The European Fund and Asset Management Association (EFAMA) welcomes the opportunity to respond to this important review of RTS 153/2013 and accompanying guidelines, in light of the procyclicality witnessed during the peak volatility of the Covid crisis. European CCPs already have standard anti-procyclicality tools in their rulebooks and this did lead to less volatile moves in margin in Europe versus other jurisdictions. Nevertheless, there remain important differences observed on CCP margin calls across CCPs which we believe can be addressed by improving the implementation of APC tools.

While the focus of this consultation is on the so-called Article 28 APC tools defined under EMIR RTS, we would like to reiterate the important antiprocyclical impact of allowing certain high quality securities to be admitted as collateral for the payment of variation margin calls.  Allowing securities to be used to cover VM calls reduces the ‘dash for cash’ effect and the related risk of pro-cyclicality which is the consequence of having to sell securities to get cash for VM call payment, as observed during the height of the Covid crisis.

We believe that there is scope for sizing  CCP IM requirements more conservatively while still preserving a careful balance between increased IM and managing volatility. This can be done using appropriate model assumptions to mitigate the potential for future procyclical initial margin moves. Finally, we would like to stress the importance of aligning any reforms with ongoing work at IOSCO level on margining practices.