International Swaps and Derivatives Association flags operational issues ahead of India’s April 1 non-cleared derivatives initial margin rules

The International Swaps and Derivatives Association (ISDA) published opening remarks by its chief executive, Scott O’Malia, at the ISDA India Derivatives Markets Forum, focusing on India’s upcoming initial margin (IM) requirements for non-cleared derivatives taking effect on April 1 and the remaining operational and legal preparations needed for implementation. The remarks highlight the Reserve Bank of India’s role in building an over-the-counter (OTC) derivatives framework aligned with Group-of-20 reforms, pointing to close-out netting enforceability legislation passed in September 2020, established clearing through the Clearing Corporation of India Limited (CCIL), and the requirement to exchange variation margin for non-cleared derivatives since May 2023. ISDA emphasized that the IM framework allows Indian branches of foreign banks to rely on substituted compliance for certain in-scope transactions, reducing the risk of having to comply with multiple rule sets. ISDA also outlined its work to support readiness through documentation and use of the ISDA Standard Initial Margin Model, while flagging risks of disputes where different IM calculations apply to the same portfolio and calling for a review of custodial arrangements and a dialogue with CCIL to support industry-standard documentation. ISDA expects work on implementation to continue beyond April 1, including support for firms in scope at go-live and for entities that come into scope later, alongside ongoing engagement on broader market development priorities set out in its earlier India whitepaper.