On 18 December 2023, the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) published a joint policy statement (PS) on margin requirements for non-centrally cleared derivatives: amendments to Binding Technical Standards (BTS) 2016/2251 (FCA PS23/19 and PRA PS18/23).

Under the onshored European Market Infrastructure Regulation (UK EMIR), firms are required to 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 PS sets out amendments to BTS 2016/2251 to extend the temporary exemptions for single-stock equity options and index options from the UK bilateral margining requirements until 4 January 2026, to allow the PRA and FCA to undertake deeper analysis to develop a permanent UK framework for these products.

Industry had also asked the PRA to clarify the UK’s approach to supervisory pre-approval of bilateral initial margin models, and the PS contains confirmation of that approach.

The PS, which also contains feedback to the FCA and PRA’s joint consultation on the topic, is relevant to:

  • PRA-authorised banks, building societies and PRA-designated investment firms in scope of the margin requirements under UK EMIR.
  • All FCA solo-regulated entities and non-financial counterparties in scope of the margin requirements under UK EMIR. 

The amendments to the BTS take effect on 18 December 2023, which is when the final technical standards instrument by the PRA and FCA comes into force.