Bloating CCP default funds. New margin models. Are the two linked?

Dealers grumble that greater guaranty fund payments could undermine the ‘defaulter pays’ principle of clearing

What clearing houses giveth with one hand, they taketh away with the other – or so banks are finding. The shift to new margin models for futures and options promises savings for some derivatives users, but dealers are concerned that greater default fund payments could outweigh any such reductions.

These worries may be justified. Contributions by big dealers to the default funds of central counterparties (CCPs) swelled by a cumulative $14 billion in the first half of last year.

Morgan Stanley’s

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