CMFAS RES 2B OTC Derivatives: Reporting, Clearing, Margin & Trading Rules question: Initial margin exchanged under the guidelines

CMFAS RES 2BOTC Derivatives: Reporting, Clearing, Margin & Trading Rules

Initial margin exchanged under the guidelines must be:

A Exchanged gross and protected from the collector's insolvency, usually with a custodian
B Available to the collecting party for its own funding, provided it is returned at maturity
C Held by MAS in a central account until the uncleared contracts mature
D Netted against the other party's initial margin, so only the difference is posted

Show the answer and explanation

Answer: A. Exchanged gross and protected from the collector's insolvency, usually with a custodian

Unlike variation margin, IM is collected by both sides gross and must be segregated so it is returnable if the collector defaults. Rehypothecation is restricted. This is what makes IM operationally heavy — hence the S$80 million threshold.

Common mistake

IM: gross and segregated. VM: net and title-transfer is common.

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Study note: OTC Derivatives: Reporting, Clearing, Margin & Trading Rules CMFAS RES 2Bpractice questions & mock exams

CMFAS RES 2B OTC Derivatives: Reporting, Clearing, Margin & Trading Rules question: Initial margin exchanged under the guidelines

Answer: A. Exchanged gross and protected from the collector's insolvency, usually with a custodian

Common mistake

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CMFAS RES 2B OTC Derivatives: Reporting, Clearing, Margin & Trading Rules question: Initial margin exchanged under the guidelines

Answer: A. Exchanged gross and protected from the collector's insolvency, usually with a custodian

Common mistake

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