News: Can you Calculate Your Initial Margin and Capital Within Your Swap Execution Facility?

06 August 2013 | Bill Hodgson

BBG logoBloomberg have integrated the Initial Margin calculations from SwapClear into their trading platform.  What this provides is:

  • The ability to always know your current IM
  • The ability to predict IM in varying market conditions
  • The ability to calculate capital requirements
  • All integrated within a trading environment

This I believe is thefirst time a CCP aligned in a horizontal sense has embedded their margin model into an upstream execution platform - and puts BBG quite a league ahead of other SEF platforms. An alternative to this is to hold your investment portfolio in your own trading system and have an IM calculator synchronised alongside to provide the same calculations. LCH and BBG will need to take care to manage change control - before only LCH had to take care to update their margin model within their own systems - now BBG must stay in-line too.

LCH.Clearnet's margin calculator is integrated with Bloomberg's multi-asset class analytics and trading platforms, making it easy to anticipate, and therefore manage, how large price movements and changing market conditions will impact capital needs. Bloomberg Professional service subscribers can access the tool to simulate their portfolios’ exposure to risk factors and perform instantaneous, consistent margin approximations, prior to clearing, for no additional cost. "As a result of mandatory clearing requirements, the need for on-demand margin analysis is critical and accessing a clearinghouse's margin calculations on the Bloomberg Professional service helps me to manage my investment decisions and operations,” said Matthew Lynes, Portfolio Manager at Aberdeen Asset Management. “Bloomberg continues to provide the solutions the industry needs to meet regulatory requirements and make better informed investment decisions on behalf of our investors.”

Does anyone know if any other SEF has an equivalent capability? Let me know in the comments. Press release: SwapClear - BLOOMBERG INTEGRATES MARGIN CALCULATOR FOR SWAP PARTICIPANTS.  


All good questions, and perhaps in the fulness of time a comprehensive approach will emerge, but this first step brings tools to the traders desktop in an integrated form. Being able to calculate and compare the IM across multiple venues, CCPs and products, and include Capital, CVA and Reg Cap, would be the holy grail of tools.

Will Bloomberg integrate the IM calculations for other IRS CCPs (CME, Eurex, etc.)? Will it also cover Credit CCPs (ICE, LCH, CME...)? Even if it does a further problem here is that in theory at least a buy side firm would want to be looking for quotes / order queue across multiple SEFs, swaps on DCMs (e.g. TrueEx) and across swapfutures and swaps (in theory) and also factor in futures portfolios where portfolio margining is available at CME.Where do they draw the line - Bloomberg executables only or SEF aggregation or one stop Rates and Credit trading quote shop?