Don’t impose blanket margin model rules, say BoE advisers

Focus instead on outcomes and costs and factor in different clearing membership, say Murphy and Vause

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Regulators should adopt an outcomes-based approach to margin models in their quest to avoid sharp, volatility-driven increases in initial margin (IM) for cleared derivatives, says a paper by current and former Bank of England (BoE) advisers. They should take this approach instead of baking in one-size-fits-all measures, say its authors, David Murphy and Nicholas Vause, as they seek to avoid the sort of margin hikes seen early in the Covid-19 pandemic.

The central question their paper poses is

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