Variation margin
WHAT IS THIS? Variation margin is a payment – typically made daily, in cash – to reflect changes in the market value of a trade, or portfolio of trades. In over-the-counter derivatives markets, variation margin is traditionally seen as a buffer against counterparty default; in listed derivatives, it is treated as settlement.
Variation margin calls drove China copper smelter insolvent
Ill-considered futures trade claims first victim of tighter post-Qingdao financing climate
Japan banks will avoid US firms over margin rules
Dollar bias of US uncleared margin rules will impact swap pricing
Buy-side firms seek margin flexibility via CSA changes
Collateral transformation facilities being lined up but are not being used
Examining the collateral and liquidity challenge: Derivatives in the insurance industry
Sponsored feature: Northern Trust
Dealers welcome US uncleared margin rules
But cash variation margin restriction may upset the buy side
Negative Eonia rate causes CSA headaches
Banks look for clarity on collateral interest payments
Dealers rail at 'absurd' EU margin rules
Draft rules would force EU banks to collect margin from non-EU corporates
End-users say non-cleared margin rules will hit hedging
New regime will "make the world safe for banks, but not safe from banks"
Buy side urged to share risk of CCP collapse
BlackRock and Citadel say all participants should accept exposure
US eases leverage ratio impact on swaps
JP Morgan says new approach boosted ratio by up to 20bp
EU applies 8% haircut to margin-currency mismatches
European regulators confirm haircut will apply to both initial and variation margin
Covered bond issuers cheer EU swaps margin relief
Regulators recognise collateral posting barriers but set six conditions for an exemption
Pension funds snub swaps over margin demand
Liabilities now being matched with bonds or property, says AllianceBernstein
Basel leverage ratio may force CSA restructuring
Cash collateral can only reduce derivatives exposure if it matches the currency of the underlying swap, threatening existing CSAs and even the new standard CSA
Insurance risk manager of the year: Axa
Axa moved early to address lapse risk concerns – now a pressing issue for the French insurance sector – and has also been vocal on regulatory change
Risk management system of the year (bank): Barclays
Hedge fund clients of Barclays can use the bank's own margin calculator to construct their portfolios - while the bank uses it to manage net counterparty exposures. Both sides benefit
Pension funds and the collateral crisis
Rising interest rates could leave pension funds facing huge margin requirements, creating an acute liquidity crisis
Why collateral research misses the point
There may be an aggregate collateral surplus, but pension funds and other firms that would face big margin calls in a rising-rate environment are not reassured
Fear the repo: funds face up to rate-contingent liquidity risks
As interest rates rise, big fixed-rate receivers such as pension funds will all slide out-of-the-money at the same time, potentially triggering huge margin calls. Some are already trying to soften the blow, rather than relying on a repo market that could…
Initial margin to significantly impact development of Asian derivatives markets: Asifma
Asifma head Austen wants exclusion of initial margin from Asian jurisdictions’ derivatives market regulation
WGMR 8% collateral haircut unlikely to apply to variation margin
Regulators suggest WGMR haircut will not apply to variation margin, reducing the threat to the viability of the standard CSA
The CCP price: users fear modelling mishaps
The CCP price
Insight Investment: The need for non-cash variation margin
Pension funds tend not to have a lot of cash lying around, making it difficult for them to meet clearing house margin calls. Specialist asset manager Insight Investment is pressing for a solution. By Tom Osborn
