Commodities surge presents UMR challenge for Asia’s sell side

Increased interest in commodity exotics comes amid scrutiny of margin calculation models

Asia sell-siders piled into exotic derivatives trades as global commodity prices hit historic highs in the aftermath of Russia’s invasion of Ukraine. Dealers ought to pay careful attention to these burgeoning positions ahead of the upcoming sixth and final phase of the non-cleared margin rules.

At the heart of the issue is the fact that hundreds of new firms are soon to be captured by initial margin requirements, and commodities remain a largely untested asset class in the regime.

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