International Swaps and Derivatives Association flags EMIR 3 authorization applications EU firms must submit before updated ISDA SIMM takes effect on 12 July

The International Swaps and Derivatives Association published the first recalibration of the ISDA Standard Initial Margin Model under a new semiannual cycle and warned that EU counterparties must obtain regulatory authorization to keep using the model when the revised version takes effect on July 12. Under the revised European Market Infrastructure Regulation (EMIR 3), EU entities must submit a complete application before using any new or modified initial margin model, including ISDA SIMM version 2.7+2412. The European Banking Authority’s December 2024 no-action letter relaxes some expectations until regulatory technical standards are issued and a central validation function is established, including indicating national regulators should not prioritise supervisory or enforcement action related to processing applications. EU financial and non-financial counterparties currently using ISDA SIMM to exchange initial margin must file an initial application with their national competent authority, while significant institutions must also apply to the European Central Bank. After the initial submission, firms will need to notify regulators annually of subsequent model changes until the EBA’s detailed requirements are in place, while entities below the initial margin threshold across all portfolios are not required to apply unless and until they exceed the threshold and before they start using ISDA SIMM for initial margin exchange. ISDA said it will publish practical guidance and educational materials on the new EU application process. Going forward, the model will be recalibrated twice a year, with a primary calibration in the first half of the year effective in July and a secondary review in the second half focused on main delta risk weights implemented in December.