Regulatory Impact Increase as IM Soars: ISDA

The latest ISDA Margin Survey, conducted by the International Swaps and Derivatives Association for the end of 2021, indicates that the amount of regulatory initial margin (IM) has continued to increase as margin rules for non-cleared derivatives have been phased in and more firms and new transactions are subject to the requirements.

The survey finds that 32 firms – including 20 phase-one entities, five of the six phase-two firms and seven of the eight phase-three firms that are subject to the margin rules – collected about $304.1 billion of IM and $1.0 trillion of variation margin (VM) at year-end 2021. ISDA says it believes the growth was also driven by phase five firms that came in scope of the IM requirements in September 2021 under the latest stage of the Uncleared Margin Rules (UMR)

According to the survey, IM collected by phase-one entities for their non-cleared derivatives transactions totalled $286.0 billion at year-end 2021, a 38.0% increase compared with the $207.3 billion these firms collected at year-end 2020. $203.5 billion of the IM collected by phase-one entities was required under global margin regulations, an increase of 57.5% from year-end 2020. $82.5 billion of IM collected by phase-one firms was independent amount (IA) received from counterparties not currently in scope and/or for transactions not covered by the margin rules, including legacy transactions. This represents a 5.6% increase compared to $78.1 billion of IA collected at year-end 2020.

ISDA says 12 other firms – five of the six phase-two firms and seven of the eight phase-three entities that participated in the survey – collected $18.1 billion of IM at year-end 2021, including $15.7 billion of regulatory IM and $2.4 billion of IA.

VM collected by phase-one firms for non-cleared derivatives decreased by 19.6% to $936.5 billion at year-end 2021, while $527.9 billion of the VM collected by phase-one firms was required under global margin regulations – a 17.3% drop from year-end 2020.

$408.7 billion of VM collected by phase-one firms was discretionary and was received from counterparties and/or for transactions not covered by the margin rules, including legacy transactions. This represents a decrease of 22.3%. The same number of firms collected $78.3 billion of VM at year-end 2021, including $51.2 billion of regulatory VM and $27.2 billion of discretionary VM.

For cleared IRD and both single-name and index CDS, IM posted at major CCPs by all market participants totalled $323.4 billion at the end of 2021, the survey finds, a drop of 2.2% from the end of 2020. $262.4 billion of this represents IM posted for IRD transactions and open interest in IRD products across five major CCPs totalled $396.6 trillion.