Netting and Unwind Trades

When a participant submits a new order, the collateral requirements for such order at the time of order entry are being calculated independently of any existing settled positions that a participant might already have in the same or any other contract.

That means that any new order that will lead to the economic unwind of an existing position will still initially require the same collateral as if it was an independent order leading to a completely new position.

Similarly, orders that, once executed, will lead to an overall reduction of the economically required collateral of a participant’s portfolio, will initially require full independent collateralization at order entry.

As soon as unwind and collateral reducing trades are executed, the Ithaca Collateral Optimization process will immediately release any excess collateral back to the participant’s FundLock.

As a result of these system mechanics however, the closeout or unwind of existing positions typically do require the temporary provision of capital to fund the on-order-entry collateral requirements.