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    AMF Issues Guideline on Margins for OTC Derivatives Not Cleared by CCP

    March 01, 2020

    AMF published the guideline on margins for over-the-counter (OTC) derivatives not cleared by a central counterparty (CCP). The guideline sets out expectations of AMF regarding the exchange of margin for non-centrally cleared OTC derivatives (covered derivatives). This guideline applies to a covered institution that trades covered derivatives with a covered counterparty. The effective dates of the expectations for the exchange of variation margin and initial margin are March 01, 2020 and September 01, 2021, respectively.

    As per the guideline, a local institution belonging to a financial group whose aggregate month-end average gross notional amount of outstanding covered derivatives for March, April, and May of a given year exceeds USD 12 billion becomes a covered institution as of September 01 of that year. From that date until August 31 of the following year, the guideline will apply to all new covered derivatives traded with a covered counterparty. However, AMF does not expect initial margin expectations to be met for existing covered derivatives. AMF expects all covered institutions to have appropriate margining practices in place for all covered derivatives traded with a covered counterparty, with the exception of:

    • physically settled foreign exchange forwards
    • cross-currency swaps
    • fixed physically settled foreign exchange transactions associated with the exchange of principal of cross-currency swaps

    Conversely, a covered institution belonging to a financial group whose aggregate month-end average gross notional amount of outstanding covered derivatives for March, April, and May of a given year falls below USD 12 billion ceases to be a covered institution. From that time on, the guideline will not apply to any covered derivative involving the institution, regardless of the date on which the derivative was traded, until such time as the institution has recovered its status as a covered institution. The same holds true for a covered counterparty.

     

    Keywords: Americas, Canada, Banking, Securities, OTC Derivatives, Non-Centrally Cleared Derivatives, CCPs, Margin Requirements, Initial Margin, Variation Margin, AMF

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