Swapfutures vs. swaps – buy-side views
Some comments from buy side firms and SEFs on the CFTC's and CCP's differential treatment of economically equivalent swaps and swapfutures are contained here (Risk mag, subs). The gist is that margin advantage alone won't make a sudden large scale shift from OTC swaps to swapfutures happen overnight but will play out over a longer period of time, This is the first article I have seen noting the Basel III effects of the differential margin treatment. Reading between the lines, it seems likely that – for two economically equivalent portfolios of swaps and swapfutures with a clearing client – a bank-affiliated FCM's RWA would be higher for the swapfutures. Essentially this is because more tail risk is exposed by lower initial margin on the same portfolio risk and the same 10-day margin period of risk under Basel III. Jon S.