Of all the firms that will be required to clear over-the-counter derivatives, pension funds are the group for which it looks most problematic – hence a three-year exemption in Europe’s clearing legislation. But that grace period started last August, and there are a lot of issues to resolve by the time it expires in 2015. In the meantime, relatively few funds are deciding to start clearing voluntarily – and that’s the right call, says Vanaja Indra, market and regulatory reform director in the financial solutions group at UK-based pension fund specialist Insight Investment.

Not a single CCP in the world yet has a solution for settling VM in securities. Moving cash through the CCP immediately transforms an exposure into a settlement into your bank account – if that's replaced, the only outcome would be exposure transformed into a claim on securities held somewhere not quite within your grasp. The CCP would take in non-cash assets, and somehow grant the receiver of VM a claim over those assets in lieu of the VM payment, but realising that claim in default isn't going to be easy – who holds those assets? The CCP? If so – there will be multiple claims in a default by anyone on the other side of the trades with the defaulting member. It's a tough one, and will take some time to find a solution that doesn't in fact complicate an already complex transformation within a CCP, and increases risk, rather than reducing it. via Insight Investment: The need for non-cash variation margin – Risk.net.