In our response to the BCBS-CPMI-IOSCO Review & Policy Proposals on the Transparency and Responsiveness of Initial Margin in Centrally Cleared Markets, the WFE agrees that it is important for market participants to properly prepare for potential liquidity needs. However, we highlight issues with multiple aspects of the consultation’s proposals, such as the standardised measure of IM responsiveness, the practicality of mandating the provision of hypothetical simulator scenarios to all market participants, and the continued focus on initial margin after the 2022 Review of Margining Practices proved that CCP practices in this domain have been effective in muting market volatility.

The response encourages the Joint Working Group on Margin (JWGM) to recognise the data that CCPs already disclose on a regular basis to the regulators, the market, and the public, and to consider which outputs from this consultation will in fact be effective tools to assist with market participant preparedness. This is particularly true regarding the proposed metric of initial margin responsiveness, which WFE does not believe will meet the report's stated ambitions. The WFE appreciates that the JWGM’s intention is to provide a simple and high-level metric that gives some level of context to how a CCP’s model reacted to recent market events, however, it is our view that, if such a metric were to be mandated, then significant caveats should accompany any reporting to ensure that it is not misinterpreted, and does not contribute to market participants being less prepared for margin calls than otherwise. These disclosures should outline that the metric is prone to producing diverging measurements under future scenarios (even if the level of volatility is the same), and that it cannot be used to compare models.

In addition, the WFE also supports the JWGM’s efforts to improve CM-to-client transparency. However, we believe that the proposed steps to increase CM to CCP transparency do not go far enough to facilitate improved overall transparency in a standardised manner within the financial system and could be improved by several additional reporting fields.