Swap traders must put up margin on uncleared swaps from next year
By Thomas Schiebe, manager,
collateral management and Sebastian Würz, associate,
collateral management at Sapient Global Markets
Margin requirements for non-cleared
derivatives pose a series of challenges by further increasing
the cost of doing business in OTC derivatives markets, while
bringing more stability and shifting credit risks from survivor
The main objectives of this framework were
the reduction of systemic risk in the market with the mandatory
exchange of both initial margin (IM) and variation margin (VM).
Margins are thus expected to give better incentives to market
participants to better internalize the cost of their risk
Another moving target is the short time
frame between the publication of the final Regulatory Technical
Standards and the deadline for an implementation. Additionally,
the effectiveness of the rules is highly dependent on
consistent requirements and coordination of regulations in the
international environment. However these changes also bring
with them several implementation concerns that could increase
project complexity, the time required for testing and,
therefore, the overall cost. Additionally, the effectiveness of
the rules is highly dependent on consistent requirements and
coordination of regulations in the international
This article is available to subscribers and registered users
Please log in to continue reading.
Not yet registered? Take a free trial.
If you have already taken a free trial you
have ongoing access to the analysis section of FOW.com including this story.
Log in using your details below to read.
Already have an account? |