On August 18, 2014, ISDA® submitted a letter requesting a delay in the implementation of global margin rules for uncleared swaps as proposed by the Basel Committee on Banking Supervision (BCBS) and the International Organization of Securities Commission (IOSCO). In the letter, ISDA asserts that the market is not able to meet the planned implementation date of December 2015 for these rules. The letter further requests that the requirements for variation margin be phased in over time rather than being implemented on a single compliance date.

ISDA notes that implementation is constrained until the rules are finalized, which is unlikely to occur until mid-2015. Until the rules are finalized, market participants are unable to develop systems and infrastructure, prepare clients or draft complete documentation for the margin requirements. Once the rules are finalized, ISDA asserts, a significant period of time will be required to put the margin arrangements in place. ISDA requests a period of two years from the time the rules are finalized in Europe, the US and Japan. Based on this, the practical start date of the uncleared swap margin collateral collection requirements would be April 2017.

ISDA also requests a phase-in schedule for variation margin collection rules rather than a single compliance date, arguing that implementation should not take place on a single compliance date for three reasons:

Finally, ISDA requests that the implementation date not fall in December or January or, for Japanese firms, at the end of March. Financial institutions generally prohibit technological changes to their systems between early December and mid-January in an annual code freeze. According to ISDA, implementing any new procedures that would require system changes is extremely difficult during the code freeze or at year-end.

The BCBS-IOSCO rules are reflected in the US in the joint margin-collection proposal issued by US bank regulators under Title VII of the Dodd-Frank Act in 2011. For an overview of these rules, see Practice Note, The Dodd-Frank Act: Derivatives Margin Collateral Rules: Re-proposed Margin Collateral Requirements for Uncleared Swaps Entered into by Banks. US bank regulators are expected to re-propose these rules shortly, however, it is anticipated that they will operate similarly to the 2011 proposal. It is these US rules to which the ISDA extension letter relates.

Until the final uncleared swap margin collateral rules are adopted in the US, parties may continue to negotiate margin collateral arrangements for their uncleared swaps and derivatives transactions as they do now, using the ISDA Credit Support Annex (CSA).