ISDA has responded to Basel’s second consultation on margin requirements for derivatives that are not centrally cleared. It says:

  • the minimum thresholds of €8 billion notional amount of transactions and €50 million initial margin are too low;
  • the level of haircuts do not align with current industry practice;
  • physically-settled FX swaps and forwards should be exempt from any margin requirements;
  • rehypothecation should be permitted if customers agree to it;
  • the timeframe for phasing in the initial margin requirements should be longer; and
  • a new Quantitative Impact Study is needed.

As an alternative to initial margin requirements, ISDA puts forward its three-level approach consisting of variation margin, capital requirements and mandatory clearing for standardised and liquid derivatives. (Source: Response to Second Consultative Document "Margin Requirements For Non-Centrally Cleared Derivatives”)