Margin requirements for non-centrally cleared derivatives

Muhammad Anuar
Prudential Regulation Authority
Threadneedle St
London EC2R 8AH

Philip Bronk / Market Conduct and Post Trade Policy Team
Financial Conduct Authority
12 Endeavour Square
London E20 1JN

[email protected], [email protected]

3 October 2022

Dear Sirs,

Margin requirements for non-centrally cleared derivatives: Amendments to BTS 2016/2251 The Associations1 welcome the opportunity to respond to the PRA and FCA joint consultation2 on proposals to amend onshored Technical Standards relating to margin requirements for non-centrally cleared derivatives.

1. Executive summary

The Associations welcome the proposals to extend the list of eligible collateral to include qualifying non-UK funds.

The Associations also support introducing transitional provisions where counterparties become subject to margin requirements for the first time due to a change in status of a counterparty or change in netting status of a relevant jurisdiction.

However, there are significant differences between, on the one hand, counterparties coming in scope due to a change in counterparty status, and, on the other hand, an entire jurisdiction, and we would urge the PRA/FCA to distinguish between these two scenarios.

We also note that, depending on the period used for the AANA calculation period, the proposed transitional period of 6 months will not be sufficient where counterparties become subject to margin requirements for the first time as a result of a change in netting status of a relevant jurisdiction. In that scenario, counterparties will need around 18 months from the change in netting status of a jurisdiction to put in place arrangements for the exchange of initial margin (IM).

1 The Associations are Investment Company Institute (ICI), Institutional Money Market Funds Association (IMMFA), International Swaps Derivatives Association (ISDA), The Asset Management Group of the Securities Industry and Financial Markets Association (SIFMA AMG), UK Finance. Information on each association is set out in the Annex to this letter.

2 PRA CP 11/22 and FCA CP 22/13