Top dealers post $1.4 trillion of collateral for derivatives trades

Margin analysis by ISDA reflects changes to collateral practices over recent years.

The 20 largest derivatives dealers posted $1.41 trillion of collateral for cleared and non-cleared derivatives trades, according to research.

A survey on margin payments in the OTC derivatives markets carried out by the International Swaps and Derivatives Association (ISDA) revealed the total collateral, which was posted during the first quarter this year.

Of the $1.4 trillion, initial margin posted by clearing participants to CCPs for cleared derivatives trades totalled $173.4 billion and $107.1 billion for non-cleared trades.

For variation margin, dealers posted a total of $1.13 trillion, with $260.8 billion for cleared and $870.4 billion for non- cleared.

ISDA explained its analysis reflects the changes to collateral practices seen in non-cleared derivatives markets over recent years, and the surge in collateral posted to CCPs has been driven by growth in clearing activity since the financial crisis.

Furthermore, in September last year, dealers were forced to comply with regulatory margin requirements for non-cleared trades.

“ISDA’s margin survey shows that the industry has made great strides to make the derivatives market safer and more robust,” Scott O’Malia, ISDA’s chief executive.

“Posting collateral reduces counterparty risk, makes the industry as a whole more resilient, and meets a key group of 20 requirement for financial reform.”