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Choosing the right model for non-cleared OTC margining

The panel

  • Sophie Marnhier-Foy, Global principal product manager, Margin and clearing risk, Calypso Technology
  • Jeff Himstreet, Vice-president and corporate counsel, PGIM
  • Petal Walker, Special counsel, WilmerHale
  • Oliver Frankel, Founder, Bilateral Risk Management
  • Moderator: Joel Clark, Contributing editor, Risk.net

When the final phase of the swaps market’s new margining regime takes effect in 2020, hundreds – possibly thousands – of buy-side firms will be hit by complex margin requirements. 

While most market participants are familiar with the variation margin requirements for non-cleared over-the-counter derivatives, only a few dozen have so far been caught by the requirements for initial margin. The third and fourth waves of the rollout – in September 2018 and 2019 – will see those numbers jump, but the ‘big bang’ final phase will pose the greatest challenge.

To avoid disputes under the new rules, big market participants have rolled out a standard initial margin model (Simm). However, its complexity exceeds the capabilities of many smaller firms.

Alternative approaches have the virtue of simplicity, but may overstate – or understate – margin requirements and open the door to constant disagreement with counterparties. One option may be to outsource Simm margin calculation to a third party, but these services are still on the drawing board.

Among the topics discussed in this webinar:

  • What differentiates the various margin models
  • Choosing the right model for your organisation
  • What buy-side firms need to do in to reduce margin costs 
  • The remaining challenges and uncertainties

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