Thursday marks an important day for financial markets with a fragmented regulatory regime about to come into force, and NDF and FX options markets are right in the firing line. Will the already fragile liquidity picture in these markets worsen?
The International Swaps and Derivatives Association (ISDA) and IHS Markit have announced the launch of the ISDA 2016 Variation Margin Protocol on ISDA Amend.
The protocol automates the process for amending existing collateral documents or setting up new agreements in order to comply with new variation margin requirements going into effect on March 1 2017.
The ISDA Amend platform enables counterparties to electronically share specially designed questionnaires through a centralised online platform, removing the need for bilateral negotiations. Counterparties can make elections under the protocol, including which regulatory regimes apply and which method they will use to make the required changes to their documentation. The service also automates the reconciliation of questionnaires between counterparties.
The new variation margin deadlines still pose a substantial challenge to financial services firms, despite the “substantial progress” that many of these firms have made in their compliance efforts, according to Scott O’Malia, CEO of the International Swaps and Derivatives Association (ISDA).
The variation margin requirements came into effect for swap dealers on March 1, 2017, but the Commodity Futures Trading Commission (CFTC) issued a no-action letter in February, which stated that it would not enforce the new rules for the first six months after this date.