We covered the significant increase in initial margin for cleared GBP Swaps in two recent blogs; How Kwasi Kwarteng has increased your IM and Rishi Sunak and the impact on GBP Swaps IM. In the first of those blogs, Chris added a brief section towards the end on variation margin and I wanted to take […]

In early October we wrote about How Kwasi Kwarteng has increased your Inital Margin, given that so much has happened in the past month, I wanted to update the GBP Swaps initial margin figures in that article. Before we start, two general points, very nicely illustrated by two The Economist covers. On the left, “Reasons […]

Initial Margin for GBP swaps has increased by up to 65% due to the mini-budget. 5 of the 6 largest ever moves in GBP rates have occurred during September 2022, since the mini-budget. We look at Initial Margin models and how IM has changed over time. It is fair to say that GBP Swap markets […]

Total Initial Margin across the industry has now topped $1trn for the first time. Initial Margin requirements across the industry have increased by $725bn since 2016. This drives the need for more optimisation. We look at the data and benchmark the ISDA projections from way back in 2015. Capitolis First this week, a recommendation. No […]

The Commodity Futures Trading Commission (CFTC) produces a monthly cleared margin report for DCOs (CCPs) required to file daily initial margin with the CFTC’s Division of Clearing and Risk. The report aggregates initial margin from six DCOs: CME, ICE Clear Credit, ICE Clear US, ICE Clear Europe, LCH Ltd and LCH SA. The latest report […]

My recent blog on Archegos, Trade Repositories and Initial Margin, was very popular, so I wanted to do a follow up on the same two topics; transparency of derivatives and initial margin requirements. For those of you not familiar with the three letter acronym, APA, it stands for Approved Publication Arrangement which is a European […]

Amongst the many questions that standout from the huge losses suffered by prime brokers in closing out the positions of Archegos Capital Management, the two that interest me most are, first the lack of transparency of the derivatives (total return swaps) used for these positions and second the in-adequate risk management by the prime brokers. […]

Clearing Houses have recently published data on the magnitude of margin calls they made in Q1 2020 and these are interesting to say the least. Given the massive price volatility we observed in March across all asset classes, we knew these were going to be big numbers, so let’s dive into the detail. Variation Margin […]

Given the recent increases in initial margin that I covered in a few recent blogs (see Procyclical margins in the time of Covid-19 and Crashing rates and swap margins), I wanted to look into backtesting of margin models. Background Backtesting is a well established practice, widely used by all CCPs to check the adequacy of […]

I recently read an interesting BIS Bulletin, titled “The CCP-Bank nexus in the time of Covid-19”, by Wenqian Huang and Elod Takis (available here), with the following key takeaways: The specific part I am going to focus on today is the third bullet point, “higher margins should be expected but the extent of procyclicality or […]