Costs set to rise amid shake-up in derivatives trading

"The plans for regulatory reform unveiled by the Obama administration this week are seeking one of two things. Either users of derivatives have to put aside capital themselves if the contracts are traded privately, or margins have to be paid to clearing houses to cover potential losses.
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Investment banks required collateral of hedge funds but funded themselves -- over half their assets, according to the BIS, short term through the repo market.

More cash and collateral are required..across privately traded markets from OTC derivatives to repo to securities lending.
Pricing has become more conservative

Celent said that collateral had become heavily weighted in favour of cash, and this trend would continue. “The coming years will bring tougher collateral agreements with reduced thresholds and more restrictions on eligible collateral, by excluding exotic, less liquid assets,” the report said. “Aside from tightening credit terms, OTC participants are examining the creditworthiness of their counterparties more closely.”

Struggle between dealers and investors for control