This chapter sets out the transitional arrangements that apply to the margin requirements.
Effective as of:
03 Apr 2020
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Last update:
03 Apr 2020
90.1
The requirements described in MGN should be phased in so that the systemic risk reductions and incentive benefits are appropriately balanced against the liquidity, operational and transition costs associated with implementing the requirements. In addition, the requirements should be regularly reviewed to evaluate their efficacy, soundness and relationship to other existing and related regulatory initiatives, and to ensure harmonisation across jurisdictions.
90.2
The requirement to exchange two-way initial margin with a threshold of up to €50 million will be staged as follows.
(1)
From 1 September 2018 to 31 August 2019, any covered entity belonging to a group whose aggregate month-end average notional amount of non-centrally cleared derivatives for March, April, and May of 2018 exceeds €1.5 trillion will be subject to the requirements when transacting with another covered entity (provided that it also meets that condition).
(2)
From 1 September 2019 to 31 August 2021, any covered entity belonging to a group whose aggregate month-end average notional amount of non-centrally cleared derivatives for March, April, and May of 2019 exceeds €0.75 trillion will be subject to the requirements when transacting with another covered entity (provided that it also meets that condition).
(3)
From 1 September 2021 to 31 August 2022, any covered entity belonging to a group whose aggregate month-end average notional amount of non-centrally cleared derivatives for March, April, and May of 2021 exceeds €50 billion will be subject to the requirements when transacting with another covered entity (provided that it also meets that condition).
(4)
On a permanent basis (ie from 1 September 2022), any covered entity belonging to a group whose aggregate month-end average notional amount of non-centrally cleared derivatives for March, April, and May of the year exceeds €8 billion will be subject to the requirements described in this paper during the one-year period from 1 September of that year to 31 August of the following year when transacting with another covered entity (provided that it also meets that condition). Any covered entity belonging to a group whose aggregate month-end average notional amount of non-centrally cleared derivatives for March, April, and May of the year is less than €8 billion will not be subject to the initial margin requirements described in MGN.
90.3
For the purposes of calculating the group aggregate month-end average notional amount for determining whether a covered entity will be subject to the initial margin requirements described in this paper, all of the group’s non-centrally cleared derivatives, including physically settled foreign exchange forwards and swaps, should be included.
90.4
Initial margin requirements will apply to all new contracts entered into during the periods described above. Applying the initial margin requirements to existing derivatives contracts is not required.1
1 Footnote
90.5
Global regulators will work together to ensure that there is sufficient transparency regarding which entities are and are not subject to the initial margin requirements during the phase-in period.
90.6
From 1 September 2016, any covered entity belonging to a group whose aggregate month-end average notional amount of non-centrally cleared derivatives from March, April and May 2016 exceeds €3.0 trillion will be required to exchange variation margin when transacting with another covered entity (provided that it also meets that condition). The requirements to exchange variation margin between these covered entities only applies to new contracts entered into after 1 September 2016. Exchange of variation margin on other contracts is subject to bilateral agreement.
90.7
From 1 March 2017, all covered entities will be required to exchange initial margin. Subject to MGN90.6, the requirement to exchange variation margin between covered entities only applies to new contracts entered into after 1 March 2017. Exchange of variation margin on other contracts is subject to bilateral agreement.