Swaps CCPs hope to slash capital via margin change
Treating margin as settlement could cut leverage – CME, Eurex, Ice, LCH.Clearnet all seeking approval
Four derivatives clearing houses are seeking legal opinions regarding whether the daily payment of variation margin can be treated as the settlement of a cleared swap contract, a step that could translate into big capital savings for bank members of central counterparties (CCPs).
Under the leverage ratio, a contract that is settled daily is deemed to have a remaining maturity of a single day, translating into lower exposures and a drop in required capital by as much as 25%, according to one bank
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