KOR's Suggested Implementation
KOR has found a better implementation for identifying uncollateralized transactions that do not need collateral reported. We do not believe using a freeform text field for multiple purposes to attempt to drive logic is best practice. As such, we have added the field Collateralisation Category as optional on Transaction and Valuation messages so that Clients may submit when a trade is uncollateralized on Transaction or Valuation messages.
ISDA's Method:
Question:
For an uncollateralized trade where there is no collateral agreement, the industry would like confirmation from CFTC staff that there is no need to send daily a collateral report for such trade as long as the Valuation report for the trade reflects in the fields for #116 IM and #124 VM that there is no collateral:
- #116 IM code: Valuation report “NOCOLLATERAL”
- #124 VM code: Valuation report “NOCOLLATERAL”
- #115: No submission of “UNCL” required, if the Valuation report submission for the same trade for #116 and #124 VM says “NOCOLLATERAL”
As a result, no separate collateral report would be needed for that trade (as the information that there is no collateral is visible on the daily valuation report already. Otherwise, “UNCL” would need to be reported repeatedly for #115 for seemingly no additional value.
CFTC Feedback:
CFTC staff confirmed that they are fine with the proposed approach below for this scenario, as they understand there is no benefit to continually sending a daily collateral report that says no collateral:
#115: No submission of “UNCL” (via a collateral report) is required, if the Valuation report submission for the same trade for #116 (IM Portfolio code) and #124 (VM Portfolio code) provides “NOCOLLATERAL”.
As a result, no separate collateral report would be needed for that trade (as the information that there is no collateral is visible on the daily valuation report already).