ISDA summarized the U.S. requirements for calculating the average aggregate notional amount ("AANA") for Phase Five initial margin ("IM") between June 1, 2019 and August 31, 2019.
In the summary, ISDA notes that the requirements in the United States deviate from requirements in other jurisdictions. ISDA lists the following steps for calculating AANA:
- identifying the legal entities that are part of a consolidated group;
- identifying the uncleared transactions in all AANA-covered products for each entity in a consolidated group for each day of the AANA calculation period;
- calculating the total notional amount of AANA-covered products;
- calculating the AANA; and
- notifying counterparties.
Commentary / Nihal Patel
The ISDA summary is a useful reminder to market participants with significant derivatives activities - and those with affiliates with significant derivatives activities - that determining whether IM requirements will apply in September 2020 requires tracking activities for the upcoming months of this year. As previously highlighted, firms should also bear in mind that this counting exercise may be just one of many to be done, given that the U.S. requirements differ from other jurisdictions, perhaps most notably in the time period during which counting is required (in Europe, for example, the period is March-May 2020).
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