Commenting on proposed Dodd-Frank regulations covering margin requirements for uncleared swaps, Willa Bruckner, partner in the firm’s Financial Services & Products Group, said “increased costs associated with margin or uncleared swaps are a concern for all market participants,” while regulations on cleared derivative margin costs are still awaiting approval.
In particular, she noted that some buy side participants are concerned “that the sell side will pass on its direct costs and its opportunity costs of posting margin for uncleared swaps,” thus effectively “doubling the buy side’s costs.
“As the overall cost for uncleared swaps increases, the advantage of uncleared swaps may be overshadowed by the need to use funds for other purposes,” Bruckner added. “The trading volume of the products and structures we know will shrink over time as the market finds alternative approaches [as] the costs of engaging in swaps has increased and will continue to increase.”
Click here to read the full article in Total Derivatives, published on August 19, 2015.
In particular, she noted that some buy side participants are concerned “that the sell side will pass on its direct costs and its opportunity costs of posting margin for uncleared swaps,” thus effectively “doubling the buy side’s costs.
“As the overall cost for uncleared swaps increases, the advantage of uncleared swaps may be overshadowed by the need to use funds for other purposes,” Bruckner added. “The trading volume of the products and structures we know will shrink over time as the market finds alternative approaches [as] the costs of engaging in swaps has increased and will continue to increase.”
Click here to read the full article in Total Derivatives, published on August 19, 2015.