Margin Collected Steadies at $1.4 Trillion in 2023: ISDA

The amount of margin on non-cleared derivatives collected by market participants was very slightly lower at the end of 2023, compared to end-2022, at $1.406 trillion, according to the latest ISDA Margin Survey.

The data was collated from margin collected by 32 leading derivatives market participants, and comprised $462.0 billion of initial margin (IM) and $944.5 billion of variable margin (VM). At the end of 2022, the relative data was $325.7 billion of IM and $1.1 trillion of VM. The 32 firms covered by the survey included all 20 of the firms subject to the first phase of regulatory IM requirements for non-cleared derivatives in September 2016 (phase-one entities), five of the six phase-two firms and seven of the eight phase-three entities.

Total margin received by the 20 phase-one firms was $1.3 trillion, a fall of 0.6% from the previous year. This included $432.3 billion of IM (a 40.8% increase versus 2022) and $851.0 billion of VM (a decline of 13.5%).

The survey also reports the amount of IM posted by all market participants to major central counterparties. Total IM posted for cleared interest rate derivatives (IRD) and single-name and index credit default swaps (CDS) reached $392.2 billion at the end of 2023, a rise of 2% compared to the year before. Of this, $331.8 billion was posted for cleared IRD transactions and $60.4 billion was delivered for cleared CDS exposures.

“The introduction of the sixth phase of the margin rules in September 2022 means more entities than ever before need to post IM for their non-cleared derivatives exposures, and additional firms continue to come into scope each year,” says Scott O’Malia, chief executive of ISDA. “This significantly reduces counterparty credit risk, but it does also mean that large amounts of high-quality liquid assets need to be sourced to meet margin calls, which means collateral management processes need to be as efficient as possible.”

To help collateral management efficiency, ISDA says it continues to work ng on several initiatives to apply the Common Domain Model – an open-source data standard for financial products, trades and lifecycle events – to collateral management documentation, collateral representation and margin and settlement processes to increase automation and efficiency and reduce operational, liquidity and counterparty risks.