On February 15th, 2013 the Working Group on Margin Requirements (WGMR) of the BCBS and IOSCO published “near final” proposed rules for the exchange of Variation Margin (VM) and Initial Margin (IM) for all non-centrally cleared derivative trades.
Collecting VM has been fairly common practice for some time, and is designed to cover the counterparty credit risk of current exposures. IM, which is new, is designed to cover potential future exposure on the same transactions. These proposals have advanced and been made more specific since the first BCBS-IOSCO Consultative Document on the topic was published for comment in July 2012.
In our Point of View, Revisions Bring Further Clarity to the Impact of Basel/IOSCO Margin Rules, we provide a brief background on the “near final” rules, summarize the key revisions made and what the implications could be for the industry, particularly to the largest broker/dealers.
