ISDA SIMM Crowdsourcing Facility

Overview

The ISDA Standard Initial Margin Model (ISDA SIMM™) is a common methodology for calculating initial margin for non-centrally cleared derivatives, developed as part of ISDA’s Working Group on Margin Requirements (WGMR) to help market participants meet the new BCBS-IOSCO margin framework for non-cleared derivatives. Margining for non-cleared derivatives is an important and concluding part of the derivatives reform package agreed by the G-20.

With ISDA SIMM, the margin calculations depend upon the identification of appropriate ISDA SIMM Risk Buckets for each underlying asset. If firms disagree on the risk buckets for the assets they won’t be able to agree on the margin that needs to be exchanged.

In order to achieve an independent consensus mapping for each asset, IBA, in collaboration with ISDA, has developed the ISDA SIMM Crowdsourcing Facility. This covers the aggregation and compilation of risk buckets for the underlying assets, enabling market participants to implement the ISDA SIMM consistently and agree the margin that needs to be exchanged. Parties use the results from the crowdsourcing facility as an input for their SIMM calculation.

Please read IBA's benchmark and other information notice and disclaimer here.

Phasing in of New Regulations

The new regulations will be phased in over five years, starting from 1 September 2016 and are based on banks’ aggregate month-end average notional amount of non-centrally cleared derivatives.

For further details on the phasing, see the Basel Committee on Banking Supervision and the Board of the International Organization of Securities Commissions document on Margin requirements for non-centrally cleared derivatives.

Methodology

How the Crowdsourcing Facility Works

  • Each day, submitting firms send their mappings of assets against ISDA SIMM risk buckets to IBA (their ‘votes’)
  • IBA calculates the resulting mappings, according to the calculation rules, and publishes the results to licence holders
  • ISDA SIMM firms submit data for positions on their books that are in scope for uncleared margin requirements
ISDA SIMM Crowdsourcing Facility factsheet

Calculation Rules

  • The published risk bucket is the bucket with the highest number of votes for that asset (within that asset class), subject to the tie breaker rules
  • Tie breaker rules:
    • If two or more buckets receive an equal number of votes, the bucket with the highest risk weighting wins
    • If two or more buckets receive an equal number of votes and have the same risk weighting, the lowest bucket numerically wins (i.e. If bucket 1 and bucket 5 have the same number of votes and the same risk weighting, bucket 1 wins)
    • The Residual bucket can never win a tie break
  • The mappings submitted to IBA carry over from day to day, so they can be used in subsequent calculations. However, they expire after seven calendar days to ensure that data is current. (I.e. if a firm supplies votes for Monday’s calculation, they will need to supply votes again before the next Monday’s calculation to be included in that calculation)
  • Each asset (within an asset class) must have a minimum of two valid votes in order to be included in the results

Governance

The Crowdsourcing Facility benefits from IBA’s independent governance and also from the governance of the ISDA SIMM Governance Forum run by ISDA.

Publication Times, Days & Holidays

The expected daily publication time is 05:15 Eastern Time. The publication holidays are: the Christmas Day bank holiday and New Year’s Day bank holiday.

Data, Reports & Licencing

Participants can download and use the data published by the facility for margin calculations for uncleared derivatives as part of the broader application of the ISDA SIMM methodology. Firms that have signed the usage license can access reports here.

Firms who wish to receive the results of the ISDA SIMM Crowdsourcing Facility, either directly from ICE or from a third party, are required to enter into a Usage Licence with ICE Benchmark Administration.

Firms who wish to redistribute the results of the ISDA SIMM Crowdsourcing Facility to third parties are required to enter into a Redistribution Licence.

For more details on licensing please refer to Licensing and Data. Alternatively for any questions on licensing or how to access the ISDA SIMM Crowdsourcing Facility results please contact the IBA licensing team.