Committee on Payments and Market Infrastructures and International Organization of Securities Commissions report on effective practices for streamlining variation margin in centrally cleared markets

The Committee on Payments and Market Infrastructures and the International Organization of Securities Commissions published a final report on examples of effective practices for streamlining variation margin in centrally cleared markets. The report sets out eight effective practices which aim to provide examples of how standards set out in the CPMI-IOSCO Principles for Financial Market Infrastructures, as supplemented by the relevant guidance, can be met.

In particular, they are intended to inform central counterparties as they design their variation margin call and collection processes in line with the PFMI and 2017 CPMI-IOSCO final report on Resilience of central counterparties: Further guidance to the PFMI. The effective practices cover several aspects of cleared variation margin practices, including scheduled and ad hoc intraday variation margin calls, the use of excess collateral held at CCPs to meet variation margin requirements, the pass-through of variation margin by CCPs and CCP-clearing members, and clearing member-client transparency regarding variation margin processes. The effective practices take into account feedback from industry on the discussion paper streamlining variation margin in centrally cleared markets published in February and build on the BCBS-CPMI-IOSCO review of margining practices published in September 2022. The report forms one element of a comprehensive approach to improving transparency, streamlining margin processes, increasing the predictability of margin requirements, and improving the liquidity preparedness of non-bank market participants for margin calls, jointly taken by the Basel Committee on Banking Standards, CPMI, IOSCO, and the Financial Stability Board. It is intended to be read alongside the other related reports published on the same day, discussed in our separate blogs, Basel Committee on Banking Standards, Committee on Payments and Market Infrastructures and International Organization of Securities Commissions final report on transparency and responsiveness of initial margin in centrally cleared markets and BCBS and IOSCO report on streamlining variation margin processes and initial margin responsiveness of margin models in non-centrally cleared markets.

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