Regulatory Alerts2019-04-08
Consultation Report on FSRA Joint Standard 1 of 2019: Margin Requirements for Non-Centrally Cleared OTC Derivatives
The Financial Sector Conduct Authority and the Prudential Authority issued this consultation report to finalize FSRA Joint Standard 1 of 2019, which mandates the exchange of initial and variation margin for non-centrally cleared over-the-counter derivative transactions to mitigate systemic risk. Responding to industry feedback, the Authorities clarified that compliance obligations rest on authorized derivative participants trading with defined counterparties, confirmed specific exclusions for sovereigns and intra-group trades, and explicitly removed foreign entities from the standard's direct binding scope. The revised framework also aligns with global Basel Committee and IOSCO standards by exempting physically-settled foreign exchange forwards and swaps from variation margin requirements to reduce operational burdens and prevent regulatory arbitrage.