Commodities threaten pain for initial margins

Market volatility and spot-based Simm approach may drive large margin spikes in little-tested asset class

One of the most tangible impacts on the global economy of Russia’s invasion of Ukraine has been the disruption caused to supplies of oil and grain. This has led to a historic hike in commodity prices – Bloomberg’s BCOM index is 28% up for the year to date – that is also posing challenges to efforts to regulate derivatives.

The sixth and final phase of the implementation of non-cleared margin rules, which comes into effect on September 1, will affect an estimated 800 firms. These businesses will