The International Swaps and Derivatives Association (ISDA) published its latest margin survey, which shows that $1.4 trillion in initial margin (IM) and variation margin (VM) was collected by 32 derivatives market participants for their non-cleared derivatives exposures at the end of 2022 versus $1.3 trillion the previous year.
The $1.4 trillion total comprises $325.7 billion of IM and $1.1 trillion of VM, which compares to $304.1 billion of IM and $1.0 trillion of VM at the end of 2021. The 32 market participants that responded to the survey include all 20 of the firms subject to the first phase of regulatory IM requirements for non-cleared derivatives in September 2016 (phase-one entities), five of the six phase-two firms and seven of the eight phase-three entities.
IM and VM collected by the 20 phase-one firms, which represent the largest derivatives dealers, totaled $1.3 trillion at the end of 2022, a 5.6% increase versus year-end 2021. That encompasses $307.2 billion of IM (a 7.4% rise versus end-2021) and $983.7 billion of VM (up 5.0%).
The survey also reports the amount of IM posted by all market participants to major central counterparties. Total IM posted for cleared interest rate derivatives (IRD) and single-name and index credit default swaps (CDS) reached $384.4 billion at the end of 2022, an 18.8% increase compared to the year before. Of this, $314.3 billion was posted for cleared IRD transactions and $70.1 billion was delivered for cleared CDS exposures.
“All six phases of the margin rules for non-cleared derivatives have now been implemented, with the final phase successfully rolled out in September 2022. This means more entities than ever before are subject to margin obligations, which significantly helps to mitigate counterparty credit risk. The corollary is that large amounts of cash and high-quality liquid assets need to be sourced as collateral, which can have knock-on impacts on liquidity. It also means internal processes for managing large numbers of margin calls must be highly efficient,” said Scott O’Malia, ISDA’s chief executive, in a statement.