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GMAC backs BCBS/IOSCO recommendations to streamline variation-margin processes
Summary
GMAC adopted a technical-subcommittee recommendation urging the CFTC to support industry implementation of BCBS/IOSCO proposals to standardize and automate variation-margin processes, broaden eligible collateral flexibility and encourage third-party services to reduce operational frictions.
The Global Markets Advisory Committee voted to adopt a technical-subcommittee recommendation asking the CFTC to support industry implementation of four BCBS/IOSCO recommendations aimed at streamlining variation-margin practices in non-centrally cleared markets.
Tara Cruz, co-chair of the technical issues subcommittee, told members that the BCBS/IOSCO working group had identified legal and operational frictions that could impede margin exchanges during stress, and that standardization and automation of margin-call workflows would reduce disputes and operational delays. The subcommittee endorsed four areas: resolving operational and legal frictions; broadening acceptable collateral types during stress (with streamlined operational handling); standardizing and automating non-cleared margin processes using open data standards; and encouraging firms without in-house scale to evaluate aligned third-party service providers.
The motion to adopt the recommendation passed by voice vote with a tally announced as 27 yes and 1 abstention. The GMAC will transmit the recommendation to the Commission for consideration.
Why it matters: Variation-margin flows and collateral management volumes rose materially after global margin reforms, increasing the need for efficient collateral-management processes to reduce systemic operational risk in stressed markets. Standardized fields and digital representations of collateral (industry models cited by witnesses) can help counterparties resolve disputes faster and reduce liquidity strains.
What's next: The recommendation asks the CFTC to facilitate and support industry uptake of the BCBS/IOSCO guidance and to consider related rule or implementation guidance as appropriate. The GMAC included references to recent CFTC proposals (e.g., MMF eligibility and related harmonization work) as part of the implementation discussion.
Ending: The committee adopted the technical-subcommittee recommendation and will forward it to the Commission for further consideration.
