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ISDA® Publishes Updated Regulatory Initial Margin AANA Self-Disclosure Letter
Practical Law Legal Update w-031-6365 (Approx. 6 pages)
ISDA® Publishes Updated Regulatory Initial Margin AANA Self-Disclosure Letter
by Practical Law Finance
| Published on 28 Jun 2021 • International, USA (National/Federal) |
ISDA published the updated ISDA Regulatory Initial Margin AANA Self-Disclosure Letter (SDL) and related answer sheet to provide an updated standard form for market participants to communicate to their trade counterparties their aggregate average notional amount (AANA) of uncleared swaps outstanding, as well as certain other information needed to determine which trading relationships are, or may become, subject to regulatory initial margin (IM) requirements for uncleared swaps, and how these IM calculations must be performed.
On June 18, 2021, ISDA® published an updated Regulatory Initial Margin AANA Self-Disclosure Letter (2021 AANA SDL) and related answer sheet (SDL AANA answer sheet) designed to provide a standard form for market participants to communicate to their trading counterparties certain information needed to determine which of their uncleared derivatives trading relationships are, or may become, subject to regulatory initial margin (IM) requirements under one or more relevant regimes, as well as how these IM calculations must be performed.
Aggregate average notional amount (AANA) means, with respect to any date of determination, an amount equal to the sum of the notional amounts of all outstanding non-cleared derivatives positions, each as of such date of determination.
The 2021 AANA SDL is intended for use by market participants who have derivatives trading relationships that are potentially subject to regulatory margin requirements for non-cleared derivatives (see Practice Note, Global Margin Compliance for Uncleared Swaps). The 2021 AANA SDL includes explanatory notes and instructions to assist market participants, as well as 24 defined terms used in the 2021 AANA SDL.
The 2021 AANA SDL both expands on and supersedes prior iterations of the ISDA initial margin self-disclosure letters (SDLs) published in 2018 and 2019 (see Legal Updates, ISDA Publishes Initial Margin AANA Self-Disclosure Letter and ISDA Publishes 2018 Information Letter for Initial Margin). The 2021 AANA SDL allows an entity to disclose information identifying whether it is a member of a group, and which average aggregate notional amount (AANA) thresholds (by regime) the entity (or its group) has exceeded for the relevant year, allowing the parties to determine how to calculate IM amounts to comply with IM obligations from the relevant compliance date.
Also available from ISDA in chart form is an AANA Calculation Periods and Compliance Dates for Non-Cleared Margin Requirement, published on April 6, 2021, that includes a general description of the expected IM phase-in compliance dates, AANA thresholds, and observation periods of the relevant regimes.
The 2021 AANA SDL is broken into two parts:
- Part I provides a market participant with an opportunity to provide relevant biographical information about itself and its margin group. This information is necessary for identification and aggregation purposes. Under many of the regulatory margin regimes, many key aspects, including the AANA are determined on an aggregated margin group basis.
- Part II provides a market participant with an opportunity to provide information regarding whether it has or expects to exceed the AANA Threshold on a regime-by-regime basis for the compliance dates of September 1, 2021, September 1, 2022, or a later compliance date. If the parties otherwise meet the conditions to be in scope of a margin regime, this information is necessary to allow them to ascertain whether their relationship will be in scope for regulatory initial margin requirements on September 1, 2021, September 1, 2022, or a later compliance date.
The AANA information provided should be entered into the SDL AANA answer sheet, which allows the parties to determine how to calculate IM in compliance with relevant IM obligations from the applicable compliance date. The 2021 AANA SDL can be used to provide information for multiple entities at once by using multiple rows on the SDL AANA answer sheet. Market participants can later supplement the information provided with any additional information when such additional information becomes available.
Once determinations have been made using the 2021 AANA 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).
For details on the US margin rules, see Practice Note, US Derivatives Regulation: Margin Collection and Exchange Requirements for Uncleared Swaps.
For further detail on the ISDA SDLs and explanation of the ISDA regulatory credit support annexes (CSAs) and other margin materials, see:
For information on ISDA margin resources – including protocols and other SDLs – that can assist parties with the margin compliance process, see the following Legal Updates (date in parenthesis is ISDA publication date):
- ISDA Publishes US Self Disclosure Letter for Margin Compliance (January 15, 2021)
- ISDA Publishes Initial Margin AANA Self-Disclosure Letter (October 31, 2019)
- ISDA Publishes 2018 Information Letter for Initial Margin (July 11, 2018)
"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.