CME broadens use of portfolio margining
The Chicago Mercantile Exchange (CME) Group will introduce portfolio margining on over-the-counter interest rate swaps, and eurodollar and Treasury futures positions, for dealer members clearing from 7 May.
The initiative will allow clearing members to benefit from significant operational efficiencies, with savings of up to 85% for certain portfolios, CME Group claims.
“We are providing margin offsets for house accounts that clear through CME. These institutions will be able to take advantage of margin offsets and risk offsets that exist between futures contracts, such as eurodollar or Treasury futures, and interest rate swaps,” says Laurent Paulhac, global head of OTC products at CME Group in Chicago.
CME Group hopes to extend the cross-margining facility to customer accounts later in the year. However, rules on the segregation of customer collateral, finalised by the Commodity Futures Trading Commission (CFTC) in January, could complicate matters. The regulatory-approved model, known as legal segregation with operational commingling, would allow clients to be pooled together for operational efficiency, but would be fully segregated in the event of a default of the clearing member and one or more clients.