1. NFA Webinar: Margin Model Approval Process
November 21, 2016
Presented by: Jamila Piracci, Vice President, OTC Derivatives
Alessandra Riccardi, Director of Capital and Risk

2. Margin Model Approval Process
Exploratory Discussions
Model Submission
Review / Assessment
Approval
Monitoring for Ongoing Suitability

3. Margin Model Approval Process
Exploratory Discussions
Model Submission
Review / Assessment
Approval
Monitoring for Ongoing Suitability

4. Margin Model Approval Process
Exploratory Discussions
Model Submission
Review / Assessment
Approval
Monitoring for Ongoing Suitability
To ensure adequate review time, NFA encourages firms to submit models for a September 1, 2017 approval ASAP, but no later than March 31, 2017.

5. Margin Model Submission: Key Documents
Model development and model validation documents
A qualitative and quantitative description of the portfolio in scope, including asset classes, product types, sensitivities, and material risks not captured in the SIMM
Backtesting results for all portfolios in scope, or a representative sample
Benchmarking results against a corporate risk measure, fully validated, backtested and calibrated in line with the SIMM calibration
Detailed ongoing monitoring plans

6. Margin Model Approval Process
Exploratory Discussions
Model Submission
Review / Assessment
Approval
Monitoring for Ongoing Suitability

7. Lessons Learned—NFA Suggestions
Do not over-rely on ISDA documentation
Theoretical portfolios used for testing purposes must be representative of the firm's business strategy in scope after the compliance date
If a firm is part of a corporate family with oversight from multiple regulators, the documentation submitted must be related exclusively to each separate CFTC Covered SD in scope
Submit detailed ongoing monitoring plans

8. Lessons Learned—NFA Suggestions
Model developer's documentation must contain enough information to enable the independent implementation of the model by the model validation team
Model validation document must be in line with best practice guidelines (SR 11-7 or OCC )

9. Lessons Learned—NFA Suggestions
Perform exhaustive backtesting on the portfolio in scope
Benchmarking must be based on a corporate risk measure, fully validated, backtested and calibrated in line with the SIMM calibration

10. Margin Model Approval Process
Exploratory Discussions
Model Submission
Review / Assessment
Approval
Monitoring for Ongoing Suitability

11. Lessons Learned—NFA Suggestions
Allow adequate time for model review
Perform extensive backtesting and benchmarking
Submit firm-specific detailed model developer's and model validation documents
Submit detailed ongoing monitoring plans

12. Contact NFA Alessandra Riccardi Director of Capital and Risk