Isda AGM: Margin regime ups liquidity risk, buy-side firms warned
Collateral demands will be pro-cyclical - rising as markets become stressed - and will be generated by uncleared as well as cleared trades, DE Shaw treasurer tells Isda conference
Margin regimes for both cleared and uncleared derivatives will introduce new pro-cyclical pressures into the over-the-counter market – and will also expose buy-side firms to liquidity risks they might not be prepared to face, according to Ted MacDonald, treasurer at DE Shaw, who was speaking this morning during a panel discussion at the annual meeting of the International Swaps and Derivatives Association in Chicago.
As things stand, OTC market participants are free to negotiate their own margin
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