Regulatory initial margin – the obligations on the buy-side

To date, the firms subject to the regulatory obligation to exchange initial margin on uncleared over-the-counter (OTC) derivatives have been the heaviest users, predominantly on the sell-side.

However, over the next two years a large number of buy-side firms will be caught as the threshold for compliance drops to include entities with uncleared OTC derivatives portfolios of €50bn or greater in 2020 and of €8bn or greater in 2021.

In this note we set out the steps that affected buy-side firms should be taking to prepare for the exchange of initial margin.