Initial margin cleared derivatives

We designed SwapClear’s risk management framework specifically to meet the unique requirements of OTC interest rate swaps. As such, many of our risk management methods have become the market standard, including our initial margin, valuation, and default management processes.

SwapClear’s fundamental purpose is to ensure the financial performance of all interest rate derivatives cleared via our service, should a clearing member default. In a default, LCH.Clearnet becomes responsible for the cleared positions of the defaulted clearing member and must (a) make good on any losses borne by the defaulter and (b) hedge and transfer the defaulter’s open positions. In order to manage outstanding notional volumes in excess of 420 trillion USD, we have designed state-of-the-art safeguards to protect our clients, clearing members and the stability of the global financial system.

Membership Criteria

SwapClear employs rigid and transparent requirements for clearing members, ensuring that they have the necessary expertise and operational competency to appropriately value, risk manage and default manage OTC IRS. Once admitted, members must participate in periodic fire drills to continually validate their operational readiness.

Initial Margin

Initial margin is collected from each member to cover potential losses in the event of a default. SwapClear initial margin is calculated using LCH.Clearnet’s proprietary PAIRS (Portfolio Approach to Interest Rate Scenarios) margin methodology. PAIRS is an expected shortfall model based on filtered historical simulation incorporating volatility scaling. The model uses ten years of historical market data to simulate changes in portfolio value from which an estimate of the potential loss distribution is calculated.

In addition to PAIRS initial margin, SwapClear applies margin add-ons covering Credit Risk and Liquidity Risk where a particular member’s inherent risk exposure is not captured within the PAIRS model.

For complete details on SwapClear’s initial margin methodology or to estimate your initial margin requirements via the SwapClear Margin Approximation Tool (SMART), please contact us.

Variation Margin

The value of individual interest rate swap contracts changes throughout each trading day. SwapClear conducts a valuation of each individual contract (known as “marking to market”) and collects losses from participants on the losing side of the trade to pay gains to participants on the gaining side of the trade. A participant’s daily gain or loss is known as the participant’s “variation margin.”

Default Management
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Shipping by airmail from UK: items normally reach US addresses within a few days but can take longer THE STOCK EXCHANGE: The clearing House. London, antique print c1880
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  • Caption below print: The clearing house
  • Condition: Good; suitable for framing. However, please note: Verso text quite apparent in margin; The image shown may have been taken from a different example of...
  • Size: 14.0 x 14.0cm, 5.5 x 5.5 inches (Small)
  • Type & Age: Year printed c1880. Antique wood engraved print
  • Verso: There are images and/or text printed on the reverse side of the picture which are likely to show through the page to some extent because the paper is quite...
Shipping by airmail from UK: items normally reach US addresses within a few days but can take longer LONDON: Clearing House, Lombard St, antique print, 1847
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  • Caption below print: The Clearing-House, in Lombard-Street
  • Condition: Good; suitable for framing. Please check the scan for any blemishes prior to making your purchase.
  • Size: 14.5 x 23.5cm, 5.75 x 9.25 inches (Medium)
  • Type & Age: Year printed 1847. Antique wood engraved print
  • Verso: There are images and/or text printed on the reverse side of the picture. In some cases this may be visible on the picture itself (please check the scan prior...

Popular Q&A

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Where can I find margin requirements of CME?

I need to know margin requirements of gold and silver futures in CME, Thus I need official link to the list of margin requirements. I searched the web and CME website, but I could not find it. Please help

This list is about 39 pages, so it's easier to click on "Download Data" then do a search (Ctrl-F) for what you want in Excel.
PRODUCT NAME INITIAL MAINT.
E-MINI SILVER FUTURES 3375.00 2500.00
COMEX MINY GOLD FUTURES 4556.00 3375.00
Your broker will have their own set of margin requirements.

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