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ISDA® Publishes Initial Margin AANA Self-Disclosure Letter
Practical Law Legal Update w-022-7056 (Approx. 5 pages)
ISDA® Publishes Initial Margin AANA Self-Disclosure Letter
by Practical Law Finance
| Published on 06 Nov 2019 • International, USA (National/Federal) |
ISDA published a Regulatory Initial Margin AANA Self-Disclosure Letter (SDL), designed to help parties comply with margin requirements for uncleared swaps in several jurisdictions. This letter expands upon and supersedes the previously published IM SDL.
On October 31, 2019, ISDA® published a standard form Regulatory Initial Margin AANA Self-Disclosure Letter (2019 SDL) together with an answer sheet. The 2019 SDL is a standard form letter designed to assist market participants with communication of certain information needed to determine:
- Which trading relationships are, or may become, subject to regulatory initial margin (IM) requirements.
- How IM calculations will need to be performed.
This 2019 SDL expands on and replaces the Initial Margin Self-Disclosure Letter published in 2018 (see Legal Update, ISDA Publishes 2018 Information Letter for Initial Margin). The 2019 SDL remains distinct from the 2016 SDL (see Legal Update, ISDA Publishes Self-Disclosure Letter to Help Market Participants Comply with Margin Rules for Uncleared Swaps) since the 2019 SDL focuses only on AANA threshold and group information while the 2016 SDL is more detailed and encompasses the regulatory status of the disclosing party for the purpose of margin rules.
The 2019 SDL has two parts:
- Part I provides market participants with an opportunity to provide relevant biographical information about itself and its margin group. This information is necessary for identification and aggregation purposes.
- Part II provides market participants with an opportunity to provide information regarding whether it has or expects to exceed the average aggregate notional amount (AANA) threshold on a regime-by-regime basis for the compliance dates of September 1, 2020, September 1, 2021, or "at a later compliance date."
The information provided should be entered into the accompanying answer sheet and allows the parties to determine how to calculate IM that is in compliance with IM obligations from the relevant compliance date. The 2019 SDL can be used to provide information for multiple entities at once by using multiple rows on the SDL answer sheet.
Once determinations have been made using the 2019 SDL, market participants can use ISDA Create-IM to execute and manage their IM documentation (see Legal Update, ISDA Launches ISDA Create-IM and Partners with AcadiaSoft to Allow Firms to Execute and Manage Initial Margin Documentation Online). Parties may also use ISDA Amend 2.0 to either update their existing ISDA collateral documentation or execute new documentation (see Legal Update, ISDA and IHS Markit Launch ISDA Amend 2.0 to Assist with Margin Compliance and Resolution Stay). The 2019 SDL is expected to be available on the ISDA Amend platform in December 2019. Once the 2019 SDL is available on ISDA Amend, counterparties will be able to use the 2016 SDL to provide general information on regulatory status and the 2019 SDL to provide AANA and group information.
For further detail on the SDL, see Practice Note, Global Margin Compliance for Uncleared Swaps: ISDA Margin Compliance Self-Disclosure Letter (SDL).
For details on the US margin rules, see Practice Note, US Derivatives Regulation: Margin Collection and Exchange Requirements for Uncleared Swaps.
For information on the EU margin rules, see Practice Note, EMIR: Risk Mitigation Requirements for Uncleared OTC Derivatives.
"ISDA" is a registered trademark of the International Swaps and Derivatives Association, Inc. (ISDA). ISDA is not a sponsor of Practical Law and had no part in the development of this resource.