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The Monetary Authority of Singapore (MAS) issued for consultation today proposals to implement margin requirements for non-centrally cleared over-the-counter (OTC) derivative trades (uncleared derivatives). Margin requirements reduce counterparty credit risks from uncleared derivatives and form part of the broader global reforms to make the trading of OTC derivatives safer.
2 MAS proposes to impose margin requirements on all OTC derivatives that are not cleared by a qualifying central counterparty (QCCP)1, except physically-settled foreign-exchange forwards and swaps. The margin requirements will be implemented in phases, starting with banks, which have the largest exposures to uncleared derivatives.
3 Margin requirements for uncleared derivatives complement MAS’ earlier proposal to mandate central clearing of specified OTC derivative contracts2. MAS’ proposals take into account the international framework for margin requirements for uncleared derivatives developed by a working group jointly established by the Basel Committee on Banking Supervision and the International Organization of Securities Commissions.
4 Before finalising the margin requirements for uncleared derivatives, MAS will also conduct a quantitative study to assess the potential impact of the proposals. MAS will closely engage the industry to ensure that the availability of eligible collateral is sufficient to meet the proposed margin and other regulatory requirements.
5 MAS invites interested parties to submit their comments to otc_margins@mas.gov.sg by 1 November 2015. Please click here to view the consultation paper.
Background
As part of the G20 objectives and Financial Stability Board recommendations on OTC derivative reforms, a working group was established jointly by the Basel Committee on Banking Supervision and the International Organization of Securities Commissions, to develop an international framework for margin requirements for uncleared derivatives.
1 A QCCP is a licensed CCP that meets the Principles for Financial Market Infrastructures jointly published by the Committee on Payments and Market Infrastructures and the Technical Committee of the International Organization of Securities Commissions.
2 MAS consulted on the Draft Regulations for Mandatory Clearing of Derivatives Contracts on 1 July 2015, available here.
