The first step in complying with the regulatory requirements for non-centrally cleared derivatives is determining if your firm is in scope for the rules. The way to do this is to calculate your “Average Aggregate Notional Amount” or AANA. To calculate your firm's AANA is to sum the total outstanding amount of non-cleared derivative positions during the prescribed observation period on a gross notional basis. Once a firm determines if they are in scope, they should begin the process of disclosing to their counterparty group(s).
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US: CFTC/USPR
CFTC/USPR - How do you calculate?
- AANA is calculated on an average daily notional amount of uncleared swaps (non-cleared security based swaps, FX forwards including physically settled FX, FX swaps)
- The calculation is inclusive of all affiliates within the counterparty group
- Calculation is at the principal level, for example, pension funds must look across all their portfolios across asset managers
- Summing up the AANA number calculated for each business day and dividing the number by the number of business days in the Observation Period
- Post Phase 6 for CFTC will be a month end average calculation for AANA with a calculation period of March, April and May of 2023 for compliance date of September 1 2023. For firms under USPR there will be a daily average calculation for the periods of June, July and August of 2023 for compliance date January 1 2024.
Products to include in your calculation
On any date of calculation, all outstanding over-the-counter derivatives of the trading entity’s Consolidated Group, including:
- Uncleared swaps
- Uncleared security-based swaps
- Deliverable FX swaps
- Deliverable FX forwards
- FX swaps and deliverable FX forward even though they are exempt from calculating regulatory IM
What not to include
- Do not include cleared derivatives
Other items of note:
- This is Gross Notional calculation. Offsetting/netted positions must be counted.
- Security based swaps that are either exempt pursuant to the SEC clearing exemption for affiliates of end users or satisfy the criteria for the SECs end-user exception for clearing would not be included in the calculation
- Firms will need to calculate their AANA annually as it is possible to fall in and out of scope for the rules if you fall below the USD 8 BILLION threshold
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EU/EMIR
EU/EMIR - How do you calculate?
- AANA is calculated for each counterparty group as of the last business day of the previous March, April, and May for the compliance date of the following January.
- Intra Group transactions, regardless of exemptions on the EMIR rules, are counted once.
- Summing up the notional amount of all In-Scope OTC Derivatives on the last business day of each month in the Observation Period and dividing by the number of months in the Observation Period.
- For March, April and May of 2023 AANA calculation compliance date will be January 1, 2024.
Products to include in your calculation
- Physically settled FX Swaps and Forwards
- Currency Swaps
- Covered Bond Swaps
- Derivatives with exempted counterparties
- Hedging trades
What not to include
- OTC derivatives that are considered centrally cleared
- Exchange-traded derivatives on a non-EU equivalent market
- Exchange-traded derivatives trades on an EU regulated market
Other items of note:
- This is a Gross Notional calculation. Offsetting/netted positions must be counted.
- Deliverable FX forwards, FX swaps, currency swaps, single-stock equity options or index options and derivatives with counterparties in non-netting jurisdictions that are (or may be) exempt from the regulatory variation margin and/or initial margin requirements must be included in your AANA calculation.
- Intra-group transactions are included but only counted once.
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APAC Region
APAC – How do you calculate?
- The calculation period below is for JFSA. The remainder of the guidelines closely follow those in the EU jurisdiction.
JFSA Margin Rule Compliance Schedule – Upcoming Phases
