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Template:M summ 2018 CSD 3(c)(iii): Difference between revisions
Template:M summ 2018 CSD 3(c)(iii) (view source)
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, 28 April 2021→Initial margin and independent amounts
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A common confusion in the {{csa}} used to be its use of “{{csaprov|Independent Amount}}” to describe what everyone else in the market colloquially calls [[initial margin]]. Were they the same? Were they different? it was quite difficult on a cold read to say, especially as an {{csaprov|Independent Amount}} ''looks'', in the {{csa}}, like it is meant to function as a distinct amount of standalone credit protection, held without reference to a given {{isdaprov|Transaction}}, but in practice it does not, and is called {{isdaprov|Transaction}}-by-{{isdaprov|Transaction}}.<ref>For a fuller discussion, see {{csaprov|Independent Amount}}.</ref> | A common confusion in the {{csa}} used to be its use of “{{csaprov|Independent Amount}}” to describe what everyone else in the market colloquially calls [[initial margin]]. Were they the same? Were they different? it was quite difficult on a cold read to say, especially as an {{csaprov|Independent Amount}} ''looks'', in the {{csa}}, like it is meant to function as a distinct amount of standalone credit protection, held without reference to a given {{isdaprov|Transaction}}, but in practice it does not, and is called {{isdaprov|Transaction}}-by-{{isdaprov|Transaction}}.<ref>For a fuller discussion, see {{csaprov|Independent Amount}}.</ref> | ||
Anyway, opportunistically {{icds}} has solved that problem by introducing two kinds of | Anyway, opportunistically {{icds}} has solved that problem by introducing ''two'' kinds of “Margin Amount” in the {{imcsd}}, and giving them ugly parenthetic suffixes: the {{imcsdprov|Margin Amount (IM)}} and the {{imcsdprov|Margin Amount (IA)}}. Maybe someone thought this was a neat trick, I don’t know. It seems a dumb one to me: once everyone knew {{csaprov|Independent Amount}} and [[initial margin]] were, for all intents and purposes, the same; now they are subtly different. | ||
The problem {{icds}} was trying to “solve for” was the swap counterparty who is ''already'' taking [[initial margin]] and wants to keep doing that, its own way, somehow, even now the technocrats have railroaded their way into the room and mandated by regulation their own version [[initial margin]], which you must do ''their'' way. | The problem {{icds}} was trying to “solve for” was the swap counterparty who is ''already'' taking [[initial margin]] and wants to keep doing that, its own way, somehow, even now the technocrats have railroaded their way into the room and mandated by regulation their own version [[initial margin]], which you must do ''their'' way. | ||