VM regime threatens explosion of small margin calls
Transfer threshold designed to avoid small payments is unworkable, critics claim
Some buy-side derivatives users are dispensing with a part of the incoming margining regime that was designed to make their lives easier, citing confusion about how to apply it. The consequence is expected to be more frequent – and smaller – margin payments, and an increased operational headache for clients and dealers alike.
The offending rule applies a combined minimum transfer amount (MTA) of up to $500,000 to the payment of variation margin and initial margin between two counterparties once
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