Cross Collateral and Margin Models for Derivatives Accounts

Summary

This guide explains how cross collateral lets traders use eligible currencies other than a derivative’s settlement currency to support positions and orders. It distinguishes settlement currencies, collateral currencies, and offset currencies; the latter can help offset upside risk in products tied to that currency. The guide also compares segregated and cross collateral accounts, each with either standard margin or portfolio margin. Standard margin adds position-level requirements, while portfolio margin stress tests a portfolio and uses the most adverse scenario described.

It explains how cross margin converts requirements across settlement currencies, and how collateral haircuts reserve part of eligible balances for initial margin. Examples illustrate haircut calculations and why spot balances can produce nonzero margin figures in cross portfolio margin accounts. These examples and haircut rates are specific to the guide and may change. The material also notes that cross-asset offsets between derivatives were not available at launch, and warns that portfolio margin users should understand the revised calculations. It is an exchange-specific explanation, not a general comparison of collateral policies across venues.

Key ideas

• Cross collateral allows eligible currencies to support derivatives settled in other currencies.
• Offset currencies can reduce some upside risk for products tied to the same currency.
• Standard margin sums requirements by position, while portfolio margin stress tests the portfolio.
• Haircuts reserve a portion of some collateral balances for initial margin.
• The guide says cross-asset derivative offsets were planned but unavailable at launch.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.