Cross-Product Margining Agreement

If a customer has multiple commercial accounts that are marginal accounts, it is preferable to use them by cross margining rather than by an isolated margin. The main reason is that it is a good risk management tool that prevents unnecessary liquidation of positions. Cross Margining is the position clearing process in which the excess margin is transferred from a merchant`s margin account to another of its margin accounts to meet maintenance margin requirements. The merchant is allowed to use his available margin balance sheet on all his accounts. Q. What about the timing? Do you expect most non-compensatory members or customers to use such a cross-margining service immediately? Q. What are the challenges of crossing borders for the service provider, your customers or users? Commerzbank now offers this CSA review as a service to customers who wish to take advantage of our experience in updating these agreements, in order to achieve greater margin efficiency, including for bilateral flow. Commerzbank also proposes collateral optimization that determines the most advantageous utility for the release of bilateral currents. With Cross Margining, combined with recently negotiated clearing agreements and details on bilateral flows and optimization, companies will have ticked all the boxes to ensure that their marginal commitments will be reduced and that their financing costs will hopefully be more manageable now and in the future. In particular, financial institutions need to have a specific size and type of portfolio, such as ETD and OTC clear flow, to balance trades and achieve the efficiencies that Cross Margining can offer. Some clients may have one-sided ETD books and over-the-counter books, and there may be no compensation between the two. Compensation level margins are calculated on the basis of combined positions managed in margin accounts with the OCC`s theoretical analysis and numerical simulations (STANS) system.

STANS is a portfolio margin methodology that uses a sophisticated option pricing model to identify the economic risk of a portfolio. The combination of secured positions, settled in separate clearing houses, into a single portfolio for margin and settlement purposes, determines the actual risk of this portfolio. The result is a more appropriate margin requirement, generally lower than if margins were calculated separately. The average daily margin savings achieved by companies participating in Cross Margining were significant. Recently, there have been a few articles on cross-margining derivatives, which focused primarily on clearing exposures within central counterparties.