Initial Margin Rules Finalized The past few years we’ve spent implementing derivatives reform. Firms purchased software, hired CCPs and participated in compression processes. This year a regulations will continue to become effective. Like the new rules on Initial Margin for Bilateral (OTC) Derivatives were recently finalized. There are two good sources for information on the final margin…

## 3 Reasons Initial Margin is Unrelated to BASEL III’s Leverage Ratio

APPLES AND ORANGES BASEL III plans to apply the leverage ratio to all collateral, including initial margin on cleared derivatives transactions (cleared at a clearinghouse). Swap Market participants are looking at cost increases estimated at 60%. A decision such as this will mean sell side will have to add on that capital charge, giving sell…

## How Swap Risk is Calculated

This blog on how swap risk is calculated is the conceptual view of how firms and CCP’s calculate the Initial Margin on Interest Rate Swaps. While the numbers reflect a real at-market swap given the terms and conditions described they made vary widely from what your firm or clearinghouse requires. Thus this blog covers how the Independent Amount…

## 3 Things To Do Before Onboarding Swaps to a CCP

There are a multitude of tasks which need to be taken in the course of migrating a swap operation to a clearinghouse. This article speaks of three items which can be used to decide whether to onboard the position into a clearinghouse. At a minimum these tasks will shed greater light on the cost-benefit of…

## Standard Initial Margin Method (SIMM) for Bilateral Derivatives

ISDA went round after round against the BASEL Committee’s requirement to post gross initial margin as opposed to offsetting trades between two counterparties, which would lower the required initial margin. proposed Initial Margin calculation which would certainly make swaps dealing a more expensive proposition. ISDA entered the ring for round 2 (or is it round 26?) this…

## Collateral Damage: Initial Margin For Swaps

September 26, 2012 The exact impact of increased collateral requirements as the derivatives market shifts from bilateral to cleared contracts is unknown but widely estimated. Moody’s has made a guess of $700 billion to $1.2 trillion which doesn’t sound too outlandish. Initial margin Requirements for Swaps Initial Margin (expected to be between 2% and 5%…