Streamlining variation margin processes and initial margin responsiveness of margin models in non-centrally cleared markets

The BCBS and IOSCO have published a final report, Streamlining VM processes and IM responsiveness of margin models in non-centrally cleared markets. The report follows Review of margining practices, a report published by the BCBS, the BIS Committee on Payments and Market Infrastructures and IOSCO in September 2022. The new report articulates the policy analyses carried out by the BCBS and IOSCO in two areas discussed in the previous report: (i) exploring the need to streamline variation margin processes in non-centrally cleared markets; and (ii) investigating the responsiveness of initial margin models in non-centrally cleared markets.

This report sets out eight recommendations to participants in non-centrally cleared markets to encourage the widespread implementation of good market practices related to (i) variation margin processes; and (ii) the responsiveness of initial margin models. The first four recommendations aim to address challenges that could inhibit a seamless exchange of variation margin during a period of stress. The other four highlight practices that would support market participants' smooth implementation of initiatives to ensure the calculation of initial margin is consistently adequate for market conditions and proposes that supervisors monitor whether these developments are sufficient to make initial margin responsive enough to extreme market shocks.