Industry calls on regulators to postpone initial margin timeline amid coronavirus pandemic

ISDA and 20 other trade associations have written to regulators to delay the execution of initial margin requirements due to the coronavirus pandemic.

The Internal Swaps and Derivatives Association (ISDA) and 20 other trade associations have called on regulators to suspend the timeline for the initial margin (IM) phase-in requirements due to the impacts of the coronavirus pandemic.

In a letter to the Basel Committee and International Organisation of Securities Commissions (IOSCO), the groups requested that phase five and six of the IM requirements, which are scheduled for 1 September 2020 and 1 September 2021, be postponed.  

As outlined in the letter, firms are unable to focus on the implementation of IM in the current volatile market caused by the outbreak of coronavirus, as their main focus is managing markets and credit risk. Staff working from home and the possibility of many falling ill was listed as another factor for the delay request.

“Work from home is limiting access to legal and operational documentation and limiting abilities to communicate with counterparties. These challenges are expected to worsen as markets continue to fluctuate, lockdowns broaden, and staff are compromised by illness or need to care for family members,” the letter stated.

“As the overall impact of COVID19 may not be known for some time, we suggest that decisions regarding a new timeline for the implementation of further phases of the IM requirements be delayed and reconsidered when relevant facts and circumstances are known.”

IM requirements for users of bilateral over the counter derivatives have been gradually phased-in since September 2016. Other trade groups that signed the letter include the Securities Industry and Financial Markets Association (SIFMA), the Global Financial Markets Association (GFMA), the Alternative Investment Management Association (AIMA), and many more.