While the global Uncleared Margin rules have technically been in force since March 1st, various jurisdictions, including the EU and US have considered the implementation difficulties experienced by many and recognised delays via various statements in Europe and a letter of No Action relief in the US.
Implementation is still required however. This post on the Mondaq web site by Donnacha O’Conner of Dillon Eustance gives an overview of the requirements and issues. This article on The OTC Space by Ravi Sonecha of JDX Consulting examines the reasons behind the delay, and also offers comment on the ultimate benefits of standardisation. A playback of the recent webinar by The OTC Space, Axiom and Cloudmargin on readiness and remediation can be found here.
The rules also contain a requirements for most of the affected parties to exchange Initial Margin, which started for the largest counterparties in some jurisdictions last September. In order to support this, ISDA have added the Standard Initial Margin model (SIMM, see here) which will likely be used by many. This article on The OTC Space by Thomas Schiebe of Sapient looks at issues that banks are encountering in its practical use.
Energy and commodity companies in the EU are only impacted by these rules if they have either “FC” or “NFC+” status under EMIR. Those NFC+s are likely to be trying to meet the Variation Margin rules and per many in the financial sector. Some will ultimately also be caught by the Initial Margin rules, although some may use more basic methods for calculating Initial Margin.
Whether currently caught or not, most in the sector will need to be aware of the change, and to be ready for a possible move to a “more margined” world, whether because of these regulations or mandatory clearing, as the rules take hold.