Calypso Takes Aim at BCBS/IOSCO Margin Requirements

The solution, dubbed the Margin Calculation Module, will help trading firms with large derivatives trading books to adhere to the Basel Committee on Banking Supervision (BCBS) and International Organization of Securities Commissions (IOSCO) rules for margin requirements for these instruments introduced in recent years and now being implemented.

The module also provides margin calculation capabilities that meet both Commodity Futures Trading Commission (CFTC) and European Securities and Markets Authority (ESMA) requirements, as well as adhere to the International Swaps and Derivatives Association (ISDA) Standard Initial Margin Model (SIMM) Methodology.

The solution will be offered as an add-on for current customers, while non-customers will be able to send in trades through a cloud-based utility service and receive back the initial margin calculation results.

The models are divided into three groups:

• BCBS / IOSCO Modeling using a cross-product VaR-based margin calculator
• BCBS / IOSCO Schedule (which does not require regulatory approval)
• ISDA SIMM methodology

Calypso notes that the requirement will be phased in over several stages, with the first deadline ─ which will only affect firms with over $3 trillion or €3 trillion of gross notional value ─ coming in December 2015.

"We are particularly excited to bring the same risk margin framework that is already deployed at leading clearing houses and adapt the models to meet the requirements for non-cleared derivatives," David Little, managing director of business development at Calypso, said in a statement. "Users can draw confidence from the fact that this new service is built on the same proven scalable industry standard solution."

The San Francisco-based vendor also notes that BCBS/IOSCO regulations require that each customer of the service obtain separate regulatory approval for the margin model in each jurisdiction in which it is used.

"Calypso is ready to help in obtaining the necessary approvals and we believe that there is sufficient time to meet the December deadline, but we can't know how long regulatory approval will take in all the jurisdictions, so early action is advised," Little added.