ISDA and IHS Markit launch variation margin protocol

Variation margin rules will go live globally from 1 March 2017 for all firms trading derivatives, regardless of size.

The International Swaps and Derivatives Association (ISDA) and IHS Markit have jointly launched a new process for amending collateral documents, allowing buy-side firms to comply with incoming variation margin rules.

The ISDA 2016 Variation Margin Protocol was launched on the ISDA Amend platform, enabling counterparties to electronically share specially designed questionnaires on collateral agreements, removing the need for bilateral negotiations.

The Protocol currently covers the initial margin rules for non-cleared derivatives in the US, Japan and Canada, as well as Europe once they become live in January 2017. Over 8,000 buy-side firms and corporates are currently subscribed to the service.

“Starting on March 1, the new variation margin rules will apply to a wide universe of financial institutions from various jurisdictions, and these firms will be required to make important changes to their derivatives documentation,” said Katherine Darras, ISDA’s General Counsel.

“The launch of the ISDA 2016 Variation Margin Protocol on ISDA Amend will enable counterparties to make those changes quickly and efficiently.”

Unlike the initial margin rules which are being phased in between jurisdictions and counterparty type, the variation margin rules will go live globally regardless of firm size.

As a result, the amount of counterparty relationships the variation margin rules will be exponentially more than the impact of the initial margin rules.

“We have closely partnered with ISDA and its working groups to develop a rules-based, electronic solution that supports the major margin regulatory regimes and helps the broader industry meet margin requirements within a compressed time frame,” added Darren Thomas, managing director and head of Counterparty Manager at IHS Markit.

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