Product Coverage

  • OTC Derivatives
    • ISDA CSA Agreement
    • Reg compliant IM CSA
  • OTC Derivatives (cleared)
    • CCP Clearing agreement
  • Repo
    • GMRA
  • Commodities
    • FOA/TOB (Future and Option Agreement)

CSA: Credit Support Annex

  • History:

    • IOSCO: calls to develop a consistent global framework for margin requirements in non-centrally cleared derivatives in response to 2008 crisis.（监管要求）
      • ISDA International Swap and Derivatives Association provided the legal framework: ISDA master agreement （法律框架）
        • CSA （操作手册）
          • Variation Margin (TODO: 读合同)
            • Minimum Transfer Amount
            • Indepedent Amount
            • Threshold
            • Interest
            • Dispute resolution
            • Settlement
          • 3 versions, initially appeared in 1994
        • Initial Margin
        • （GMRA）
        • （FOA）

  • Why the 2008 finacial crisis still triggered if the CSA has been already existed since 1994：

    1994       2008        2013        2016+         2021+
 |           |           |            |             |
CSA v1 → → → | → → → → → | → → → → → →| → → → → → → |   
             |           |            |             |
   金融危机暴露风险   →   IOSCO发布IM/VM规则 →   标准化CSA → 监管型/合规型CSA整合至主协议

Variation Margin

  • The operations team calculates variation margin based on the prior COB portfolio’s mark-to-market (MTM) valuation, incorporating parameters outlined in the Credit Support Annex (CSA), such as the Independent Amount and Threshold. When applicable, the unsecured counterparty under the VM CSA issues a margin call to the secured party via email or the AcadiaSoft platform. If the margin call is undisputed, the operations team records the call in Calypso. Upon approval, the internal cash management system debits or credits the client’s ledger account accordingly. For outgoing payments, an MT900 SWIFT message is sent to the Nostro account; for incoming payments, the team awaits receipt of an MT910. If a margin call is disputed, the operations team initiates an investigation, documenting the resolution process—including timelines and trade-level reasons—in line with EMIR dispute resolution requirements. This often involves portfolio reconciliation and escalation to the valuation control team or the credit risk function.

Initial Margin

        时间线（你还活着）                  时间线（你死了）
        ───────────────────                ─────────────────────
        |          |           |              |          |          |
     Day -1     Day 0       Day 1         Day 1     Day 2      Day 5
              VM paid     ⛔违约         → MPOR        →我平仓

        ↑ VM 管的是 Day 0 的市值变化
                          ↑ 你违约了，我之后几天的风险
                                     ↑ 这部分风险只有 IM 能覆盖
  • Initial Margin is calculated daily by the operations team using approved methodologies such as the ISDA SIMM. IM is exchanged on a gross basis and settled within the timeframes specified in the IM CSA. It must be held in segregated accounts—either third-party or tri-party—to ensure the margin is both accessible to the collecting party in the event of a counterparty default and safeguarded for the posting party in case of the collector’s insolvency. Sanity checks are performed on valuation data, data feeds, and collateral eligibility. Under the IM CSA, the unsecured party issues a margin call via email or AcadiaSoft. Once the amount is confirmed and undisputed, a margin call trade is booked in Calypso using a placeholder asset with a par value, as the exact collateral to be allocated by the tri-party agent is not yet known. Booking this placeholder trade triggers an MT527 SWIFT instruction to the tri-party agent, which specifies the Required Value (RQV). The agent then allocates eligible assets to or from the bank’s Longbox under the relevant IM CSA during their next allocation cycle. After the day’s final allocation cycle, the tri-party agent sends an MT569 message listing the actual assets allocated. Calypso processes the MT569 message, replacing the dummy trades with updated trades that reference the real collateral allocated by the tri-party agent.