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.
JSCC, FICC lead VM spike across CCPs
BoJ decision to allow 10-year yields above 1% contributed to JSCC spikes
Morgan Stanley’s default fund contributions jump $1.9bn in Q2
Aggregate increase across US clearing banks pushes requirements to highest point since 2021
Pension funds weigh corporate bonds as margin for gilt repo
Stung by disastrous losses during last year’s LDI squeeze, funds consider greater range of collateral on gilt repo
LME case could redefine exchange powers to cancel trades
European trading venues have broad discretion when responding to market emergencies
Peak IM call hits record $4.8bn at FICC’s GSD
Required IM also rose to all-time high during volatile Q1
Nasdaq exec criticises VAR models in erratic energy markets
FIA Boca 2023: Model being adopted by rivals is “bad choice” for unpredictable assets, says exchange tech official
OTC share of EU gas derivatives surges to 25%
Energy price cap may supercharge flight from ETDs and affect CCPs’ ability to manage risks, Esma warns
LME model quirk saved members $915m nickel margin
Report on March 2022 blow-up says CCP may need to “intervene” on deduction of VM gains from IM
CME revises estimated worst-case payment obligation
IRS and F&O clearing units both subject to revision in Q3
Ice Europe made $7.8bn VM call in Q3
Highest cash call on record triggered by higher commodity prices as Europe energy crisis persists
Banks raise concerns over Macquarie concentration risk at ASX
Exit of Bell Potter exacerbates shortage of clearing capacity in Australia’s energy market
Pension funds face intraday margin calls from anxious clearers
Some banks stick with T+1 margin posting, but others balk at funding cost and counterparty risk
Pension funds foresaw margin meltdown (a decade ago)
Years of warnings went largely unheeded. Questions may now spread to post-crisis clearing and margining project
Margining solution of the year: S&P Global Market Intelligence
Asia Risk Awards 2022
Collateral management solution of the year: Adenza
Asia Risk Awards 2022
UK pensions hit with £100m margin calls as gilts and sterling slide
At least three LDI managers request emergency capital as others consider unwinds to avoid default
Liquidity risk up 138% at Eurex in Q2
CCP revised estimated worst-case payment obligation to highest level on record
Esma to meet with clearing industry over EU energy crisis
Widening eligible collateral on table; ECB intervention would need government indemnities
LME member default fund contribution jumps 89%
Following record-breaking margin breach in Q1, the CCP plumped up its line of defence
Buy-side retreats to ‘dirty’ CSAs amid collateral crunch
Repo market fears prompt insurers and pension funds to revert to bond collateral
Share of required margin increases at top EU CCP members
Number of clearing members with total requirements of €10bn and above has been increasing since 2017