Margin models converge as CCPs battle for dealer support

Dealers say they won’t join clearing houses that are not robust – and have already blackballed one central counterparty. As a result, the initial margin methodologies employed by the big rates clearers have begun to converge. Matt Cameron reports

The children's story of the three little pigs extols the virtues of hard work and a healthy aversion to risk: two pigs build rickety homes from straw and wood, and pay the price as their houses are blown in by a big, bad wolf. The third pig builds his house using bricks, which stands firm despite the wolf’s huffing and puffing.

It’s a fable to which derivatives dealers can probably relate: huge volumes of their capital and assets will be tied up at central counterparties (CCPs) after the bulk of