In this FTF Exchange podcast, Gemma Bailey at triCalculate, and Neil Murphy at OSSTRA, talk about why firms need to be keeping a close eye on UMR’s final phase.
[zoomsounds_player type="detect" dzsap_meta_source_attachment_id="" source="https://www.ftfnews.com/wp-content/uploads/2022/06/TriOptima-FTF-Podcast-03-2022-3.mp3" config="default" autoplay="off" loop="off" open_in_ultibox="off" enable_likes="off" enable_views="off" play_in_footer_player="default" enable_download_button="off" download_custom_link_enable="off"]A key deadline is looming for the set of regulatory overhauls known as the Uncleared Margin Rules (UMR), which began a phased-in approach in 2016. The sixth and final phase begins on September 1 of this year.
Gemma Bailey, director, business management, for triCalculate, and Neil Murphy, business manager at triResolve, both part of OSSTRA, which is the new home of TriOptima, have been keeping an eye on UMR and its manifold impacts on financial services firms. OSTTRA encompasses the businesses of MarkitServ, Traiana, TriOptima, and Reset, and is a joint venture between CME Group and S&P Global.
Bailey and Murphy provide their insights via this edition of the FTF Exchange podcast series.
The UMR reforms are causing operational challenges that some firms may not have seen coming, Murphy says via the podcast.
The new rules “introduce a new requirement on firms to both calculate and exchange initial margin or IM and I think this is quite a significant impact because since prior to UMR firms have only been required to exchange variation margin or VM bilaterally. So for many, this will be an entirely new area,” Murphy says.
Many firms that conform to a clearing model are already aware of the complexities of margining.
“But, in contrast to the clearing model, Reg IM is different for one key aspect — the calculation and exchange of IM is on a gross basis so firms who are in scope will be expected to post initial margin and also to receive initial margin,” Murphy says. “I think this perhaps is probably a real key surprise for firms when they begin their IM journey as they’re not really expecting that much of an operational impact. … It means you go from one VM margin call today to potentially three margin calls with those two additional IM calls each day.”
Among the issues that the podcase explores are:
- What firms have learned from earlier UMR phases that will help them with Phase 6;
- The biggest challenges that firms have had when meeting their requirements & what remains their biggest challenge;
- Where firms should be as they move toward the Phase 6 deadline;
- What steps firms can take to avoid or delay their UMR Phase 6 compliance;
- The viability of firms monitoring their initial margin exposure so as not to exceed the $50 million threshold; and
- Recommendations to firms that are in scope and need to optimize UMR compliance.
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