Attempts to mitigate the negative effect on liquidity of the margin requirements delineated in the first consultation proposal by taking into account a 2012 quantitative impact study (QIS) that examined and quantified the liquidity costs of requiring initial margin posting for uncleared derivatives transactions. The amount of initial margin posting required under final derivatives margin collateral rules is a matter of great concern to market participants because a requirement to post greater amounts of initial margin collateral on swap trades would tie up capital.

Allows for an initial margin threshold of €50 million for bilateral swaps between covered entities, defined as financial firms and systemically important non-financial entities. These parties, when entering into a bilateral derivatives transaction with another covered entity, have the option of not collecting margin of up to €50 million from their covered entity swap counterparty. These parties would only be required to collect margin above the €50 million threshold. Therefore, if a covered entity's portfolio required €60 million of initial margin, the counterparty (which must also be a covered entity) would only be required to collect €10 million. The counterparty could, however, collect up to the full €60 million of initial margin based on the entities' internal risk guidelines and principles. This threshold would greatly reduce the total liquidity cost compared to the initial margin threshold of zero proposed under the first consultation proposal. The variation margin threshold remains at zero, which means variation margin must be collected to cover any counterparty exposure under the swap.

Provides for a gradual four year phase-in period beginning in 2015 with swaps between the most systemically significant entities, defined as consolidated groups that have more than $3 trillion in notional amount of swaps outstanding.

Excludes sovereigns, central banks, the Bank for International Settlements (BIS) and multilateral development banks from the margin requirements.

Applies to a larger scope of financial instruments, including FX swaps and options on securities.

Requires that both parties post margin to each other as opposed to US margin collection proposals which do not require dealers to post collateral to commercial end users (see, Practice Note, The Dodd-Frank Act: Derivatives Margin Collateral Rules: Margin Collateral Collection Requirements).

Utilizes different models and standardized calculations for determining initial and variation margins, and requires an entity to utilize a consistent method in determining margining levels for financial products within the same asset class.

Whether to exempt physically settled FX swaps and forwards from margin requirements, as under proposed Dodd-Frank swap margin regulations.

The ability to engage in limited rehypothecation of initial margin that has been collected.

The proposed phase-in framework.

The adequacy of the QIS.