Final Regulatory Technical Standards On Margin For Uncleared Derivatives

On March 8, 2016, the European Supervisory Authorities published final draft regulatory technical standards on risk-mitigation techniques, including details on specific operational procedures, for OTC-derivative contracts not cleared by a Central Counterparty. Under the European Market Infrastructure Regulation, counterparties to uncleared OTC derivative transactions are required to implement risk mitigation techniques to reduce counterparty credit risk. These draft 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. The draft RTS outlines a broad list of securities eligible as collateral for the exchange of margins, such as sovereign securities, covered bonds, specific securitisations, corporate bonds, gold and equities. The criteria for eligible securities include diversification of collateral and the removal of wrong-way risk. The draft