Margin failings raise concern over Treasury basis trade

Opaque models at clearing houses cast doubt on calculations for concentration add-on

Confusion over the margin that clearing houses levy on outsized or concentrated positions is leading to fears of runaway risk in the popular Treasury basis trade.

Clearing houses may not have full visibility of the amount of leverage embedded in parts of the trade, insiders warn. Meanwhile, the models that clearing houses use to calculate concentration add-ons are opaque, raising questions over whether the entities are charging the appropriate level of margin, say futures commission merchants