ISDA has submitted a letter on behalf of 21 industry associations and their members requesting a delay to further initial margin (IM) implementation.
They submit that, due to the severe impact of the Covid-19 pandemic on market participants’ preparations, BCBS, IOSCO and global regulators should suspend the current timeline for the compliance dates for Phases 5 (September 2020) and 6 (September 2021) of the IM requirements, to allow market participants to focus their resources on ensuring continued access to the derivatives markets.
While the letter does not suggest a specific time period for a delay, Risk Magazine commenting on the letter noted that: "While industry support for a delay is overwhelming, there has been some debate over the length of any appropriate extension. According to one participant, many ISDA members supported a 12-month reprieve, while others felt six months would be sufficient."
Risk Magazine further reported last week that Patrick Pearson, head of the financial market infrastructure and derivatives unit at the European Commission, had said that the Commission has no intention of postponing the September deadline for Phase 5 and that it has not heard any concern from the industry regarding preparations.
It is to be hoped that the ISDA letter, combined with other industry efforts, is the message of concern that global regulators need in order to consider a delay.
As the overall impact of COVID-19 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.