ISDA Margin Survey 2013

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INTERNATIONAL SWAPS AND DERIVATIVES ASSOCIATION 1 Information about ISDA and its activities is available on the Association's web site: www.isda.org. Since its founding in 1985, the International Swaps and Derivatives Association has worked to make over-thecounter (OTC) derivatives markets safe and efficient. ISDA’s pioneering work in developing the ISDA Master Agreement and a wide range of related documentation materials, and in ensuring the enforceability of their netting and collateral provisions, has helped to significantly reduce credit and legal risk. The Association has been a leader in promoting sound risk management practices and processes, and engages constructively with policymakers and legislators around the world to advance the understanding and treatment of derivatives as a risk management tool. Today, the Association has more than 800 member institutions from 60 countries on six continents. These members include a broad range of OTC derivatives market participants: global, international and regional banks, asset managers, energy and commodities firms, government and supranational entities, insurers and diversified financial institutions, corporations, law firms, exchanges, Clearinghouses and other service providers. ISDA’s work in three key areas – reducing counterparty credit risk, increasing transparency, and improving the industry’s operational infrastructure – show the strong commitment of the Association toward its primary goals; to build robust, stable financial markets and a strong financial regulatory framework. Information about ISDA and its activities is available on the Association's web site: www.isda.org. SAPIENT GLOBAL MARKETS Sapient were contracted by ISDA to serve as consultants to the 2013 Margin Survey and were responsible for the collection and aggregation of the individual data submissions. Sapient Global Markets, a division of Sapient® (NASDAQ: SAPE), is a leading global provider of business and technology services for capital and commodity market participants, intermediaries and regulators. It provides strategy and advisory services, design and implementation of advanced technology solutions, and delivery through a proven, globally distributed model. Sapient Global Markets helps its clients optimize and transform their business processes, capitalize on business and operational opportunities, adapt to regulatory mandates, and foster business innovation and growth. The company operates in key financial and commodity centres in Europe, North America and Asia. For more information, visit: www.sapientglobalmarkets.com. ISDA Margin Survey 2013 June 2013
SUMMARY 2 1. Collateral in circulation in the non-cleared OTC derivatives market rose 1 percent during 2012, from US$ 3.65 trillion at end-2011 to US $ 3.70 trillion as at December 31, 2012. 2. The number of active collateral agreements (those with exposure and / or collateral balances) supporting non-cleared OTC derivatives transactions was 118,853 at end-2012, of which 87 percent are ISDA agreements. About 88 percent of all collateral agreements are bilateral, an increase of 4 percentage points over last year. 3. 87.4 percent of all collateral agreements are with counterparties whose portfolios of collateralized transactions include less than 100 OTC derivatives. 0.4 percent of all collateral agreements are with counterparties whose portfolios of collateralized transactions include more than 5000 trades. 4. Among all firms responding to the survey, 73.7 percent of all OTC derivatives trades (cleared and noncleared) are subject to collateral agreements. For large firms, the figure is 80.7 percent. 5. Responding firms also reported that 69.1 percent of all non-cleared trades are subject to collateral agreements. For large firms, the figure is 75.3 percent. 6. On an asset class basis, 83.0 percent of all CDS transactions (79.4 percent of non-cleared) and 79.2 percent of all fixed income transactions (72.5 percent of non-cleared) are subject to collateral agreements. For large firms, the figures are 96.3 and 89.4 percent, respectively (and are 94.5 percent and 74.9 percent, respectively, for non-cleared). 7. Portfolio reconciliation, which refers to the matching of the population, trade economics and mark-to-market of outstanding trades in a collateralized portfolio, is widely used and considered best market practice. For all firms in 2013, the survey evidences a clear effort to increase the frequency of portfolio reconciliation. 8. With respect to collateral types, cash used as collateral represents 79.5 percent of collateral received and 78.7 percent of collateral delivered, which is an increase from 78.8 and 75.6 percent respectively last year. Government securities constitute 11.6 percent of collateral received and 18.4 percent of collateral delivered this year, consistent with last year’s results. ISDA Margin Survey 2013 June 2013
Page 1: ISDA Margin Survey 2013 June 2013 I
Page 5 and 6: 1.2. ABOUT THE SURVEY RESPONDENTS 4
Page 7 and 8: 2. COLLATERAL ASSETS 6 2.1. ESTIMAT
Page 9 and 10: Chart 2.2: Gross Credit Exposure of
Page 11 and 12: 10 re-use collateral, and what perc
Page 13 and 14: 3. EXTENT OF COLLATERAL USE 12 3.1.
Page 15 and 16: Table 3.2: Percentage of collateral
Page 17 and 18: 4. MARKET PRACTICES 16 4.1 SWAP VAL
Page 19 and 20: Table 4.1: Valuation of derivatives
Page 21 and 22: 20 dependent thresholds, but intere
Page 23 and 24: 22 5. ELECTRONIC MESSAGING The incr
Page 25 and 26: 24 Table 6.1: Reconciliation freque
Page 27 and 28: 26 Table 7.1b: Collateral Outstandi
Page 29 and 30: 28 Table 7.3: Value of collateral r
Page 31: 30 Appendix 2: Adjustment to report

ISDA Margin Survey 2013

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