Collateral posted as margin must be highly liquid and hold its value under stress after haircuts, drawing on a national list that may include cash, high-quality government, central bank, corporate and covered bonds, major index equities and gold (MGN20.29-20.31). Haircuts must be risk-based and conservative, set either by an approved model or the standardised schedule: 0% for same-currency cash, 0.5%, 2% and 4% for high-quality sovereign securities by residual maturity band, 1%, 4% and 8% for high-quality corporate and covered bonds, 15% for major index equities and gold, plus an additive 8% currency mismatch haircut (MGN20.32-20.34). The chosen approach must be applied consistently within each asset class, and collateral must not be overly concentrated (MGN20.34-20.35). Substitute collateral must meet all requirements after haircuts (MGN20.37). Initial margin must be exchanged gross, immediately available to the collector on counterparty default and protected if the collector fails, under legally effective arrangements (MGN20.38-20.40). Initial margin may be rehypothecated only to hedge customer derivatives, with written consent after disclosure, a segregation option, segregation from proprietary assets, a ban on further reuse, customer notification and liquidity regulation of the collector (MGN20.41-20.42); volumes must be disclosed to authorities (MGN20.43). Variation margin may be reused (MGN20.44).
The graph holds this control, the 0 it maps to, and the evidence behind each claim, over MCP and REST.