Portfolio Margining for OTC Interest Rate Swaps

Reduce your margin requirements by offsetting cleared swaps vs. interest rate futures and options exposures.

Clients increasingly choose to clear at CME based on the unparalleled efficiencies available through portfolio margining, which allows firms to offset their cleared swap and futures exposures through an efficient margining framework.

Overview

  • Margins 24 OTC IRS currencies versus SOFR futures and options, Treasury futures and options, Fed Funds futures, and Eris swap futures
  • Margin savings as high as 98% for invoice spreads and convexity bias strategies
  • Supported by 16 clearing members
  • Used by 14 house accounts and 600+ customer accounts
  • Accounts using portfolio margining save an average of over 50% on initial margin

Use Cases

SOFR Convexity Bias Trades

  • Below are examples of popular SOFR convexity bias strategies with $1,000 DV01 in each strategy. Portfolio margining IRS with SOFR futures can result in indicative margin savings as high as 98% (subject to change).
    Swap Margin w/o PM Swap Margin w/ PM Margin Savings w/ PM
Swap
vs
SR3		 Second Quarterly Contract Spread 78.4 2.2 97%
Third Quarterly Contract Spread 73.3 1.2 98%
Fifth Quarterly Contract Spread 69.4 1.6 98%
Sixth Quarterly Contract Spread 71.6 1.2 98%
Seventh Quarterly Contract Spread 66.7 3.1 95%
Eighth Quarterly Contract Spread 61.6 7.0 89%
Swap
vs
ED
Strip		 1Y USD Swap + White Pack 71.5 1.4 98%
1Y x 1Y USD Swap + Red Pack 66.7 2.4 96%
2Y x 1Y USD Swap + Green Pack 59.9 7.2 88%
3Y x 1Y USD Swap + Blue Pack 63.3 9.9 84%
4Y x 1Y USD Swap + Gold Pack 68.3 11.6 83%

Invoice Swap Spreads

  • Invoice Swap Spreads are packaged trades between swaps and futures, providing a liquid, off-balance-sheet proxy to the swap spread. Clearing both the futures and swap legs at CME can generate margin savings as high as 96% (subject to change).
Invoice Spread Strategy Margin if Cleared Separately CME Portfolio Margin Margin Savings Savings Percentage
2YR (TU) Treasury vs IRS 65.4 13.6 51.8 79%
5YR (FV) Treasury vs IRS 60.2 11.0 49.2 82%
10YR (TY) Treasury vs IRS 61.8 13.1 48.7 79%
Ultra 10YR (UXY) Treasury vs IRS 65.5 10.8 54.7 84%
Treasury Bond (US) vs IRS 69.3 15.8 53.5 77%
Ultra Treasury (WN) vs IRS 72.0 11.3 61.7 85%

LatAm swaps vs. UST futures

  • Portfolio margining LatAm IRS with Treasury futures can result in indicative margin savings as high as 18% (subject to change).
Invoice Spread Strategy Margin if Cleared Separately CME Portfolio Margin Margin Savings Savings Percentage
2YR MXN TIIE Swap vs 2YR UST Future 132.7 116.5 16.2 12%
2YR CLP ICP Swap + 2Y UST Future 115.1 104.6 10.5 9%
2Y COP IBR Swap + 2Y UST Future 100.3 81.9 18.5 18%
5Y BRL CDI Swaps + 5Y UST Future 191.0 182.6 8.4 4%

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