International Swaps and Derivatives Association steps up training and advocacy for ISDA SIMM adoption by Australian superannuation funds

The International Swaps and Derivatives Association has outlined training and advocacy work to support Australian superannuation funds in adopting the ISDA Standard Initial Margin Model (ISDA SIMM) as derivatives use expands with rising offshore investment. ISDA argues that a risk-sensitive margin model would align initial margin more closely with portfolio risk than the standard regulatory schedule and help limit avoidable liquidity pressures in stressed markets. The association links the issue to the scale and internationalisation of the sector. Australian superannuation assets are about 160% of GDP, around half invested offshore, and the Reserve Bank of Australia expects the system to reach about 180% of GDP within a decade with overseas investments approaching 75%. Foreign exchange hedges are estimated at AUD 500 billion and could double over the same period. For funds subject to margin rules on non-cleared derivatives, initial and variation margin can generate sudden calls for cash and other high-quality liquid assets. Even where foreign exchange swaps and forwards remain exempt from regulatory margin, banks may seek discretionary margin as hedge books grow, while frequent rollovers and settlement still concentrate liquidity needs. ISDA said its earlier paper recommends contingent liquidity facilities such as repo, broader eligible collateral for non-cleared derivatives where possible, and stronger stress testing, early warning indicators and contingency planning. Use of ISDA SIMM requires authorization from the Australian Prudential Regulation Authority, which ISDA said remains unclear for some funds, and the association plans further training later in the year alongside continued engagement with the industry and APRA.