No Margin For Error: Making The Margin Requirements For Non-Cleared OTC Derivatives Happen

The implementation of the mandatory exchange of initial and variation margin for non-cleared OTC derivative trades in the EU commenced on 4 February for financial counterparties with the largest derivatives portfolios. The introduction of these rules – which was part of the G20's mandate to reduce the systemic risk posed by the OTC derivatives trading – is expected to lead to an increase in the cost of trading for non-cleared trades.

The rules will be phased in for the remaining market participants and those non-financial counterparties subject to the rules in accordance with the timeline below.

First wave firms have already had to deal with a number of implementation challenges, which means that there are a number of lessons learnt which are relevant to those firms subject to the requirements at a later date. This blog discusses some of these operational challenges and the actions that firms subject to the rules at a later date should consider taking to become