IM Disputes and Reconciliation

When two SIMM numbers disagree

Two firms computing initial margin on the same portfolio with the same model will still get different answers, and every day the difference has to be explained, agreed or disputed. IM reconciliation is the discipline of tracing that gap to its source — a trade one side does not have, a sensitivity computed differently, a curve or bucket mapped another way — and closing it before it turns into a margin call neither side accepts.

Open in the app · Risk & the Greeks · advanced

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What the lesson covers

1. What it is
2. How it works
3. Why it matters
4. The usual causes
5. Risks to watch

Key terms

• IM dispute — Disagreement over the amount of an initial margin call, with the undisputed portion still transferred.
• Portfolio reconciliation — Matching the two counterparties’ trade records so both compute margin on the same population.
• Trade-level attribution — Measuring each trade’s contribution to total IM, often by removing it and recomputing.
• Algorithmic differentiation — Computing sensitivities analytically through the pricing code, as opposed to bumping inputs and revaluing.
• Qualifying credit — SIMM’s credit risk class for investment-grade, high-yield and similar names; securitisations and similar fall under non-qualifying.
• Dispute tolerance — The difference, in amount or percentage, below which a call is accepted without investigation.

Every key term, A to Z

In practice

Collateral and margin teams at dealers and buy-side firms reconcile IM daily, often through industry utilities that match portfolios and CRIFs automatically. Large or ageing disputes are escalated to senior management and, where required, reported to the regulator.

Read next

• ISDA SIMM — The model behind uncleared initial margin
• The Uncleared Margin Rules — Who must post initial margin, and when
• Collateral and the CSA — The cash and bonds that back an OTC exposure

In the app, IM Disputes and Reconciliation carries a five-step lesson, a worked example and a bank of twelve questions drawn differently every sitting.

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Educational content only. Nothing here is financial advice, an offer to trade, or a recommendation to buy or sell any instrument.