The Financial Markets Standards Board (FMSB) has published a Spotlight Review on the calculation and exchange of uncleared margin for over-the-counter (OTC) derivatives, summarising operational frictions and areas where firms support potential solutions. The review draws on work by FMSB’s Post-Trade Committee and an FMSB member survey designed to test where industry views align on key problems and remedies. The review links its work to inefficiencies previously highlighted by the Bank of England’s Post-Trade Task Force, including high settlement fails and costs. While many frictions were expected, the survey results indicated that standing settlement instruction (SSI) issues dominated the causes of settlement fails, despite being a non-product-specific problem with established solutions. It also finds that parts of the trade cycle, particularly the margin call process, are relatively mature, and that some residual frictions offer low marginal gains because root causes and solutions are fragmented; it notes that some non-standardisation is inherent in bespoke OTC markets, including firms’ desire to retain autonomy over valuation models and inputs. Reducing the time taken to determine the cause of disputes was identified as a key improvement opportunity, with workflow changes and new technology cited as potential initiatives. The review also distinguishes between solutions firms can apply unilaterally or negotiate bilaterally with clients and initiatives that would require broad market adoption, for which the survey shows extensive, and in some cases unanimous, support; the working group plans to work with the International Swaps and Derivatives Association (ISDA) on encouraging adoption and developing further solutions in areas such as onboarding, disputes and settlement.

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