UK EMIR PRA and FCA amend UK Margin Rules
12 January 2022
On 30 June 2021, the PRA and FCA published a joint policy statement appending new PRA and FCA Standards Instruments that amend the onshored UK version of EU Delegated Regulation 2016/2251 (the UK Margin Rules).
The amendments, on which the PRA and the FCA consulted in March this year (discussed in this briefing):
- amend the initial margin implementation timetable in line with BCBS-IOSCO recommendations, such that:
- Phase 5 implementation (applicable to entities with an average aggregate notional amount (AANA) of
between €50 billion and €750 billion) will occur on 1 September 2021; and
- Phase 6 implementation (applicable to entities with an AANA of between €8 billion and €50 billion) will
occur on 1 September 2022;
- introduce an "opt-out" from the requirement to exchange variation margin for physically-settled foreign exchange forwards and swaps, except where both counterparties are credit institutions or investment firms under the onshored Capital Requirements Regulation, or third-country equivalents thereof; and
- extend the current temporary exemption from the margin requirements for single-stock equity options and index options until 4 January 2024.
The amendments took effect on 30 June 2021 and bring the UK Margin Rules into line with the corresponding EU rules under EU Delegated Regulation 2016/2251 (the EU Margin Rules), which were similarly amended in February this year (discussed in this briefing).
A further change, which was not included in the original consultation, extends temporary transitional relief under the UK Margin Rules so that units or shares in EEA UCITS qualify as eligible collateral until 31 December 2022, rather than 31 March 2022. The extension was requested by market participants, who are concerned that restricting collateral eligibility to units or shares in UK UCITS would significantly reduce the pool of assets available for use as collateral by UK firms, adversely affecting their ability to enter into uncleared derivatives. A consultation on further transitional relief is expected early next year. In contrast, units or shares in UK UCITS ceased to be eligible collateral under the EU Margin Rules on 1 January 2021.
Authors: Kerion Ball, Kirsty McAllister-Jones and Amelia Howison
