European Commission Adopts Technical Standards On Margin For Uncleared Derivatives

On October 4, 2016, the European Commission adopted Regulatory Technical Standards on risk mitigation techniques for uncleared OTC derivatives. The European Market Infrastructure Regulation requires counterparties to uncleared OTC derivative transactions to implement risk mitigation techniques to reduce counterparty credit risk. These RTS prescribe the regulatory margin amounts to be posted and collected and the methodologies by which the minimum amount of initial margin and variation margin should be calculated as well as outlining a broad list of securities eligible as collateral for the exchange of margins, such as sovereign securities, covered bonds, specific securitizations, corporate bonds, gold and equities.