Inter-affiliate trades face threat from clearing, execution, margin rules

Inter-affiliate trades under US rules may be subject to the same clearing, execution and uncleared margin requirements as other derivatives – making them expensive, or even impossible. Dealers are also grappling with how the rules will dovetail with sections 23A and 23B of the Federal Reserve Act. By Matt Cameron

Daisy chains are associated with childhood, sunshine and grass-stained fingers. But the use of the term during the crisis – to illustrate the way derivatives exposure bound dealers together – gave it a much darker set of associations, and it is these chains that politicians and regulators want to break up through the use of central clearing, new execution rules and bilateral margining.

Daisy chains also exist within a single banking organisation – client-facing entities will execute a trade and