Margin Management: Best Practices for Commodity Trading Firms

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What's Inside

Commodity firm’s main liquidity risk is growing

Recent market volatility has seen margin requirements spike. Firms have been forced to source extra liquidity at short notice – at a time when access to bank financing has already been restricted by regulation and an economic downturn – costing them tens of millions in additional financing costs. 

Derivatives margin has become the largest uncapped liability for Commodity Trading Firms, making active margin management mission critical.

In our best practices guide, we break down how Commodity Trading Firms can maintain cost-effective hedges while guaranteeing their own liquidity. We explain how to approach those business-critical questions – so that Treasurers can answer them with confidence:

Liquidity Control
  • Are my current margin calls correct?
  • How has recent trading activity impacted the change in margin requirements?
Capacity Checks
  • What is my margin call going to be tomorrow?
  • What should my margin calls be under normal circumstances?
  • What could my margin call be in extreme market conditions?
Cash Opportunities
  • How can I free up cash by liquidating positions?
  • How can I free up cash by optimising the portfolio?
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