Risk 25: The search for margin efficiency

Growing demand for collateral means the ability to offer margin efficiency will be a big competitive advantage for derivatives clearing houses. But critics fear the industry will be left with a collateral shortfall in a crisis

The future looks like a cold, scary place for many users of derivatives. Most participants have been able to trade without posting initial margin in the past and some have not had to deliver variation margin, something that will change in the new world ushered in by the Dodd-Frank Act and other legislation. Even worse, portfolios will be split into cleared and uncleared trades, breaking up risk offsets and magnifying margin requirements, with cleared trades being further subdivided across