Long Awaited OTC Margin Rules Are Now Final

Almost exactly five years after the Financial Services Board released the first draft board notice on margin requirements for derivatives, the (very) long awaited final "Margin Requirements for non-Centrally Cleared Over the Counter Derivative Transactions" ("OTC Margin Rules") have been published. The Financial Sector Conduct Authority ("FSCA") and the Prudential Authority of the South African Reserve Bank ("PA") published Joint Standard 2 of 2020 on 2 June 2020.

As part of South Africa's G20 commitments to regulate derivatives, the government has used the Basel Committee on Banking Supervision ("BCBS") and the International Organisation of Securities Commissions ("IOSCO") revised framework on margin as an international reference point in formulating the various drafts of the margin requirements. The OTC Margin Rules will require OTC derivative providers to exchange initial margin ("IM") and variation margin ("VM") with "counterparties" (defined in the OTC