Sungard’s John Omahen assesses the impact of new regulations on the push towards central clearing and the futurisation of OTC swaps.
futures and derivatives landscape is in the midst of major
transformation as the industry ponders direct trading on
SEFs, the futurization of swaps, and the continuing impacts of
global regulatory change.
With the introduction of mandatory OTC clearing, costs
have increased for the buy side, making futurised OTC contracts
seem a promising solution to
help restore profitability.
There are many advantages for end users of these swaps
– chief among them is that the margining of swap
futures, that is, the money required by the CCP to hold a
position open overnight, is relatively inexpensive when
compared to the margin on an OTC-cleared swap.
Some of this cost savings is due to the way futures and
swaps are margined differently. That is, the algorithms used to
calculate the standalone margin on a position have fundamental
differences in terms of how far they look ahead when computing
a worst-case scenario.
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