Dealers push ‘margin-sharing’ as answer to collateral crunch

Dealers have found a way to halve the amount of margin required in an uncleared derivatives trade – without models, assumptions or tricks. Now, they just need to convince regulators it’s above board. Matt Cameron reports.

A problem shared is a problem halved, they say – an axiom that rarely seems to apply to any real-world problems, but might have been designed for incoming rules on margining for uncleared swaps. The problem in this case is the amount of collateral that will be hoovered up if both counterparties to an over-the-counter trade are required to collect initial margin from each other, so dealers are now pushing a simple solution, which they call margin-sharing: instead of having the two counterparties