One size fits none: Industry split over futures and OTC holding periods

Some listed derivatives have equivalents in the cleared over-the-counter market, but the two product types are subject to different margin regimes – leaving the futures under-margined, and OTC swaps over-margined, critics say. The issue divides US and European regulators. By Matt Cameron

"It's like running a bowling alley and saying you’re only going to supply size nine bowling shoes because that’s the average. You might technically be right, but it’s not going to be workable in practice,” says one clearing expert at a US bank, questioning the orthodoxy that margin for all listed futures can be calculated on the basis of a one-day holding period, while a five-day period is used for all cleared over-the-counter swaps.

The holding period is an assumption about how quickly a