Summary: Initial Margin requirements for OTC Derivatives are large and increasing at CCPs IM Optimization is a periodic or trade by trade analysis that seeks to reduce overall IM Clearing members can achieve significant cost and capital benefits Similar techniques can be extended to UMR and ISDA SIMM Client IM is growing much more rapidly than […]

aka “How Volatile is Initial Margin?” The month of November has seen a very significant market movement for most markets, and in particular for fixed income derivatives. Some of our clients this past month have seen some massive swings in margin requirements for their cleared swaps, and I was intrigued to go see if this […]

Following on from my article on Sizing the Margin Buffer for Cleared Swaps I wanted to look at how a margin buffer sized prior to Trump’s US Election win, would have held up on November 9, 2016 and whether such Event Risk should be handled differently. USD Swap Rates We covered the market moves in our […]

Daily Variation Margin flows between Clearing Houses and Clearing Members and between Clearing Members and their Clients are sizeable e.g. we know from LCH SwapClear’s CPMI-IOSCO Disclosures that the highest VM paid on a single day by all members to the CCP was $16 billion! As Clearing Houses make intra-day margin calls, Clearing members generally maintain […]

Back in August I wrote an article about how large, self-clearing firms can reduce the amount of capital required to support their cleared business by wisely choosing to backload margin-reducing bilateral trades. While I wrote that about large banks, there is an analogous case for trading firms that do not self-clear.  In fact, we’ve been […]

Continuing with the theme of Uncleared Margin, I wanted to look at how large the Initial Margin for Uncleared Swaps and Other Derivatives could become at the end point in 2019. ISDA Research Lets start with this interesting document from ISDA, Initial Margin for Non-Centrally Cleared Swaps. In which ISDA estimates that, with the $50 million counterparty […]

We’re all aware that in the US, the new Uncleared Margin Rules (UMR) took effect on September 1st.  Except they kinda didn’t take effect.  There was this chestnut of No-Action relief issued by the CFTC on the day, which, if you just read the headline news reports, meant that the Rules were pushed back 1 […]

For all those Category 1 Covered Entities in the US and Japan, the following few days should be interesting with the introduction of Bilateral Margin Rules.  For all entities not yet covered by the rules, you have some time on your hands. And this time should be used wisely. As a brief reminder, all covered […]

We look at the Standardised Schedule of Initial Margin for non-centrally cleared derivatives Cross Currency Swaps are a large part of the uncleared market that we did not look at last week We therefore take a look at the July volumes to estimate Initial Margin requirements for cross currency swaps Margin Requirements for non-centrally cleared derivatives The […]

Uncleared Margin Rules (UMR) come into effect as of 1st September So let’s play a fun little game. Take the SDR data for Uncleared Derivatives. Import this data into CHARM, our Initial Margin and Risk tool. Make a few broad assumptions about the trades and the Dealer market. We end up with an estimate of how much IM […]