How Do Margin Requirements Differ between OTC and Exchange-Traded Derivatives?

Exchange-traded derivatives have standardized, mandatory margin requirements set by the clearing house, including initial and maintenance margin. OTC margin is negotiated bilaterally, often governed by a CSA, and is more flexible.

While both aim to cover potential losses, the OTC process is less standardized and depends on counterparty credit ratings.

How Does MTM in Futures Markets Differ from Its Application in OTC Derivatives?
Why Are Standardized Options Contracts More Liquid than Customized OTC Options?
How Are the Prices of OTC Derivatives Determined?
Why Would a Corporation Choose an OTC Derivative over a Standardized Exchange-Traded One?
What Are the Primary Differences between Exchange-Traded Derivatives and Over-the-Counter (OTC) Derivatives?
What Is the Difference between a Standardized and a Non-Standardized Derivatives Contract?
Contrast Standardization with the Customization Found in Forward Contracts
How Do Futures Contracts Differ from Forward Contracts in Financial Derivatives?