CME Group, today announced it received regulatory approval to begin offering portfolio margining of over-the-counter interest rate swap positions and Eurodollar and Treasury Futures for customer accounts on November 19, 2012. CME Group will continue to work with clearing members on their readiness to deliver this efficiency to market participants.
The risk reduction achieved by this program may result in significant capital efficiencies for certain portfolios. Earlier this year, the same benefits were made available for house accounts, which clearing members are using to reduce risk posed to CME Clearing and to significantly reduce their initial margin requirements.
"As part of our industry leading risk management framework, CME Group believes in recognizing economic risk offsets where they legitimately exist – allowing market users to capture the efficiencies associated with trading related products at a single clearing house," said Kim Taylor, President, CME Clearing. "We are pleased to offer cross-margining (risk offsets) between our OTC rates swaps and our rates futures. This will help end users take advantage of the benefits of central clearing while also helping them manage their capital costs."
"We worked with buy side clients to develop innovative and efficient risk management solutions that work for them such as portfolio margining, Deliverable Swap Futures and real-time clearing," said Laurent Paulhac, Senior Managing Director, CME Group, OTC Products & Services. "Because of CME Clearing's ability to clear IRS, CDS, FX and Commodity spreads, we have the unique opportunity to offer unparalleled capital efficiencies and our customer's potential margins savings are quite compelling."
"CME Group's ability to extend portfolio margining to additional products is an important step forward for the marketplace," said Bob Burke, Global Head of OTC Clearing, BofA Merrill Lynch. "We expect to be able to provide this enhanced capability to our clients in the coming months, enabling them to capture significant savings on their initial margin."
"Goldman Sachs fully supports CME Group's effort to develop the technological infrastructure to make portfolio margining a reality for our customers," said Michael Dawley, Global Co-Head of Futures and OTC Clearing at Goldman Sachs. "Portfolio margining of swaps and futures will allow our customers to capture material capital efficiencies through significant margin reductions."