Margin for OTC products is too high, says Pimco's De Leon

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Regulators need to balance setting margin requirements

Incoming margin regimes for over-the-counter derivatives are too high while those for the futures market may be too low, according to William De Leon, global head of portfolio risk management at Pimco. The too-high OTC margin requirements could distort markets for eligible collateral, he says.

The issue hinges on assumptions about how long it will take a central counterparty (CCP) to liquidate the portfolio of a defaulted member or client. That assumption drives the amount of initial margin a

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