Variation margin
WHAT IS THIS? Variation margin is a payment – typically made daily, in cash – to reflect changes in the market value of a trade, or portfolio of trades. In over-the-counter derivatives markets, variation margin is traditionally seen as a buffer against counterparty default; in listed derivatives, it is treated as settlement.
Nasdaq exec criticises VAR models in erratic energy markets
FIA Boca 2023: Model being adopted by rivals is “bad choice” for unpredictable assets, says exchange tech official
OTC share of EU gas derivatives surges to 25%
Energy price cap may supercharge flight from ETDs and affect CCPs’ ability to manage risks, Esma warns
LME model quirk saved members $915m nickel margin
Report on March 2022 blow-up says CCP may need to “intervene” on deduction of VM gains from IM
CME revises estimated worst-case payment obligation
IRS and F&O clearing unit both subject to revision in Q3
Ice Europe made $7.8bn VM call in Q3
Highest cash call on record triggered by higher commodity prices as Europe energy crisis persists
Banks raise concerns over Macquarie concentration risk at ASX
Exit of Bell Potter exacerbates shortage of clearing capacity in Australia’s energy market
Pension funds face intraday margin calls from anxious clearers
Some banks stick with T+1 margin posting, but others balk at funding cost and counterparty risk
Pension funds foresaw margin meltdown (a decade ago)
Years of warnings went largely unheeded. Questions may now spread to post-crisis clearing and margining project
UK pensions hit with £100m margin calls as gilts and sterling slide
At least three LDI managers request emergency capital as others consider unwinds to avoid default
Liquidity risk up 138% at Eurex in Q2
CCP revised estimated worst-case payment obligation to highest level on record
Esma to meet with clearing industry over EU energy crisis
Widening eligible collateral on table; ECB intervention would need government indemnities
LME member default fund contribution jumps 89%
Following record-breaking margin breach in Q1, the CCP plumped up its line of defence
Buy-side retreats to ‘dirty’ CSAs amid collateral crunch
Repo market fears prompt insurers and pension funds to revert to bond collateral
Share of required margin increases at top EU CCP members
Number of clearing members with total requirements of €10bn and above has been increasing since 2017
Liquidity risk down 34% at the OCC
Projected largest payment obligation set at $6.2 billion for Q1
Back in time: a brief history of LME’s nickel meltdown
As prices went haywire, margin remained frozen and calls to suspend trading were rejected
Ukraine crisis ‘made VM three times IM’ on CME commodities
Isda AGM: Margins spiked in April following rises in oil, gas and wheat prices triggered by Russia’s Ukraine invasion
LME could revamp margining after nickel kerfuffle
Bourse could move to end permitted netting of IM and VM calls, says Chamberlain
Energy market split over emergency government support
German move to backstop margins with liquidity facility welcomed by energy producers – but others say it’s unnecessary
Ice Clear Europe issued $5.4bn VM call in Q4
Price volatility in energy markets behind the largest cash call on record by the CCP
Members of CME’s F&O unit added $950m to default fund in Q4
Market volatility triggered a $3.4bn peak initial margin call on one day during the last quarter of 2021
Liquidity risk up 163% at Ice Clear Credit in Q4
Rate hike expectations led to the highest level on record of contributions to the CCP’s default fund
Automate today to prepare for initial margin compliance
Neil Murphy, business manager, TriOptima, at OSTTRA explores how automation can increase efficiency and maximise time savings across margin activities, delivering collateral cost reductions and allowing firms to focus their attentions on higher-value…
Ucits’ clash with IM rules could cause collateral damage
Strict collateral reuse guidelines may restrict popular investment vehicles’ hedging capabilities