Regulatory initial margin: Difference between revisions

{{g}}[[Reegulatory margin]] for [[initial margin]] (known to [[ISDA ninja]]s as an “{{csaprov|Independent Amount}}”, as opposed to [[regulatory variation margin]]. Introduced later and with a lot more complexity, because — in order to properly address credit risks between the parties and not aggravate them, [[regulatory initial margin]] can’t be [[Title-transfer collateral arrangement|transferred outright]]. that means, no [[title transfer]] of [[securities]], and no [[cash]].

It is true, my little striplings. In the old world, {{csaprov|Independent Amount}}s were transferred outright to the Transferee, by title transfer.<ref>Under an [[English law]] {{csa}}, at any rate. But the effect was the same where [[rehypothecation]] was allowed under a New York law {{1994csa}} too.</ref> This created a conceptual issue for regulators, who were trying to ''minimise'' credit exposure between the parties: a [[title transfer]] of [[collateral]] to cover an {{vmcsaprov|Exposure}} that doesn’t yet — and might never — exist creates a ''negative'' exposure, because the holder of an {{csaprov|Independent Amount}} would be indebted to the {{csaprov|Transferor}} for its return.<ref>Hence, [[regulatory initial margin]] cannot be [[cash]], and must be [[Pledge|pledged]] and not [[title transfer]]red.</ref>