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.
LCH margin changes to ease funding stresses, say FCMs
Clearers welcome move to free up excess cash margin and remedy ‘double-dipping’ complaints
LCH and Eurex extend new swap VM treatment
Three US banks used method to cut swaps assets by more than $300bn in third quarter
FCA: buy side can stop work on VM rules for forwards
UK regulator follows up on statement from ESAs that urged forbearance
EU sparks hopes of securitisation margin reprieve
Optimism over EU Council amendment, but Parliament will still have to approve
EC backs forex forward margin exemption
Need for change is “undisputed”, official says – but short-term relief expected to come via forbearance
Forex forward users delay VM plans amid uncertainty
Firms postpone plans to start margining before January 3 in case EU regulators scrap new requirement
EBA and Eiopa confirm changes to VM rule for forwards
Bodies aim to align EU with other jurisdictions – hinting at end of unpopular rule
EU proposals feed hopes of forex forward VM relief
Expectations rise of forbearance after Council of the EU proposes buy side VM exemption
JP Morgan CRO: CCPs need extra tail-risk buffers
Bail-in capital would help avoid contagion, says JPMorgan Chase's Ashley Bacon, in an interview with Risk.net
BAML and Morgan Stanley swaps drop $186bn on VM change
At least seven banks now using settled-to-market treatment for variation margin
Goldman swaps assets drop $140bn after margin change
Move follows guidance from US regulators; no word from Goldman on capital impact
Asian buy side faces non-cleared margin currency penalty
Global banks charge premium for accepting local securities instead of major currencies
Swiss regulator fast-track key to cleared Saron swaps launch
Ice warns against rushing new products into clearing, however
CCPs say central bank access needed to avoid liquidity crisis
Uniform access to deposit accounts and overnight liquidity vital, say market participants
Industry hails potential US relaxation of margin timing rules
Treasury’s proposed shift from T+1 for non-cleared swaps welcomed, but IM calculation comments draw fire
Asia clearing surge raises concerns over eligible collateral
Scarcity of high-quality liquid assets gives rise to liquidity risk worries, say banks
Don’t leave margining till the last minute
Institutions in Asia have a narrowing window to plan for initial margin regime
Eurex urges more regulators to endorse VM capital savings
CME, Ice and LCH treat variation margin as settlement; Eurex awaits further guidance
US regulators approve VM route to capital savings
Guidance tips balance in debate over interest payments in settled-to-market swaps
Banks warn clients of possible unwinds as VM deadline nears
Clients on old CSAs told they face unwinds and trading bans unless repapering talks underway
VM change helps Barclays cut derivatives by $113bn
Three factors slashed size of book by 25%, including move to treat margin as settlement
FX forwards users drop EU banks over margin rule
Other dealers do not have to collect margin on physically settled forwards
Swaps users face potential margin bill for Libor transition
New margin rules could snare legacy trades amended to reference alternative rates, lawyers warn
Accounting for initial margin under IFRS 13
Chris Kenyon and Richard Kenyon show why initial margin should be part of the fair value of a derivative