New rules intended to enable the reuse of pledged collateral in South Korea are yet to make an impact, leaving swaps dealers with a liquidity ratio headache.
Since September last year, participants in Korea’s derivatives market have been required to exchange variation margin on non-cleared trades, but bonds posted by local swaps users cannot be rehypothecated by their dealer counterparties, leaving them with a liquidity gap to cover.
“Rehypothecation of Korean treasury bonds hasn’t taken into
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