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To discuss the US Commodity Futures Trading Commission’s (CFTC’s) final rule regarding margin for uncleared swaps (the CFTC margin rule) and an interim final rule exempting non-financial and certain other end-users who are eligible for the end-user clearing exception from the scope of the CFTC margin rule, both adopted in December 2015.

Compares the CFTC margin rule to the similar “Bank margin rule”; explains what trades and types of entities are covered, the treatment of inter-affiliate swaps, the initial margin and the variation margin requirements, the types of collateral that can be posted, the required documentation, how netting is applied, the custodian requirements and the compliance dates.

The margin rules apply to uncleared swaps including cross-currency swaps, non-deliverable foreign exchange forwards and currency options. Exempt foreign exchange swaps and deliverable foreign exchange forwards are not required to be margined. Non-financial end-users who rely on the end-user exception are exempt from margin requirements.

Practical guidance from experienced financial services lawyers.

This paper develops a model that explains how the creation of a futures clearinghouse allows traders to reduce default and economize on margin. We contrast the collateral necessary between bilateral partners with that required when multilateral netting occurs. Optimal margin levels balance the deadweight costs of default against the opportunity costs of holding additional margin. Once created, it may be optimal for the clearinghouse to monitor the financial condition of its members. If undertaken, monitoring will reduce the amount of margin required but need not affect the probability of default. Once created, it becomes optimal for the clearinghouse membership to expel defaulting members. This reduces the probability of default. Our empirical tests suggest that the opportunity cost of margin plays an important role in clearinghouse behavior particularly their determination of margin amounts. The relationship between volatility and margins suggests that participants face an upward-sloping opportunity cost of margin. This appears to dominate the effects that monitoring and expulsion might have on margin setting.

This chapter discusses the evolution of online trading, its application in various market structures, and its benefits and potential concerns. Computers were first used in electronic communication networks among brokers and dealers to make trades and for informational purposes. Online brokers became popular with retail investors as the internet spread. Online trading comes with various trading protocols and order types. It enables traders to automate trading decisions and process data more easily using charting tools and customized programs connected to the broker's infrastructure. Electronic trading allows for greater centralization but can also be accompanied by market fragmentation. Market regulation has affected market structure and is still evolving. Centralization allows for more competitive prices and reduces search costs. Decentralized markets could cope better with asymmetric information.

Assesses the likely success of various proposed property investment vehicles and property derivatives that are being introduced in the marketplace. Discusses single property investments, authorised property unit trusts and convertible and participating mortgages. Concludes that there are still many problems associated with these products and such problems will inhibit the growth and capacity of these new markets.

The purpose of this paper is to propose a new dynamic margin setting method for margin buying in China and evaluate the validity of its performance with the current margin system adopted by stock exchanges in extreme episodes.

This paper adopts the dynamic conceptual model of Huang et al. (2012) (which is based on Figlewski (1984)) but incorporates Markov chain to describe the data generation process of stock price changes. By applying the model to margin buying contracts for the period of March 16, 2018, to May 2, 2018 (baseline study) and June 15, 2015, to July 27, 2015 (robustness test), the model’s superiority to the current margin system adopted by stock exchanges is also tested.

The paper has several important findings. First, the margins derived by this system vary with market conditions, rising (declining) when stock prices go down (up), and are generally lower than the requirements imposed by stock exchanges. Second, this margin system induces lower overall percentage of costs than that adopted by stock exchanges. Third, parameter estimation plays an important role on shaping empirical results.

The primary limitation of this paper lies in the fact that it does not solve the issue of determining optimal parameters of the Markov chain model. On the implication of findings, policy-makers and regulators on supervising margin buying activities may need a tune-up on the current margin system which features static margin requirements. Dynamic margins that incorporate market factors are virtually useful to balance the trade-off between liquidity and prudence.

To the best of the authors’ knowledge, this study is the first of its kind to develop a dynamic margin setting method for margin buying in China, aiming to balance the trade-off between liquidity and prudence. It not only takes into account the uniqueness of Chinese markets but also allows for time variations in both initial and maintenance margins.

Detailed step by step calculations have been made of the recovery with fixed elevator from a high speed dive for three different aircraft; for these calculations measured wind tunnel data were used. The aircraft differed markedly in the behaviour of their restoring margin Km=− (∂Cm/∂CL)M. The calculations demonstrated in all cases an initial, rapidly damped, short period oscillatory phase, a nearly constant value of ρV2 throughout the recovery, and subsequent to the initial oscillatory phase Cm was small. These results enable three different approximate methods for calculating the recovery after the initial oscillatory phase to be developed. The first is applicable where only a rough estimate of the recovery characteristics is required and the value of Km is about 0·3 or greater; it is very simple and quick to apply. The second is only a little more complicated and is found to give reliable results where Km is of the order of 0·1 or greater. The third method is the most complicated of the three but is still fairly simple and quick and it can be expected to give reliable results in all cases except where Km is appreciably negative for a considerable portion of the recovery. In the latter case, however, the aircraft is liable to be unstable and detailed step by step calculations or simulator studies are essential for an accurate assessment of the recovery. The main features of the initial oscillatory phase are satisfactorily predicted by Gates' manoeuvrability theory if the restoring margin Km is adequately positive (that is, greater than about 0·005) and if this factor docs not vary rapidly with Mach number at that stage. No detailed investigation has been made for aircraft diving at supersonic speeds; however, it seems likely that the general results of this investigation will still apply in such cases.

This paper investigates the asymmetric volatility between conditional volatility and initial margin using daily market return of TOPIX and Nikkei225 over 1970 to 1990. In prior studies, generally, it has been known that margin is regard as a main discipline to control volatility with respect to a policy tool. Our empirical test provides the following results. First, this paper shows that there is significantly positive relation between return of stock market and margin, implying that as margin increases, also return increases. Thus we conclude that the trade-off of risk and return is found. Second, our result suggests that in normal state, margin affects to conditional volatility negatively and significantly, indicating that margin policy could control the conditional volatility. Third, this paper finds that in recession state, there is little bit evidence of discipline action in controlling volatility. Fourth, our paper also finds that in boom state, there is adversely evidence of margin on conditional volatility. As a result, government has motivation to decrease the volatility in bull market state, whereas it also has motivation to increase the volatility in bear market state. Our paper finds the evidence that the motive for changing the margin is fitted to normal and boom state. Therefore, our result suggests that government has to adjust the change of margin policy adequately to fit the market conditions.

Short option positions carry significant risk of losses well in excess of 100 per cent of the initial option price. Margin requirements associated with such positions are therefore considerable. The purpose of this paper is to develop a methodology for calculating margin requirement‐based option portfolio returns that realistically represent the returns realized by investors, and to demonstrate the effects of this methodology on analyses of option returns.

A methodology is developed for calculating margin requirement‐based short option portfolio returns.

Accounting for margin requirements reduces the returns of simple short option strategies by up to 92 per cent compared to the price return. In long/short portfolio analyses, use of margin requirement returns necessitates additional methodological adjustments to ensure that unwanted volatility risk is properly hedged.

The result is a portfolio return that more accurately represents the return realized by investors, and increased power to detect cross‐sectional patterns in option returns.

Brazil is characterized by the inexistence of a more robust system of guarantees and rules to minimize risks and protect agents in energy futures contracts. In this sense, this study aims to answer the question of how a centralized clearing agent can compute safety margin requirements to help reduce the systemic risk of the energy futures contracts market in Brazil.

The intermediate steps and specific objectives are to analyze the volatility behavior, identify the autoregressive conditional heteroscedasticity effects and model the variance of the return series. Based on this, the authors calculate the value-at-risk and conditional value-at-risk metrics for the energy futures contracts. As a robustness test, the authors added a peak over threshold methodology from extreme values theory.

In general, monthly products require margins because of their higher variance. With the asymmetrical distribution of returns, the authors needed to consider different maintenance margins for the long and short positions. It was also shown that two guarantee margins were required to secure the contracts as follows: the initial margin and the maintenance margin. The three factors that defined the size of the maintenance margin the volatility, skewness and kurtosis of the return series.

The contribution of this study lies in promoting the understanding of the risk dimensions of the energy derivatives market in Brazil and it offers concrete recommendations for how to mitigate this risk through market mechanisms and structures. Similar arrangements can be applied to other emerging markets.