In emailed commentary, Jo Burnham,, margin expert at OpenGamma, said that the move towards central clearing offers a clear path to overcoming longstanding margin inefficiencies in US dollar interest-rate swaps.
“By consolidating swaps and futures positions, firms can reduce the capital set aside for margin, freeing up funds for increased trading activity. This could even potentially boost liquidity in the US Treasuries market, or other markets, as participants gain the flexibility to deploy capital elsewhere.”
“However, market participants must also be proactive in understanding what their wider margin costs and levels are likely to be under this new regime. There are tools and services to assess this, and insights can be drawn from existing bond and repo clearing structures.
“But it’s important to recognize that margin requirements will vary across products and markets. US cash treasuries, for example, cannot be viewed with a one-size-fits-all approach when comparing them to other government bond markets.”