In defence of cross-product margining

Clients are currently able to agree with their clearing members to receive portfolio benefits on initial margin across cleared and uncleared positions. Proposed new rules would prevent such arrangements with respect to cleared swaps. Mariam Rafi of Citi argues for a more flexible approach

Under the mandatory clearing requirement of the Dodd-Frank Act, clients will have to clear a large proportion of their over-the-counter derivatives transactions. Yet not all derivatives are available to be cleared – cross-currency swaps, swaptions and credit default swap (CDS) tranches, to name a few – and many commonly used, but customised, derivatives may never be listed for clearing at all. Once clearing becomes mandatory, many clients will find themselves with portfolios that are split