‘Near-final’ margin rules to be issued within days, says Iosco chief

Global regulators will publish an interim consultation on collateral requirements for non-centrally cleared derivatives within days, according to David Wright, secretary general of the International Organization of Securities Commissions (Iosco).

Speaking at a liquidity conference organised by the Association for Financial Markets in Europe this morning, Wright confirmed the industry would have an opportunity to comment further on the controversial proposals that were first published in July 2012 by the Working Group on Margining Requirements (WGMR) - a body jointly led by the Basel Committee on Banking Supervision and Iosco.

"We haven't sorted out yet the margin requirements for over-the-counter derivatives that are not cleared. You can expect in a few days that Iosco and the banking regulators will come out with what is described as a near-final consultation, which will open up for further comment three or four issues," said Wright.

The WGMR had originally planned to publish final guidance by the end of 2012, but the process was delayed as consensus had not yet been reached on a number of key issues, including the crucial question of whether or not foreign exchange swaps and forwards above a certain tenor - which will not be mandated for central clearing - should instead be subject to mandatory collateral requirements.

The WGMR guidelines are also understood to have been delayed by senior policy-makers who expressed concern about whether new - and potentially large - collateral requirements would affect the economic recovery. Wright confirmed that further analysis on the economic impact of the proposals still needs to be carried out.

"I think it's an important opportunity for the industry as a whole to give its views on the calibration and the economics. There is a strong signal from the world's regulatory community that we need to do more economic thinking on the balance of the overall package. So there's an important set of economic work that has to be done before this package is finalised," said Wright.

Wright added that the goal of Mark Carney, governor of the Bank of Canada and chairman of the Financial Stability Board, which coordinates implementation of regulations, is to complete all standards relating to OTC derivatives reforms by September 2013. "There is still a lot of work to do," he said.