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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 the Legal Documentation Differ between Standardized and Customized Derivatives?
Why Are Standardized Options Contracts More Liquid than Customized OTC Options?
Are All Over-the-Counter (OTC) Derivatives Subject to Mandatory Clearing and Novation?
How Do Regulatory Frameworks like Dodd-Frank or MiFID II Impact the Mandatory Clearing of OTC Derivatives?