All covered entities (ie financial firms and systemically important non-financial entities) that engage in non-centrally cleared derivatives must exchange initial and variation margin as appropriate to the counterparty risks posed by such transactions4.
|
| 7. | For the purpose of this element, Systemically Important Non-financial Entities will be entities whose aggregate month-end average national amount of non-centrally cleared derivatives for the preceding March, April and May exceeds SAR 30 billion, at a consolidated group wide basis.
|
| 8. | For purposes of determining whether a group’s non-centrally cleared derivatives notional amount exceeds SAR 30 billion, the following shall apply:
|
| | • | Inter-affiliates trades should not be counted.
|
| | • | All other non-centrally cleared derivatives must be counted.
|
| 9. | Covered entities include all financial firms, and systemically important non-financial firms as defined in paragraph 7 above. Central banks, sovereigns5, multilateral development banks, the Bank for International Settlements, and non-systemic, nonfinancial firms are not covered entities6.
|
| 10. | Only non-centrally cleared derivatives transactions between two covered entities are governed by these requirements. A transaction between a covered entity and one of the aforementioned entities is not covered by these requirements.
|
| 11. | All covered entities that engage in non-centrally cleared derivatives must calculate, balance and exchange, on a bilateral basis, the full amount of variation margin (ie a zero threshold) on a daily basis. In case of any delay or exception, SAMA should be pre-notified.
|
| 12. | All covered entities must exchange, on a bilateral basis, initial margin with a threshold not to exceed €50 million. The threshold is applied at the level of the consolidated group to which the threshold is being extended and is based on all non-centrally cleared derivatives between the two consolidated groups7.
|
| 13. | All margin transfers between parties may be subject to a de-minimis minimum transfer amount not to exceed €500,000.
|
4 Different treatment is applied with respect to transactions between affiliated entities, as described under Element 6 below.
5 Public sector entities (PSEs) may be treated as sovereigns for the purpose of determining the applicability of these margin requirements.
6 Multilateral development banks (MDBs) exempted from this requirement are those that are eligible for a zero risk-weight under the Basel capital framework (as prescribed in the document published by the BCBS and IOSCO.)
7 Investment funds that are managed by an investment advisor are considered distinct entities that are treated separately when applying the threshold as long as the funds are distinct legal entities that are not collateralised by or are otherwise guaranteed or supported by other investment funds or the investment advisor in the event of fund insolvency or bankruptcy.
