CMRA has surveyed a variety of market participants and market observers on the margin regulations for uncleared swaps, which have been gradually rolling out since the fall of last year. Survey participants shared their thoughts on variation margin, initial margin, and ISDA SIMM.
- Variation margin compliance is on target to be completed by September 2017
- Requirements for margin to be posted in cash by larger counterparties raise funding cost concerns
- T+1 settlement in the US vs. T+2 in Europe is causing problems with collateral management and optimization
- Initial margin regulations are rolling out gradually but funding costs are already seen as high enough to push additional product types to CCPs
- Initial margin (based on a 10-day 99% move) is reported to be too high for relatively liquid product types and too low for large or illiquid swaps relative to risk