On August 16, 2016, ISDA® published the ISDA 2016 Variation Margin Protocol (VM protocol). The VM protocol is designed to help market participants comply with global rules on variation margin (VM) for uncleared swaps, which begin phase in as of March 1, 2017 (see Practice Note, The New ISDA® Credit Support Annexes and Global Margin Compliance for Uncleared Swaps: Applicable Rules and Phase-in Dates).

The VM protocol allows parties to make standardized amendments to their bilateral credit support documentation – in most cases ISDA Credit Support Annexes (CSAs) – in order to facilitate compliance with the new rules.

The VM protocol:

The VM protocol and accompanying documents are available on the ISDA 2016 Variation Margin Protocol section of ISDA’s website. Frequently asked questions and adherence guidance is available on ISDA's Protocol Management page. The protocol is intended for use by both ISDA members and non-member firms.

Compliance dates for rules requiring the exchange of initial margin (IM) and VM between certain parties to uncleared derivatives are approaching in the US and certain other jurisdictions (though the EU recently delayed its rules – see Legal Update, EU Delays Margin Rules for Uncleared Swaps).

VM protocol questionnaires are exchanged primarily on ISDA Amend (as with the ISDA Dodd-Frank Protocols (see Practice Note, Practical Law Guide to the ISDA Dodd-Frank Protocols and ISDA/Markit Amend). ISDA Amend allows market participants to amend multiple ISDA Master Agreements using a single online tool. Currently, over 60,000 legal entity identifiers (LEIs) participate in ISDA Amend, which is expected to allow market participants to:

The ISDA VM protocol is designed to be used in conjunction with the previously published Regulatory Margin Self-Disclosure Letter (SDL). The SDL may be used by parties to assist in the exchange of information necessary to determine if, and when, their trading relationships with each of their uncleared derivatives counterparties will become subject to regulatory margin requirements. For more information on the SDL, see Legal Update, ISDA Publishes Self-Disclosure Letter to Help Market Participants Comply with Margin Rules for Uncleared Swaps.

For further detail on the VM protocol, see The New ISDA® Credit Support Annexes and Global Margin Compliance for Uncleared Swaps: ISDA 2016 Variation Margin Protocol.

For a complete list of ISDA credit support documentation, see Practice Note, The New ISDA® Credit Support Annexes and Global Margin Compliance for Uncleared Swaps: Agreements and Documentation: 2016 CSAs and Margin Protocols.

For details on the US margin rules, see Practice Note, The Dodd-Frank Act: Margin Posting and Collection Rules for Uncleared Swaps.

For information on the EU margin rules, see Practice Note, EMIR: Risk Mitigation Requirements for Uncleared OTC Derivatives.