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In connection with the global roll-out of variation margin requirements for uncleared OTC derivative transactions, market participants will need to complete the ISDA Regulatory Margin Self-Disclosure Letter for regimes applicable both to them and their counterparties. SDL Roadmap will give clients the regulatory background in order to complete the SDL.
Margin rules
Margin rules will require parties to uncleared OTC derivatives to exchange variation margin on a daily basis and, depending on their trading volumes, to post and collect initial margin on a segregated basis. The initial margin requirements will be phased in through to September 2020, whereas the variation margin requirements will apply for most market participants from 1 March 2017.
The margin rules stem from a G20 requirement. Although implementation amongst G20 jurisdictions was originally envisaged to take place contemporaneously, not all jurisdictions are currently on the same timetable. The EU, U.S., Japanese, Canadian, Hong Kong, Singapore and Australian variation margin requirements will go live on 1 March 2017, with a transitional period for compliance applying in Hong Kong, Singapore and Australia until September 2017. The Swiss variation margin requirements are expected to apply from September 2017.
Counterparties will need to ensure that their relationship complies with all regimes applicable to the relationship. For example, where one party is subject to the U.S. rules and the other is subject to the EU rules, the relationship will need to comply with both the U.S. and the EU rules.
The SDL
In order to assess whether the margin rules apply to a particular relationship and, if so, which rules apply, a market participant needs to provide and receive information under not only the regime(s) applicable to it, but also under the regime(s) applicable to its counterparty. In order to facilitate this exchange of information, the International Swaps and Derivatives Association, Inc. has published the ISDA Regulatory Margin Self-Disclosure Letter (the SDL). The SDL is available in paper format and also on ISDA Amend.
SDL Roadmap
In order to complete the SDL, market participants may have to complete sections for regimes with which they are not familiar. Each party’s completion of the SDL will be based on its own factual circumstances. In order to know how to complete the SDL, however, an understanding of the regulation underpinning each question is essential.
SDL Roadmap brings together guidance from each regime covered by the SDL to assist market participants in completing the SDL.
SDL Roadmap covers Europe, U.S., Canada, Japan, Switzerland, Hong Kong, Australia and Singapore.
Tailored access: Accessible on a jurisdiction by jurisdiction basis, subscribers can select only those jurisdictions relevant to themselves and their counterparties.
Entity scope: SDL Roadmap includes guidance to enable all entity types to establish their own categorisation for the purposes of responding to the entity status questions of the SDL.
Example guidance includes:
> How to determine categorisation of an entity as a financial or non-financial user.
> How to determine an entity’s group for the purposes of the rules.
> How to work out the AANA for an entity/group.
> Summary of the key consequences of the responses.
> Specific information on commonly asked questions.
Who might wish to use SDL Roadmap?
> Uncleared OTC derivative counterparties.
> Managers whose clients are uncleared OTC derivative counterparties.
> Parties who want to facilitate their counterparties’ completion of the SDL but are unable to provide them with legal advice.
December 2016
SDL Roadmap: jurisdiction by jurisdiction guidance on the ISDA Regulatory Margin Self-Disclosure Letter
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Key contacts
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INNOVATIVELAWYERS2016
Europe
U.S.
Japan
Hong Kong
Australia
Switzerland
Singapore
Motoyasu FujitaPartner, TokyoTel: +81 3 6212 [email protected]
Caird Forbes-Cockell Partner, New YorkTel: +1 212 903 [email protected]
Chong LiewPartner, Hong KongTel: +852 2842 [email protected]
Deepak SitlaniPartner, LondonTel: +44 20 7456 [email protected]
Jacqueline Low Consultant, SingaporeTel: +65 6692 [email protected]
Tatsuya OzawaManaging Associate, TokyoTel: +81 3 6212 [email protected]
Kenneth LamManaging Associate, TokyoTel: +81 3 6212 [email protected]
Jonathan ChingCounsel, New YorkTel: +1 212 903 [email protected]
Edward Ivey Associate, New YorkTel: +1 212 903 [email protected]
I-Ping SoongCounsel, Hong KongTel: +852 2901 [email protected]
Victor Wan Partner, Hong KongTel: +852 2901 [email protected]
Rod AldusSenior Associate, AllensTel: +61 8 9488 [email protected]
Tom HighnamPartner, AllensTel: +61 2 9230 [email protected]
Simon FirthPartner, LondonTel: +44 20 7456 [email protected]
Suzanna BruntonManaging Associate, ParisTel: +33 6 21 18 24 [email protected]
How to find out more
SDL Roadmap is an economical way to access the information required to complete relevant sections of the SDL. If you have any questions, or would like information on the costs associated with accessing SDL Roadmap, please email us at [email protected], or get in touch with any of the contacts set out below.
In collaboration with:
© Linklaters 2016.
Delphine MeylanAssociate, Lenz & StaehelinTel: +41 58 450 70 [email protected]
François Rayroux Partner, Lenz & StaehelinTel: +41 58 450 70 00 [email protected]
