Requirements to post initial margin (IM) on uncleared OTC derivative trades are being implemented in many of the world’s major economies. Welcome to Episode 1 of Series 1 of Initial Margin for Uncleared Derivatives in 2019 and 2020.

Episode 1: Edmund Parker, Mayer Brown’s Global Head of Derivatives & Structured Products, provides a detailed overview of the background and documentation requirements for Phase 4 and 5 of the Uncleared Margin Rules. If you are involved in implementing uncleared derivatives margin requirements, this is a must-see.

FIS’ Andrew Whyte discusses how the cleared derivatives industry will change over the next ten years and the key role technology will play. Learn more: https://www.fisglobal.com/insights/what-we-think/2020/may/the-cleared-derivatives-market-in-the-2020s

What is a Derivatives Clearing House? What do they do?

These classes are all based on the book Trading and Pricing Financial Derivatives, available on Amazon at this link. https://amzn.to/2WIoAL0
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After legally-binding trade between a buyer and a seller, the role of the clearing house is to centralize and standardize all of the steps leading up to the settlement of the transaction. The purpose is to reduce the cost, settlement risk and operational risk of clearing and settling multiple transactions among multiple parties.

In addition to the above services, central counterparty clearing (CCP) takes on counterparty risk by stepping in between the original buyer and seller of a financial contract, such as a derivative. The role of the CCP is to perform the obligations under the contract agreed between the two counterparties, thereby removing the counterparty risk the parties of the contract had to each other and replacing it with counterparty risk to a highly regulated central counterparty that specializes in managing and mitigating counterparty risk.

Collateral acts as a backstop that protects market participants and the economy as a whole. The requirement to post collateral is a key reform that makes the derivatives market more transparent, resilient and safe. ISDA’s new whiteboard animation video explains how collateral is used in the derivatives market, and how it makes the financial system safer.

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