Margin Efficiencies Become More Important to Firms

  • 22 Apr 2020
  • By CME Group

Firms focus on margin optimization to help navigate financial market strains 

As the need for capital efficiency grew in the first quarter, firms utilized CME Group portfolio margining capabilities to generate a record $7 billion margin savings in their interest rate swaps and futures portfolios.

Firms focus on margin optimization to help navigate financial market strains

As the need for capital efficiency grew in the first quarter, firms utilized CME Group portfolio margining capabilities to generate a record $7 billion margin savings in their interest rate swaps and futures portfolios.

Strategies projected to generate the greatest savings:

  • 83% to 96% savings for USD interest rate swaps that offset with Eurodollar futures.
  • 81% savings for invoice swap spreads (Treasury futures vs. interest rate swaps).

More on capital efficiencies

Enhancements to portfolio margining

Based on client feedback, we are working to expand the products available in portfolio margining, including:

  • Targeting Q4 2020 to add Eurodollar options in the portfolio margining program
  • Adding SOFR futures and ERIS futures.
  • Exploring cross margining of OTC FX with cleared FX futures and OTC IRS to further help participants optimize capital. 

For more on upcoming initiatives, contact us.

Newly Supported CME CORE Margin Optimizer API

Get direct access to our margin engines to calculate standalone or incremental initial margin for new or hypothetical portfolios.

In a dynamic environment, the API allows users speed, reliability and STP to perform portfolio optimization calculations to achieve the greatest margin efficiencies.

The service is free for CME Group market participants, with 80+ clients already set up.

More on CME CORE Optimizer

 

SOFR OIS and Basis Swaps included in portfolio margining with CME Futures

Indicative margin savings as high as 81% at the 5-year point for cleared SOFR swaps vs. Treasury futures, providing an efficient means to manage financing risk using cleared products.

More on SOFR swaps

The information in this communication is not, and should not be construed as, an offer or solicitation to sell or buy any product, investment, security or any other financial instrument or to participate in any particular trading strategy. Cost savings examples are indicative and provided as illustrative examples.  Actual cost savings may vary and depend on each individual’s portfolio and situation.

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