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ARTICLE · 22 FEBRUARY 2017

Collateral Damage: New Margin Rules Set To Shake Up The Derivatives Industry

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Starting March 1, many derivatives counterparties will be subject to new margin rules.

CanadaFinance and Banking
Simon Williams
Simon Williams
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Starting March 1, many derivatives counterparties will be subject to new margin rules. The impact of mandatory margining will be significant: higher transaction costs, new collateral documentation and more ground for disputes.  

What You Need To Know

  • Mandatory posting of both initial and variation margin will be required, to be phased in under separate timetables.
  • The regulatory landscape covering the new margin regime is complex, with similar but not equivalent rules potentially applying to the same trades within Canada. Trades with a cross-border element may be eligible for substituted compliance under the margin requirements of a qualifying foreign jurisdiction.
  • Legacy trades will be grandfathered, but covered transactions entered into after March 1, 2017 will need to be documented under regulatory-compliant collateral documentation.

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