, at BoE, says: "The international work on centrally cleared initial margin is a powerful example of addressing financial stability risks through international coordination across authorities and committees. The [BoE] will continue to support this work as standard-setting bodies consider how best to implement the proposals."
The first report sets out 10 final policy proposals relevant to CCPs and clearing members, seeking to aid market participants’ and regulator’s understanding of initial margin requirements and responsiveness through increased transparency.
The CPMI and IOSCO have published a report including eight effective practices of how standards set out in the CPMI-IOSCO ‘Principles for financial market infrastructures’, as supplemented by the relevant guidance, can be met.
The practices aim to enhance market participants’ liquidity preparedness for above-average variation margin calls through increased transparency, as well as the efficient collection and distribution of variation margin in centrally cleared markets.
In addition, the BCBS and IOSCO have published the final report setting out eight recommendations to firms to encourage the widespread implementation of good market practices.
These practices aim to streamline variation margin processes and increase the responsiveness of initial margin models.
The Financial Stability Board’s (FSB’s) ‘Final report on Liquidity Preparedness for Margin and Collateral Calls’, published in December 2024, also forms part of this work programme and complements the above-mentioned BCBS, CPMI and IOSCO reports.
These reports are meant to be read together as elements of a comprehensive approach to improving transparency, streamlining margin processes, increasing the predictability of margin requirements, and improving the liquidity preparedness of non-bank market participants for margin calls.
Richard Haynes, deputy director of risk surveillance at the CFTC, adds: "The BCBS-CPMI-IOSCO margin group, by focusing on detailed data from a broad set of global regions, was able to sift between market rumours and reality, and achieve a balanced and pragmatic set of policy conclusions for implementation."
The reports are part of a holistic work programme bringing together the Basel Committee on Banking Supervision (BCBS), the Bank for International Settlements’ Committee on Payments and Market Infrastructures (BIS CPMI), and the International Organization of Â鶹´«Ã½ Commissions (IOSCO).
The Bank of England (BoE) and the Commodity Futures Trading Commission (CFTC) co-chaired international work on increasing the transparency and evaluating the responsiveness of initial margins in centrally cleared markets, which resulted in the reports’ publication.
Sasha Mills, executive director, financial market infrastructure, at BoE, says: "The international work on centrally cleared initial margin is a powerful example of addressing financial stability risks through international coordination across authorities and committees. The [BoE] will continue to support this work as standard-setting bodies consider how best to implement the proposals."
The first report sets out 10 final policy proposals relevant to CCPs and clearing members, seeking to aid market participants’ and regulator’s understanding of initial margin requirements and responsiveness through increased transparency.
The CPMI and IOSCO have published a report including eight effective practices of how standards set out in the CPMI-IOSCO ‘Principles for financial market infrastructures’, as supplemented by the relevant guidance, can be met.
The practices aim to enhance market participants’ liquidity preparedness for above-average variation margin calls through increased transparency, as well as the efficient collection and distribution of variation margin in centrally cleared markets.
In addition, the BCBS and IOSCO have published the final report setting out eight recommendations to firms to encourage the widespread implementation of good market practices.
These practices aim to streamline variation margin processes and increase the responsiveness of initial margin models.
The Financial Stability Board’s (FSB’s) ‘Final report on Liquidity Preparedness for Margin and Collateral Calls’, published in December 2024, also forms part of this work programme and complements the above-mentioned BCBS, CPMI and IOSCO reports.
These reports are meant to be read together as elements of a comprehensive approach to improving transparency, streamlining margin processes, increasing the predictability of margin requirements, and improving the liquidity preparedness of non-bank market participants for margin calls.
Richard Haynes, deputy director of risk surveillance at the CFTC, adds: "The BCBS-CPMI-IOSCO margin group, by focusing on detailed data from a broad set of global regions, was able to sift between market rumours and reality, and achieve a balanced and pragmatic set of policy conclusions for implementation."
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