ARE THE FIRMS READY FOR INITIAL MARGIN PHASE 5 & 6 TODAY?

Abstract

Derivatives has gained popularity in the recent times into the mindset of general public. Although, derivatives have been used by mankind since a very long time. Since the inception of time, mankind haven’t liked the general idea of uncertainty. More so, they did not like the idea of economic uncertainty. Therefore, the need of offsetting these uncertainties led to the evolution of contracts. This final policy framework presented in the document establishes are firms ready for Initial Margin Phase 5 & 6 for non-centrally cleared derivatives as agreed by the Basel Committee on Banking Supervision (BCBS) and the International Organization of Securities Commissions (IOSCO). The objective of the research paper is to understand and evaluate the current scenario of firms in adopting regulatory measures, one such is the SIMM Model that includes IM requirements as designed by ISDA in an attempt to redesign and regulate the accounts of all Non-centrally cleared Derivatives, to study how and why are the firms not ready for the next phase of regulatory IM Phase 5 & 6 as per the schedule announced by ISDA, what are the reasons behind the release of a one-year extension to Phase 4, and delay for Phases 5 & 6 and what are and will be the serious logistical challenges faced by the firms to implement these phases.