WGMR proposals raise procyclicality fears
Proposals on the margining of uncleared over-the-counter derivatives trades have been revised to dampen the potential liquid impact. But dealers warn the rules are still dangerously pro-cyclical and will lead to huge numbers of disputes. By Matt Cameron
The derivatives industry looked to have won an important victory when revised proposals on the margining of uncleared over-the-counter derivatives were published in February. Responding to concerns that the first iteration of the rules could have led to a crippling collateral crunch, the Working Group on Margining Requirements (WGMR) – a body led by the Basel Committee on Banking Supervision and the International Organization of Securities Commissions (Iosco) – opted to introduce a margin
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