The International Swaps and Derivatives Association published opening remarks by its chief executive, Scott O’Malia, for a pre-Annual General Meeting event on derivatives in the pensions sector, emphasising the role of derivatives in pension risk management and flagging regulatory and market-structure changes affecting pension funds’ hedging and margining practices. The remarks also set out operational steps ISDA is taking to improve the resilience and predictability of margin and collateral processes. ISDA pointed to its recent survey-based report finding that 87% of nearly 1,200 companies across seven major stock indices use derivatives, including pension funds using them to manage interest rate, inflation and equity risks and to support returns. It highlighted the Netherlands’ planned shift from defined benefit to defined contribution pension arrangements by 2028 and noted growing regulatory scrutiny of Australian superannuation funds, including expectations around operational risk management, governance, reporting and margining. The speech referenced ongoing work following the United Kingdom’s 2022 liability-driven investment episode and Financial Stability Board recommendations on liquidity risk management, stress testing and operational processes, alongside ISDA’s engagement with consultations on margin practices. On implementation, ISDA said it has moved the ISDA Standard Initial Margin Model to semiannual calibration and is promoting greater automation in collateral management, including suggested operational practices and use of the Common Domain Model to digitise documents, standardise collateral terms and automate calculations and cash collateral payments. ISDA indicated a forthcoming paper on regulatory developments affecting Australian superannuation funds and said it will continue engaging with policymakers as approaches to margin practices are refined.
ISDA 2025-05-13
International Swaps and Derivatives Association details margin and collateral initiatives for pension derivatives users including semiannual SIMM calibration
The International Swaps and Derivatives Association (ISDA) highlighted the role of derivatives in pension risk management and discussed regulatory and market-structure changes impacting pension funds' hedging and margining practices. ISDA also noted its efforts to enhance margin and collateral processes, including semiannual calibration of the ISDA Standard Initial Margin Model and promoting automation in collateral management.