What is IM?
IM is a measure of the losses which could occur in a portfolio:
- Over a specific holding period
- Using a confidence level
- Calculated using a variety of methods
OTC derivatives trades cleared via SwapClear or other CCPs always have IM required. For SwapClear the IM is:
- Holding period: 5 days for direct member and 7 days for clients
- Derived using Expected Shortfall to pick the losses, rather than a confidence level
- Calculating using a historical Value at Risk simulation with 5 years history
This article by ClarusFT compares the IM method across many clearing houses.
Global regulators now required un-cleared OTC trades to be subject to variation margin and initial margin. These requirements are being phased in each September until 2021.
The general IM requirements for un-cleared trades are:
- For a 10 day holding period
- With a 99% confidence level
- Over a 1, 3 or 5 year period of scenarios
You can compare the un-cleared margin requirements using the tools at the FlightPlan Regulations Map for all global jurisdictions.