Margin Requirements for Non-Centrally Cleared Derivatives

Last updated: 2026-02-24

Introduction

Margin Requirements for Non-Centrally Cleared Derivatives are part of the global regulatory reforms introduced following the 2007–2009 global financial crisis to address the risks associated with over-the-counter (OTC) derivatives.

The basic idea is simple: when two parties enter into a derivative contract outside a central clearing system, each party is exposed to the risk that the other party may be unable to fulfill its obligations. Therefore, Margin Requirements for Non-Centrally Cleared Derivatives were established to ensure that financial collateral is available to cover potential losses in the event of a counterparty default, thereby limiting the transmission of the shock to the broader financial system.

How Were They Developed?

Following the 2007–2009 global financial crisis, the G20 launched reforms of the OTC derivatives market. In 2011, the G20 requested that the Basel Committee on Banking Supervision (BCBS) and the International Organization of Securities Commissions (IOSCO) develop international standards for margin requirements for non-centrally cleared derivatives. The standards were finalized in 2013.

Why Were They Established?

Margin Requirements for Non-Centrally Cleared Derivatives were established to reduce Counterparty Credit Risk and Systemic Risk associated with non-centrally cleared derivatives.

These requirements help limit losses when a counterparty defaults, reduce the likelihood that such losses will spread to other financial institutions, and encourage the use of Central Clearing where appropriate.

Conclusion

Margin Requirements for Non-Centrally Cleared Derivatives aim to make the non-centrally cleared derivatives market safer by reducing counterparty default risk and limiting the transmission of losses throughout the financial system.