End-users face extra unwind costs from CSA rate floors

Dealers demanding compensation for extra funding costs

In-the-money end-users have been caught out when looking to unwind trades

Derivatives end-users are facing millions of dollars of extra charges to unwind or novate certain trades thanks to the impact of negative interest rates on collateral agreements.

The value of interest rate floors in collateral agreements, known as credit support annexes (CSAs), has surged since central bank rates started turning negative in 2014. The floors reduce variation margin requirements for collateral posters and keep them from having to post interest on top of margin payments.

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