On 18 July 2023, the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) published a consultation paper (PRA CP13/23 / FCA CP23/16) setting out proposed changes to the bilateral margining requirements under the UK version of the European Market Infrastructure Regulation (UK EMIR).

Under UK EMIR, firms must exchange initial and variation margin on non-centrally cleared over-the-counter derivatives. Single-stock equity options and index options are currently exempted from these requirements until 4 January 2024.

The consultation paper sets out proposals to:

  • Extend the temporary exemption for single-stock equity options and index options from the UK bilateral margining requirements from 4 January 2024 until January 2026, to allow the PRA and FCA to undertake deeper analysis to develop a permanent UK framework for these products.
  • Set out the PRA and FCA’s proposed approach to pre-approving bilateral initial margin models, following requests from the industry for clarity on this point.

The consultation closes on 18 October 2023.