According to data from the International Swaps and Derivatives Association (ISDA), there is now about $4,000bn of collateral in circulation, up from an estimated $2,100bn in 2008.
The results of the 2009 ISDA margin survey, released at its 24th Annual General meeting in Beijing, reveal that cash continues to grow in importance among most firms, and now stands at more than 84% of collateral received and 83% of collateral delivered.
“Recent market events underscore the importance of collateralisation as a risk mitigation tool," said Robert Pickel, executive director and chief executive officer, ISDA, at the meeting. "ISDA’s 2009 Margin Survey indicates that, amidst the volatility in the financial markets, collateral management programs continue to expand, covering increased trade volumes and credit exposures."
The survey also reports that there are now more than 150,000 collateral agreements in place. Among firms that responded both in 2008 and 2009, collateral agreements grew by 9%. Respondents forecast further growth of 26% during 2009.
Additionally, more than half of the respondents stated that they engage in some form of systematic portfolio reconciliation, many on a daily basis. Portfolio reconciliation is the process by which market participants verify the existence and salient details of outstanding trades.
Of the 67 firms who took part in the 2009 ISDA Margin Survey, 58 were banks or broker-dealers, and the remaining were institutional investors or other end users.
