As per the European Market Infrastructure Regulation (Emir) and the Dodd Frank Act in the U.S., usage of collateral in bilateral agreements will be permanently changed, Financial Times reports. After enforcement of the new rules, market participants will be required to establish and maintain a collateral account for meeting counterparty margin demands as well as choose a clearing broker and central counterparty to clear eligible trades.
Participants will have to select a collateral manager that can help raise cash or securities eligible to collateralize derivatives trades and to provide short-term financing to raise cash against certain securities if necessary. Participants will also have to safe-keep and segregate independent amounts or initial margin in either bilateral or tri-party legal arrangements.
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