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ESAs consult on margins required for non-centrally cleared derivatives 

June 15, 2015

Out-Law

European Supervisory Authorities (ESAs) have launched a second consultation on draft standards outlining the framework of the European Market Infrastructure Regulation (EMIR).

As most decisions have already been agreed on the review of the EMIR framework following a first consultation held in April 2014, this second consultation focuses on over-the-counter non-centrally cleared derivatives, the European Banking Authority (EBA) said in a statement. 

Draft regulatory technical standards (RTSs) have been developed to prescribe the amount of initial and variable margin that counterparties must exchange, as well as the methodologies that should be used to calculate them, the EBA said.

The draft RTSs also cover the criteria for deciding whether collateral is eligible, sufficiently diversified, and not subject to 'wrong-way' risk, the EBA said.

ESAs have reviewed or clarified some aspects of proposed rules from the first consultation, including the exchange of margins with third-country entities and the treatment of non-financial counterparties, the treatment of covered bonds swaps, the timing of margin exchanges, concentration limits for sovereign debt securities, requirements on trading documentation, minimum credit quality of collateral, initial margin models, 'haircuts' for foreign exchange mismatch, the treatment of cash collateral for initial margin, and reviewed criteria on intragroup exemptions, the EBA said.

Read more: Out-Law

 
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