Template:M summ 2018 CSD 3(c)(i)

Margin Amount (IM) is the snappy, memorable label for that portion of one’s initial margin burden that is imposed directly by one’s local regulators. This is the compulsory part of initial margin that you have to pony up, by law, even if neither you nor your counterparty want to. It would be nice had the drafting said this a little less obliquely — you know, they might have called this “Regulatory IM”, even, but look: I wish feijoas grew in England, and that won’t happen either, so there’s no point getting upset about it.

A Chargor must post Margin Amount (IM) to a third party Custodian (IM) who will hold it out of harm’s way and subject to a security interest in favour of the Secured Party and an account control agreement determining who gets to say what happens to it and and when.

Since it is held out of harm’s way, neither the Chargor nor the Secured Party can use it, and it sits immobilised, a permanent dead weight on the capital efficiency of the world’s financial markets. But everyone is safer that way — unless you are a hardcore modernist, a little redundancy is no bad thing — so we shouldn’t feel too bad about it.

To be contrasted and not, however easy it may be, confused with Margin Amount (IA).