VM rules may spark Asian migration away from EU/US banks
Six-month transition could make inter-Asian trades cheaper, but only if liquidity is sufficient
The introduction of new derivatives variation margining (VM) rules in March may prompt a temporary shift among Asian banks away from trading with European and US banks, but a lack of liquidity in the region is likely to prevent longer-term decoupling of trades, say market participants.
"You will see some shift towards more inter-Asian trading, but this will be limited and short-lived because, after all, the VM rules will eventually catch up with us," says a senior manager at a regional bank.
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