‘Teething problems’ with new swaps margin rules

ISDA members said they encountered problems immediately after implementing swaps margin rules on 1 September.

Several members of the International Swaps and Derivatives Association (ISDA) have discussed initial “teething problems” following the implementation of swaps margin rules on 1 September.

Scott O’Malia, CEO of the industry association, reviewed the issues with other members at ISDA’s annual conference in London this week.

Eric Litvack, head of regulatory strategy at Societe Generale and ISDA chairman, described implementation as being “down to the wire,” adding that he witnessed “teething problems” immediately afterwards.

“In terms of what we saw on the day, it was dicey and it wasn’t smooth sailing,” Litvack said.

Kieran Higgins, head of trading and flow sales at Royal Bank of Scotland and ISDA board member, told delegates the inconsistency of delivery of the rules has led to “technical debt” and complex execution.

ISDA chief O’Malia added that it was good the rules were implemented over a quiet period, as it allowed firms to “iron out the glitches”.

In August, Australia, Hong Kong and Singapore joined their European counterparts in delaying the swaps margin rules.

The rules came into force on 1 September for the US, Canada and Japan, despite hopes from many dealers that it would delay implementation.

The increased margin requirements apply to swaps which will not be centrally cleared through a central counterparty (CCP).

Litvack explained “broadly speaking, the problems did resolve themselves over the period,” referencing the volume of trades executed in the first week of implementation.