Margin requirements for over-the-counter derivatives scheduled to start kicking in this fall for a large number of asset managers will be delayed by one year, international regulators said Tuesday.
The Basel Committee on Banking Supervision and the International Organization of Securities Commissions said in a statement there has been progress on the framework for the margin requirements, but the one-year delay until September 2021 will support "smooth and orderly implementation" and help to avoid market fragmentation.
The new requirements will be phased in starting September 2020 for entities with more than €50 billion ($55.78 billion) in swaps. With full implementation in 2021, covered entities with an aggregate average notional amount of non-centrally cleared derivatives greater than €8 billion will be affected by the requirements. That would subject as many as 3,000 money managers and pension funds to the new margin requirements.
Changes to the uncleared margin requirements were made after the global financial crisis to improve transparency and resilience in the OTC derivatives market.
The regulators voiced concerns that not all money managers are ready. "The Basel Committee and IOSCO expect that covered entities will act diligently to comply with the requirements by this revised timeline and strongly encourage market participants to make all relevant arrangements on a timely basis," they said in a joint statement.
Peter Rippon, CEO of derivatives analytics firm OpenGamma, said that some fund managers "have only recently discovered that they will have to post hundreds of millions in initial margin for the first time," and the delayed implementation will give them breathing room to adjust their trading plans. "In the months ahead, expect to see more and more asset managers affected by the rules to move away from trading bilateral uncleared derivatives, and shift towards central clearing," Mr. Rippon said in a statement.